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  • EC 314: Public and Private Investment Q2: Time Value

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    Jamie Woods
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    The document provides equations for calculating the present value of cash flows using different factors: future value, annuity, growing perpetuity, and annuity due. It also includes a cash flow diagram and questions asking to write equations in factor notation for the cash flows and calculate the present value at a 10% interest rate.

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    Q2120210a

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    The document provides equations for calculating the present value of cash flows using different factors: future value, annuity, growing perpetuity, and annuity due. It also includes a cash flow diagram and questions asking to write equations in factor notation for the cash flows and calculate the present value at a 10% interest rate.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    75 views1 page

    EC 314: Public and Private Investment Q2: Time Value

    Uploaded by

    Jamie Woods
    The document provides equations for calculating the present value of cash flows using different factors: future value, annuity, growing perpetuity, and annuity due. It also includes a cash flow diagram and questions asking to write equations in factor notation for the cash flows and calculate the present value at a 10% interest rate.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    of 1

    EC 314: Public and Private Investment PASS NO PASS

    Q2: Time Value Name:

    (F |P, i, N ) F = P (1 N
     + i)N 
    (P |A, i, N ) P = A (1+i) −1
    N
     i(1+i)
    N −iN −1
    
    (P |G, i, N ) P = G (1+i)2 N
     i (1+i)N   
    1−(1+g) (1+i)−N N
    (P |A1 , g, i, N ) P = A1 i−g or P = A1 1+i if : i = g

    Consider the following cash flow diagram. Not


    Factor
    Note
    15
    16
    Cash Flow

    10
    8 8
    5
    4 4
    2 2
    0
    1 1
    0 2 4 6 8
    Period

    Off By
    One
    1. Write an equation, in factor notation, that describes the present worth of this cash
    flow sequence.

    2. Write an equivelent equation in factor notation, i.e., decompose the cash flow differ-
    ently.

    3. Calculate the present worth of this series when the interest rate is 10.00%?

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