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corporate finance
corporate finance chapter 2
| Term | Definition |
|---|---|
| future value formula | fv=p(1+r)^t |
| present value formula | pv= c/(1+r)^t |
| net present value formula | NPV= C0+pv npv=C0+C1/(1+r) |
| rate of return formula | return=profit/investment |
| npv rule | accept investments/projects that have positive net present values |
| rate of return rule | accept investments/projects that offer rates of returns in excess of their opportunity costs of capital |
| discounted cash flow/IRR formula | pv=C1/(1+r)+C2/(1+r)^2+C3/(1+r)^3..... Ct/(1+r)^t |
| perpetuity | payments that have no maturity date.go on forever |
| annuity | payments that have a specific maturity date. end after some point |
| perpetuity formula | pv of perpetuiy= c/r |
| annuity formula | pv of annuity = C[1/r - 1/r(1+r)^t or c/r[1-1/(1+r)^t] |
| growing annuity formula | pv= c/r-g[1-(1+g)^t/(1+r)^t] |
Created by:
cborno
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