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Developing Financial Insights PDF
Developing Financial Insights PDF
The case deals with the calculation of the future value and present value and its use in
making financial decision. It starts with basic formulas for calculating the present and
future values of a single payment. It also explains the way to calculate the present and
future values of a stream of cash flows. But the thing I learned from case is the way to
simplify those calculations by using premade tables, which provide combinations of the
duration and interest rates on the cash flow and give numbers which simplify the NPV
formula immensely.
The problems were not really hard, except the fourth and fifth. I was not sure how to
implement the tax deductibles in the calculation, so I assumed that the tax income is
cancelled by the tax deductible from depreciation. Here are the solutions to the problems.
1)
b) -25000+(500*6,336)+(15000*1.085)=-25000+3168+22039.92=207.92
2)
a) 50000000/1.184=25789413.961
b) x*2,690=25789413.961
x=9587142.736
3)
40000*8.384=335360
a) 48000*7.360=353280
b) 50000*4.917+30000*(8.384-4.917) = 245850+104010=349860
4)
a) -45000+(8000*5.747)=976
b) -45000+8000*3.993+4800*(5.747-3.993)=-45000+31944+8419.2=-4636.8
5)
-6000000+220000*6.710-100000*6.710=-6000000+805200=-5194800
6)
-520000+100000*X=0
X=5.2
(X is the parameter in the table which combines a certain duration and interest)