 # Corporate Finance Case

Autor:   •  December 3, 2012  •  Coursework  •  423 Words (2 Pages)  •  1,183 Views

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CORPORATE FINANCE

1) Valuation formulae

Let V be the present value of an asset or security that pays cash flows in the future, where the last cash flow is to be received at time T (note that, if cash flows are to be received forever, then T = ∞). Let CFt be the cash flow to be received at time t, and let rt be the appropriate discount rate for the period from now to time t. Then,

Special cases:

(i) Time periods between cash flow payments are of equal length

(ii) The discount rate is the same for all periods (rt = r)

(iii) The discount rate is the same for all periods (rt = r), cash flows for times from next period until the maturity of the asset are constant (CFt = C), with an additional final payment being made at maturity (when T = M)

(iv) There is only one cash flow to be received, at the maturity of the asset (T = M)

(v) The discount rate is the same for all periods (rt = r) and cash flows for times from the next period until the maturity of the asset are constant (CFt = C)

(vi) The discount rate is the same for all periods (rt = r) and cash flows are constant forever (CFt = C)

2) TVM keys on a financial calculator

How do these valuation formulae translate to the TVM keys on a financial calculator?

3) Types of cash flow streams

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