Post on 21-Dec-2015
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Time Value of MoneyTime Value of Money
AGEC 489-689AGEC 489-689
Spring 2010Spring 2010
Page 60 in bookletPage 60 in booklet
2009 2010 2011 2012 2013 ……. 2019
Time Value of Money…Time Value of Money…
Assume it is the year 2009 and you have been given the choice of a single payment of $500 paid to you ten years from now (2019) or a payment of $300 today. Which would you choose?
Page 60 in bookletPage 60 in booklet
Present Value Interest Factor (PIF) Table
PIFr,n = (1 + r) -n
Page 61 in bookletPage 61 in booklet
I would take the $300 today since it has a higher present value, given my discount rate of 6%, than $500 ten years from now.
I would take the $300 today since it has a higher present value, given my discount rate of 6%, than $500 ten years from now.
Present Value Interest Factor (PIF) Table
PIFr,n = (1 + r) -n
Page 61 in bookletPage 61 in booklet
EPIFr,n = [1 – (1 / (1+ r)n)] / r
Equal Payment Present Value Interest Factor (EPIF) Table
EPIFr,n = [1 – (1 / (1+ r)n)] / r
Equal Payment Present Value Interest Factor (EPIF) Table
Pages 61-62 in bookletPages 61-62 in booklet
Present Value Interest Factor (PIF) Table
PIFr,n = (1 + r) -n
Present Value Interest Factor (PIF) Table
PIFr,n = (1 + r) -n
Page 62 in bookletPage 62 in booklet
Page 63 in bookletPage 63 in booklet
Pages 63-64 in bookletPages 63-64 in booklet
Page 64 in bookletPage 64 in booklet
EPIFr,n = [1 – (1 / (1+ r)n)] / r
Equal Payment Present Value Interest Factor (EPIF) Table
Page 64-65 in bookletPage 64-65 in booklet
EPIFr,n = [1 – (1 / (1+ r)n)] / r
Equal Payment Present Value Interest Factor (EPIF) Table
Page 65 in bookletPage 65 in booklet
Page 65-66 in bookletPage 65-66 in booklet
Know equations 40, 44 and 45Know equations 40, 44 and 45
Let’s Work Some Let’s Work Some ProblemsProblems