《财务英语chap004》.ppt

the time value of money and Valuation 货币的时间价值和估价 Key Concepts and Skills Understand the time value of money Be able to compute the future value and/or present value of a single cash flow or series of cash flows Be able to compute the return on an investment Understand perpetuities and annuities the time value of money Problem Peter Minuit bought Manhattan Island for 24$ from native Americans in September 11,1626. Some people have said that it was the best real estate deal in history. However, if invested at 8 percent, the amount of money the native Americans received would be worth about $24×1.08385=$177.16 quadrillion the time value of money The basic idea behind the concept of time value of money is: $1 received today is worth more than $1 in the future OR $1 received in the future is worth less than $1 today Why? because interest can be earned on the money Future Value（终值） In the one-period case, the formula for FV can be written as: FV = C0×(1 + r) Where C0 is cash flow today (time zero), and r is the appropriate interest rate. Present Value（现值） In the one-period case, the formula for PV can be written as: 4.2 Compounding Future Value (复利现值） The general formula for the future value of an investment over many periods can be written as: FV = C0×(1 + r)T Where C0 is cash flow at date 0, r is the appropriate interest rate, and T is the number of periods over which the cash is invested. (1 + r)T is the Compounding Future Value factor of $1 Compounding Present Value (复利现值） In the multiperiod case, the formula for PV can be written as Present Value of Investment PV = CT/(1 + r)T= CT ×(1 + r)-T where CT is cash flow at date T and r is the appropriate interest rate. (1 + r)-T is the Compounding Present Value factor of $1 The Power of Compounding （复利的威力） Take the stock market, for example. Ibbotson and Sinquefield have calculated what the stock market returned as a whole from 1926 through 1999. They find that one dollar placed in these stoc