Presentation on theme: "1 Time Value Analysis Corporate Finance Dr. A. DeMaskey."— Presentation transcript:
1 Time Value Analysis Corporate Finance Dr. A. DeMaskey
2 Learning Objectives Questions to be answered: What is time value of money? What is compounding? Discounting? How are the principles of time value analysis applied to the various types of cash flows? What different types of interest rates are used in finance?
3 Basic Concepts Why time value of money? Evaluating financial transactions Expected cash flows Risk
4 Time Lines CF 0 CF 1 CF 3 CF 2 0123 i% Tick marks at ends of periods, so Time 0 is today; Time 1 is the end of Period 1; or the beginning of Period 2.
5 Single Cash Flow 100 012 Year i% Time line for a $100 lump sum due at the end of Year 2.
6 Even Cash Flows: Annuity 100 0123 i% Time line for an ordinary annuity of $100 for 3 years.