FME Session 9

8/4/2019 FME Session 9

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Find Future ValueSingle cash flow

1 PV 5,000Rate 13.65%

Years 18

2 PV 1,000Rate 8.00%Compounding Half-yearly

Years 5

Multiple cash flow3 Year 1 2 3 4

PV 300 400 700 500Rate 8.00% 8.00% 8.00% 8.00%

Annuity4 Amount 200

Rate 8.00% Years 5

Find Present ValueSingle cash flow

5 FV 1,000Rate 8.00%

Years 5

6 FV 600Rate 4.50%Compounding Quarterly

Years 3

Multiple cash flow7 Year 1 2 3 4

FV 800 450 650Rate 12.00% 12.00% 12.00% 12.00%

8 AnnuityPMT 1,000

Rate 8.75%Periods 6

Find the interest rate9 PV 5,000

Years 18FV 50,029

10 A client invests Rs.5 Lacs into a bond mutual fund to earn 7% annually. Estimate value11 A client has a Rs.50 Lacs portfolio and invests 5% in a money market fund projected to


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If the same is compounded quarterly?

12 To cover a college tution payment, a father will make a Rs.25 Lacs payment in 5 years f 13 A retiree needs Rs.1 Crore in 25 years from now, how much will he have to invest now t

14 How much will an RD earn in a year if you invest Rs.5,000 monthly at 7% interest

15 Godrej is spending Rs1Crore on advertising. This would increase cash flows by Rs.16 La

16 Widia is considering a JV that will require an investment of Rs. 13 Crores. At the end of tIf the hurdle rate is 12%, calculate the JV NPV if the project generates Rs. 3 Crores in ca


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f the investment after 7 yearsarn 3% annually. Estimate the value of the fund in 3 years


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rom now. How much will he need to invest today to meet his goal if the investment earns 6% ao meet his requirement if the interest on a fixed deposit is 8%

s for 10 years. The corporate cost of capital is 12.5%, Calculate NPV and IRR of the project

he fifth year the JV partner will buy out Widia's interest for Rs. 10 Croressh flows each year upto the fifth year. Estimate IRR of the project


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nually


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EX1

PMT 100NPER 5RATE 10%FV Rs.610.51

EX2

FV 100000RATE 8%NPER 18PV ###

EX3

Suppose that you have $1,250 today and you would like to know how long it wi

PV 1250FV 2500RATE 9%NPER 8.04

EX4

EX5

EX6

EX7

Suppose that you have Rs.100 to invest for a period of 5 years at an interest ra

Suppose that you are planning to send your daughter to college in 18 years. F or tuition, room and board, party supplies, etc. If you believe that you can ear

as a lump sum to achieve your goal?

Suppose that you are planning to send your daughter to college in 18 years. F or tuition, room and board, party supplies, etc. If you have $20,000 to invest t

Suppose that you are offered an investment that will pay you $1,000 per year f willing to pay for this annuity?

Suppose that you will be borrowing $1000 each year for 10 years at a rate of 9have to repay?

Su ose that ou are lannin to send our dau hter to colle e in 18 ears. F


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FV 100000RATE 8%NPER 18PMT

EX8

FV 100000RATE 8%NPER 18PV 5000PMT

EX9

EX10

EX11

EX12

pay for tuition, room and board, party supplies, etc. If you believe that you canthe end of each year to achieve your goal?

Rs.2,670.2

Suppose that in the above case you have just received a gift from one of your d tuition. How does this change the amount that you would have to invest each y

Rs.2,136.7

Imagine that you have just retired, and that you have a nest egg of $1,000,000. per year on average and withdraw $70,000 per year, how long will it take to bu

irst withdrawal will occur one year from today.

Suppose that in the above case you would like to leave an inheritance of at leawithdraw the $70,000 per year?

Suppose that you are offered an investment that will cost $925 and will pay yoinvestment will pay $1,000. If you purchase this investment, what is your comp

Suppose that you are planning to send your daughter to college in 18 years. F or tuition, room and board, party supplies, etc. If you believe that you can ear

beginning of each year (starting today) to achieve your goal?


