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by: Chris Holder

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# Study Guide Exam 2 FIN 315

Marketplace > Finance > FIN 315 > Study Guide Exam 2
Chris Holder
UNCG
GPA 3.28

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This is a list of the material that was said to be on the test. Make sure that you know how to use your financial calculator to calculate Future Value, Present Value for a single amount, FV & PV ...
COURSE
PROF.
Dr. Milanese
TYPE
Study Guide
PAGES
3
WORDS
CONCEPTS
FIN 315
KARMA
50 ?

## Popular in Finance

This 3 page Study Guide was uploaded by Chris Holder on Monday February 29, 2016. The Study Guide belongs to FIN 315 at a university taught by Dr. Milanese in Spring 2016. Since its upload, it has received 69 views.

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Date Created: 02/29/16
Chris Holder FIN 315: Managerial Finance Exam 2 Review Cash flow is the meat and potatoes that keeps a firm alive Understand how cash flows work Chapter 4: Cash flows Positive values represent cash inflows Negative values represent cash outflows () Depreciation: a portion of the costs of fixed assets charged against annual revenues over time. Depreciation for tax purposes is determined by using the modified accelerated cost recovery system (MACRS) Depreciation formula = (full cost – salvage value)/useful Life Depreciation formula under (MACRS) = (full cost)/useful life Recovery period aka useful life, is the appropriate depreciable life of a particular asset as determined by MACRS. (n + 1) Developing the statement of cash flows Liquidity is increased by cash inflows and decreased by cash outflows. Categorization of Cash flows:  Operating Activities: cash flows directly related to sales and production  Investment Activities: cash flows related to purchase and sale of both fixed assets and equity investments in other firms.  Financing Activities: cash flows related and that result from debt (loans from the bank) and equity transactions. Calculating Operating Cash Flows: the cash flow generated from normal operations: OCF=NOPAT+DEPRECIATION Free Cash Flow equations: Net Fixed Asset Investment NFAI=Change∈¿Assets+Depreciation Net Current Asset investment NCAI=Change∈current assets−Change∈ (accounts payable+accrua)s Free Cash Flow FCF=OCF−NFAI−NCAI Then evaluate according to the interest expense, if FCF > INTEREST, then the firm generated a sufficient amount of cash flow to satisfy investors. Chapter 5 Time value of money: Money today is worth more than a money in the future. FV PV= n Present Value: (1+i) Future Value: FV=PV ×(1+i) n Discounting: present value(the inverse of future value) Compounding: future value Annuities(2 types) nominal vs effective rate: 1. nominal rate: the stated annual rate of interest charged. Does not reflect the effects of compounding frequency. 2. effective rate: the annual rate of interest actually paid/earned. This rate reflects the effects of compounding frequency** ordinary annuity vs annuity due: Annuity Due v Ordinary Annuity Ordinary Annuity: the cash flow occurs at the end of each period. (INCALCULATOR_END) Annuity Due: the cash flow occurs at the beginning of each period. They have higher future value than ordinary annuities because each cash flow can earn interest for 1 year more than each of an ordinary annuity.*(INCALCULATOR_BEGIN) Finding the future value of an ordinary annuity Calculator Inputs Input Function -1000 PMT 5 N 7 I CPT FV Finding the present value of an an ordinary annuity Calculator Inputs Input Function 700 PMT 5 N 8 I CPT PV LONG METHOD OR FOR FINDING THE PRESENT VALUE FOR A PERIOD SUM OF PRESENT VALUES ∑ PV= FV (1+i)n *To Find The Present or Future value of an annuity due just change the mode from END to BEGIN mode Amortization of a loan  (on financial calculator. = shift+AMORT+enter+(++)) Net Present Value  The sum of all the present values for a mixed stream. Used (FV, I, n as the period, pmt=0) Internal Rate of Return Perpetuity is an annuity with an infinite life PV=CF ÷r *You must also learn how to use the financial calculator. Mixed Streams: unequal periodic cash flows Future value of a mixed stream:  You need to use your calculator to calculate the future value of each individual cash flow  Then sum the values to get the future value of the entire cash flow stream. Present value of a Mixed Stream:  Use the future/present value of a Single lump sum equation for each period then add up all the values

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