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  • MBA540 Quiz1 Review

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    Kyle Stair
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    This document provides an overview and review of key concepts for Quiz 1 on discounted cash flow (DCF). It discusses the core principles of time value of money and the timeline approach. For single cash flows, it covers future value, present value, number of periods, and interest rate calculations for single and multiple periods. For multiple cash flows, it introduces the general methodology and three special cases of annuity, annuity due, and perpetuity present value calculations. It notes that calculations will be required and discusses additional cases like growing perpetuity. Sample questions are also provided for review.

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    This document provides an overview and review of key concepts for Quiz 1 on discounted cash flow (DCF). It discusses the core principles of time value of money and the timeline approach. For single cash flows, it covers future value, present value, number of periods, and interest rate calculations for single and multiple periods. For multiple cash flows, it introduces the general methodology and three special cases of annuity, annuity due, and perpetuity present value calculations. It notes that calculations will be required and discusses additional cases like growing perpetuity. Sample questions are also provided for review.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    12 views8 pages

    MBA540 Quiz1 Review

    Uploaded by

    Kyle Stair
    This document provides an overview and review of key concepts for Quiz 1 on discounted cash flow (DCF). It discusses the core principles of time value of money and the timeline approach. For single cash flows, it covers future value, present value, number of periods, and interest rate calculations for single and multiple periods. For multiple cash flows, it introduces the general methodology and three special cases of annuity, annuity due, and perpetuity present value calculations. It notes that calculations will be required and discusses additional cases like growing perpetuity. Sample questions are also provided for review.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 8

    Topic1Summary

    (1) To visualize the project


    Draw the timeline
    To simplify calculation

    (2) General methodology Adding assumptions


    (2.1) Single CF
    PV & FV
    Single period

    (2.2)
    (2
    2) Multiple CFs
    NPV introduced

    Multiple periods

    FV

    (3.1) Annuity
    N is finite.
    Same CFs
    Same interval
    At the end of
    each interval

    (3) Special cases

    (3.2) Annuity due


    N is finite.
    Same CFs
    Same interval
    At the
    beginning of
    each interval

    (3.3) Perpetuity
    N is infinite.
    Same CFs
    Same interval
    At the end of
    each interval

    PV
    FV
    NPV PV (Ci )
    (1 r ) n
    PV
    C
    1
    C
    i 0
    (1 r )
    n
    PV

    PV

    annuity

    n
    FV PV (1 r )
    perpetuity

    r 1 r
    r
    Ci
    FV PV (1 r )
    NPV

    i
    FV
    rn
    i 0 (1 r )
    FV
    1
    PVannuity due (1 r ) PVannuity
    r
    1
    PV
    PV
    FV
    ln

    PV

    n
    ln(1 r )

    Quiz#1Review
    Quiz#1on09/29(Thu.),from6:30pmto7pm.
    Contents:
    C t t
    Discountedcashflow(DCF)
    5multiplechoice(orT/F)questions(5pts):concepts
    andcalculation
    1discussionquestion(5pts)
    1calculation(5pts)
    1 calculation (5 pts)
    Total:15pts

    Timing:30minutes
    2

    Quiz#1Review
    Quiz#1on09/29(Thu.),from6:30pmto7pm.
    Youcanbring:
    Y
    bi
    Oneformulasheet:alettersizedpaper,doublesided,
    printedorhandwritten.
    Calculator:financialorscientific

    References
    Classnotesandreviewnotes
    Class notes and re ie notes
    Examplesinnotesandsamplequestions:helpfulfor
    th di
    thediscussionquestionandthecalculationquestion
    i
    ti
    d th
    l l ti
    ti
    3

    Quiz#1Review
    Quiz#1on09/29(Thu.),from6:30pmto7pm.
    DiscountedCashFlow
    Di
    t d C h Fl
    Core:timevalueofmoney
    Tool:thethreerulesandthetimeline
    Singlecashflow:FV,PV,N,r
    Single cash flow: FV PV N r

    Singleperiod

    M lti l
    Multipleperiods
    i d

    Calculation is required!

    Multiplecashflows

    Generalmethod

    3specialcases:Annuity/Annuitydue;Perpetuity

    Quiz#1Review
    Quiz#1on09/29(Thu.),from6:30pmto7pm.
    DiscountedCashFlow
    Di
    t d C h Fl
    Specialcases

    (1)Annuity andannuitydue;(2)Growingannuity;(3)
    Perpetuity;(4)Growingperpetuity

    PVcalculation

    ThetimeunitofN,r,andC:mustsame

    ThePVformulashowsthevalueisatwhichtimepoint?

    Steps

    Identifythepattern:usingtimelineandkeywords

    Formula&calculation

    Quiz#1Review
    Quiz#1on09/29(Thu.),from6:30pmto7pm.
    DiscountedCashFlow
    Di
    t d C h Fl
    Othercases

    N&r:fromthePVequations,(PV,C,N,r)

    Compoundingperiod

    Compoundingmtimesinoneyear

    (1)r/m;(2)EAR

    Loanamortization(NOTrequired)

    Quiz#1Review
    Quiz#1on09/29(Thu.),from6:30pmto7pm.
    Officehour
    Offi h
    Time:

    Saturday09/29,5:00PMto5:50PM,UCOM220E

    Or,youcanalwaysemailmeyourquestionsor
    ,y
    y
    y
    q
    concernsregardingourquizandourclass.

    Myemail:shaokang.wang@wilkes.edu
    y
    g
    g@

    Quiz#1Review
    TopicIsamplequestions
    Q1,Q5,Q6,Q7,Q8,Q10arerequired.
    Q1 Q5 Q6 Q7 Q8 Q10
    i d
    Q2,Q3,Q4,Q9arenotrequired.

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