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EX13

Suppose you would like to invest some amount to make some money. If you ar Amount('000) Inv in Mafg P

Initial Investment 1000 950 1500 750Cash InfloYear1 100 90 200 75

Year2 250 275 205 150 Year3 325 300 215 200 Year4 350 300 300 250

Salvage V Year5 950 875 1150 700Borrowing Rate 15% 18% 8% 12%

BuyProperty &Rent it out

Lend forinvestmentin Business

Open Storein GandhiBazar


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ll take you double your money to $2,500. Assume that you can earn 9% per year on

e of 10% per year. How much will you have accumulated at the end of this time per

rthermore, assume that you have determined that you will need $100,000 at that ti an average annual rate of return of 8% per year, how much money would you nee

rthermore, assume that you have determined that you will need $100,000 at that ti day, what compound average annual rate of return do you need to earn in order to

r 10 years. If you can earn a rate of 9% per year on similar investments, how much

, and then paying back the loan immediate after receiving the last payment. How

rthermore assume that ou have determined that ou will need Rs100 000 at that ti


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ughter's grandparents. They have given you Rs.5,000 to be invested to help pay for ear?

This is the amount that you will be drawing down for the rest of your life. If you ex n through your nest egg (in other words, for how long can you afford to live)? Ass

t $100,000 to your favorite charity. How does this affect the number of periods in w

interest of $80 per year for the next 20 years. Furthermore, at the end of the 20 yeound average annual rate of return?

rthermore, assume that you have determined that you will need $100,000 at that ti an average annual rate of return of 8% per year, how much money would you nee


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given with the following options, in which project would you be interested in inves

80090

185200220690

12%

Open Storein MG rd


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our investment.

od?

e in order to payd to invest today

e in order to payreach your goal?

should you be

uch would you

me in order to


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her college

ect to earn 6%me that your

ich you can

rs, the

e in order to payd to invest at the


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ing your money?


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CALCULATING PAYMENT (PMT):

EXERCISE How much would I have to pay back every month if I took out a lo

PV 10000NPER 5RATE(%) 10%

PMT Rs.212.47


PV 10000NPER 5RATE 10%PMT Rs.210.71


PV 5000NPER 3RATE 5.60%FV 500PMT Rs.163.99


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n for 10000 over 5 years with an annual interest rate of 10%.

n for 10000 over 5 years with an annual interest rate of 10% and the payment i

n for 5000 over 3 years with an annual interest rate of 5.6% and a lumpsum of


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done at the start of the month.

00 to pay at the end of 3 years.


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CALCULATING YEARS (NPER):

EXERCISE- How many years will it take an investment of 1500 to grow to

PV 1500FV 2000RATE 4.30%

NPER 6.83

EXERCISE- How many years will it take for me to save 60000 if my bank a

PV 5000FV 60000PMT 750RATE 0.50%NPER 74.26


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2000 if the annual average growth rate is 4.3%.

ccount is currentlyhas 5000 and I deposit 750 every month with monthly interes


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of 5%.


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CALCULATING RATE (%):

EXERCISE What annual interest rate have you received if you pay 5 every year fo

PMT 5FV 16NPER 3

RATE 7%

EXERCISE What annual interest rate have been changed if you pay off 1000 loan i

PMT 300PV 1000NPER 4RATE 8%


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3 years and receive 16 at the end.

n 4 years making annual payment of 300.


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CALCULATING FV:

EXERCISE Suppose that you have 100 to invest for a period of 5 years at rate of

PMT 100NPER 5RATE 10%

FV ###


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0% per year. How much you have accumulated at the end of 5 years?


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CALCULATING NPV:

Current Investment at the end of 10000 NPER 1 2RATE 10% AMOUNT 3000 4200

NPV Rs.2,727.27 3471.07


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3 TOTAL NPV6800

5108.94 ### ###

NPV (using Form ###

FME Session 9

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