1. 4-1 Exercises and Shortcuts in Time Value of Money

2. 4-2 Net Present Value of an Investment Opportunity

3. 4-3 Perpetuities, Annuities, and Other Special Cases Perpetuities Annuities Growing Cash Flows –Growing Perpetuity –Growing Annuity

4. 4-4 Short Cuts Perpetuity – A fixed amount of cash is received forever. Examples: Preferred stock, consol bond Note: Mathematically, we have a declining geometric series, which has a finite value

5. 4-5 Short Cuts Perpetuity – A fixed amount of cash is received forever. Examples: Preferred stock, consol bond Note: Mathematically, we have a declining geometric series, which has a finite value

6. 4-6 Perpetuity - example Suppose that as a successful TCU graduate you decide to establish an endowed chair in finance that will pay $250,000 a year in perpetuity. How much money do you need to donate to the school to establish this endowment? Assume the prevailing interest rate is 10%

7. 4-7 Short Cuts Annuity - An asset that pays a fixed sum each year for a specified number of periods. Example: mortgage payments, car payments, car insurance, rent

8. 4-8 Short Cuts

9. 4-9 Present Value of a Lottery Prize Annuity

10. 4-10 Retirement Savings Plan Annuity

11. 4-11 Future Value of an Annuity

12. 4-12 Growing Perpetuity Suppose you change your wish and decide that the salary that the professorship pays should grow at 4% annually. How much money do you need now?

13. 4-13 Growing Perpetuity

14. 4-14 Retirement Savings with a Growing Annuity

15. 4-15 Present Value of a Growing Annuity