FIN 335 TIME VALUE OF MONEY CHAPTERS 4, 5, 6, 7, 8, 9 EXAM REVIEW SPRING 2012.

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Presentation transcript:

FIN 335 TIME VALUE OF MONEY CHAPTERS 4, 5, 6, 7, 8, 9 EXAM REVIEW SPRING 2012

Breakdown of Question Types Concept/Application 13 TVM Problems12 Capital Budgeting Problem 5 parts –Total30 Capital Budgeting Case (34 pts.) –Compute Depreciation Schedule (9) –Complete After-Tax Cash Flow Table (18) –Compute NPV and IRR, Invest decision (7)

Chapters 4, 5 Present Value of single payment to be received at some time in the future assuming a discount rate Future Value of a single deposit or investment at some rate of interest for a set period of time. Present Value of a series of equal payments (annuity) Future Value of a series of deposits; e.g., IRA, 401(k) Impact of time, interest rates, & payment frequency on Present and Future values. N I/Y (P/Y) PV PMT FV CLT TVM

Homework Questions & Problems Chapter 4: –Questions 4.2, 4.3 –Problems 1, 2, 3, 4, 7 Chapter 5 –Questions 5.1, 5.2 –Problems 1, 16, 20, 24

Chapters 6, 7 Market Value (Price) of Bonds –Term to maturity (N) –Frequency of Coupon Payments (P/Y) –Yield to Maturity (I/Y) –Price (Present Value) –Face Value (assumed to be $1000) –Relationship between rate changes and prices

Homework Questions & Problems Chapter 6 –Questions 6.15, Zero-Coupon Bonds –Problems 3, 4, 5

Chapters 8, 9 Investment Decision Rules –Net Present Value (NPV) –Internal Rate of return (IRR) –Payback Period (PBP) Determine –Initial Outlay (I 0 or CFo) Impact of sale of old asset on I 0 Impact of sale of new asset at end of investment project Tax consequences on net cash flow from sale of asset –Annual Depreciation Expense (ADE) –Complete an After-Tax cash Flow Table –Compute NPV and IRR –Apply Decision Rule

Homework Questions & Problems Chapter 8 –Questions 8.2, 8.3, NPV, IRR Decision Rules –Problems 1, 5 Chapter 9 –Questions 9.2, 9.3 –Problems 6, Class Problem (Depreciation Table, After-Tax Cash Flow table, compute NPV and IRR)