Professional Documents
Culture Documents
Chapter 3
Cash Flow Analysis - II
3-1
$5,000
$3,000
0
1
3-3
F = P(1 + i)N
P = F/(1 + i)N
3-7
3-8
In Excel: FV function
Syntax
Rate
Nper
Pmt
Pv
Type
Required. The interest rate per period. (e.g. 10%/12, or 0.83%, or 0.0083)
Required. The number of periods.
Optional. The payment made each period (annuity).
Required. The present value (required if Pmt is omitted).
Optional. The number 0 or 1 and indicates when payments are due. If type is
omitted, it is assumed to be 0.
Required. The interest rate per period. (e.g. 10%/12, or 0.83%, or 0.0083)
Required. The total number of periods.
Optional. The payment made each period (annuity).
Required. The future value, (required if Pmt is omitted)
Optional. The number 0 or 1 and indicates when payments are due.
N-1
..
0
..
3 - 15
i
( A, F , i, N ) =
N
(1 + i ) 1
3 - 16
( A / P, i , N ) = ( A / F , i , N )(F / P, i , N )
=
i (1 + i )N
(1 + i )N 1
3 - 17
A(1+i)N-2
A
A
A(1+i)N-1
0 1 2
0 1 2
(1 + i) 1
N 1
N 2
F = A(1 + i) + A(1 + i) + + A = A
+
1
(1
i
)
N 1
N 2
F = A(1 + i) + A(1 + i) + + A = A
+
1
(1
i
)
N 1
N 2
F = A(1 + i) + A(1 + i) + + A = A
(1 + i ) N 1
P = A
N
+
i
i
(
1
)
Equations
- Find P given F
F
P=
(1 + i ) n
- Find F given P
F = P (1 + i ) n
- Find A given F
i
A = F
n
(1 + i ) 1
- Find A given P
i (1 + i ) n
A = P
n
(
1
+
)
1
i
- Find F given A
(1 + i ) n 1
F = A
(1 + i ) n 1
P = A
n
+
i
(
1
i
)
- Find P given A
Answer
i = 0.059/12 = 0.00492 per month
A = P(A/P, i, N) = $17 000(A/P, 0.00492, 48) =
$398.50
i (1 + i ) n
A = P
n
(
1
+
)
1
i
(1 + i )N 1
(F / A, i , N ) =
i
3 - 22
Answer
An effective annual interest rate must be calculated first:
3 - 23