贴现现金流估值 chap004.pdfVIP

Chap 4 Discounted cash flow valuation Yixia Wang CM,HUST Mar.2010 Outline of Lecture 3 l Time Value of Money l Interest Rates (Simple vs. Compound) l Present and Future Value l Multiple Cash Flows l Annuities and Perpetuities l Growing Annuities and Perpetuities l EAR and APR l Loan Types and Loan Amortization 2011/2/16 CM,HUST 2 l Which would you prefer -- $100,000 today or $100,000 in 5 years? Obviously, $100,000 today. You already recognize that there is TIME VALUE of MONEY!! 2011/2/16 CM,HUST 3 Why Time? Why is TIME such an important element in your decision? TIME allows you the opportunity to postpone consumption and earn INTEREST. 2011/2/16 CM,HUST 4 What Would Represent the Time Value of Money? l No risk, no inflation. uInterest rate of T-bills (one-year) (in America) uBenchmark interest rate (LIBOR) 2011/2/16 CM,HUST 5 Types of Interest Rate l Simple Interest Interest paid (earned) on only the original amount, or principal borrowed (lent). l Compound Interest Interest paid (earned) on any previous interest earned, as well as on the principal borrowed (lent). 2011/2/16 CM,HUST 6 Simple Interest vs. Compound Interest l Assume that you have put $100 in a savings account at 5% per year: SIMPLE INTEREST Simple Interest Year Principal Interest Interest on Interest Earned Total