公司财务原理(第9版)课件03.pptVIP

Simple and Compound Interest The value of a $100 investment earning 10% annually. Compound Interest Compound interest versus simple interest. The top two ascending lines show the growth of $100 invested at simple and compound interest. The longer the funds are invested, the greater the advantage with compound interest. The bottom line shows that $38.55 must be invested now to obtain $100 after 10 periods. Conversely, the present value of $100 to be received after 10 years is $38.55. Compound Interest The same story as the previous chart, except that the vertical scale is logarithmic. A constant compound rate of growth means a straight ascending line. This graph makes clear that the growth rate of funds invested at simple interest actually declines as time passes. Compound Interest Compound Interest Example Suppose you are offered an automobile loan at an APR of 6% per year. What does that mean, and what is the true rate of interest, given monthly payments? Compound Interest Example - continued Suppose you are offered an automobile loan at an APR of 6% per year. What does that mean, and what is the true rate of interest, given monthly payments? Assume $10,000 loan amount. Web Resources Click to access web sites Internet connection required * 34 * 34 Copyright ? 2008 by The McGraw-Hill Companies, Inc. All rights reserved 3- * McGraw Hill/Irwin Chapter 3 Principles of Corporate Finance Ninth Edition How To Calculate Present Values Slides by Matthew Will Copyright ? 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw Hill/Irwin Topics Covered Valuing Long-Lived Assets Looking for Shortcuts – Perpetuities and Annuities More Shortcuts – Growing Perpetuities and Annuities Compound Interest Present Values Present Values Discount Factors can be used to compute the present value of any cash flow. Present Values Example You just bought a new computer for $3,000. The payment terms are 2 years same as cash. If you can earn 8% on your money,