1. Basic Financial Calculations MGT 4850 Spring 2009 University of Lethbridge

2. http://www.media.mit.edu/physics/publications/books/nmm/files/index.html http://www.conference-service.com/conferences/uz/complex-systems.html http://www.finance-innovation.org/risk09/ http://www.efinancialcareers-canada.com/ http://www.global-derivatives.com/

3. Topics http://www.santafe.edu/education/csss/csss08/programinfo.php Net Present Value Internal Rate of Return Future Value Pension and accumulation problem Continuously Compounded Interest

4. PV and NPV Discount rate10% Present value$379.08<-- =NPV(B2,B7:B11) Cash Yearflow 1100 2 3 4 5

5. Exact NPV problem in Excel Discount rate10% Net present value-20.92<-- =G7+NPV(G2,G8:G12) Cash Yearflow 0-400 1100 2 3 4 5

6. IRR 7.931%<-- =IRR(B19:B24) NPV-20.92 For discount rate 10% Cash Yearflow 0-400 1100 2 3 4 5

7. COMPUTING THE VALUE OF A GROWING INFINITE ANNUITY Please, recall the Dividend Growth Model (p.9 bottom)

8. INTERNAL RATE OF RETURN NPV of a project set to 0, discount rate that makes future cash flow equal the initial investment

9. USING THE IRR IN A LOAN TABLE (p.12) Recall loan amortization

10. USING A LOAN TABLE TO FIND THE IRR Goal seek is under the Tools Menu (Data>What if analysis> Goal Seek.

11. Loan amortization

12. Loan amortization 2

13. 1 step calculate IRR

14. Multiple Internal Rates of Return Discount rate6% NPV-3.99<-- =NPV(B3,B9:B13)+B8 Cash Yearflow 0-145 1100 2 3 4 5-275

15. Multiple Internal Rates of Return

16. Bond Cash Flow

17. Loan Amortzation

18. Future Value Problems (p.19)

19. FV (p. 20)

20. Annuity problems (p. 22)

21. Compounding periods Continuous compounding (p.26)

22. Continuous discounting

23. Continuous Return

24. Table Type in the first column # compounding periods Header of the second column = cell with interest rate Highlight the table area Activate the command Data What if analysis/Tab le

25. Dated Cash Flows XIRR – for IRR p 30 XNPV – p.31