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Time value exercise solutions. simple calculations on how a price is increase/decreased after some years of buying it
Typology: Exercises
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Define: Time The end of a year or period MARR Minimum Attractive Rate of Return Interest %I Rate lender charges to use their money Discount Rate Is an interest rate, but used to discount FV to PV Opportunity Cost The cost to use your own money PV Present Value FV Future Value AV Annual Value PMT Payment, monthly MV Monthly Value, same as PMT
Convert: PV to FV
Use Table: PV to FV Annual
Calculation: $30,000 x 1.3382 = $40,
Convert: FV to PV
Use Table: FV to PV Annual
Calculation: $35,000 x 0.5835 = $20,
Convert: PV to AV
Use Table: PV to AV Annually
Calculation: $50,000 x 0.3087 = $15,
Time Line:
Convert: PV to PMT
Use Table: PV to PMT Monthly
Calculation: $50,000 x 0.02489 = $1,
Convert: AV to PV ($400/yr) FV PV ($500 salvage)
Use Table: AV to PV Annually & FV to PV Annual
Calculation: $400 x 2.4018 = $960. $500 x 0.7118 = $355. Sum $1,316.
Known PV FV N
To be determined %I
Actually 3%