The Money Game 2008 Objective: Use the calculators below (Cash Flow & Sci-Math) to answer upcoming questions. |
Cash Flow Calculator (see examples) |
SPFV
Future Value of $1 paid now = (1+x)^n SPPV Present Value of $1 paid in future = 1/(1+x)^n USFV Future Value of uniform future payments of $1 = ((1+x)^n)-1)/x SFFV Payment required each period to achieve Future Value of $1 = x/((1+x)^n)-1) CRPV Payment required each period to achieve Present Value of $1 = (x*(1+x)^n)/((1+x)^n)-1) USPV Present Value of uniform future payments of $1 = ((1+x)^n)-1)/(x*(1+x)^n) ------- Definitions: n=number of periods, x=interest rate for a period. Time note: if periods are in months and interest rate is per year, then x = [interest rate yearly/12]. SPFV example: (Future value of $100 in 7 years at 10% interest = $194.87) SPPV example: (Present value of $500 received six years from now at 8% interest = $315) USFV example: (Future value of $1,000 each year for 7 years at 9% interest = $9,200) SFFV example: (Deposit required each month for 10 years at 15% interest to accumulate $200,000 = $603) CRPV example: (Monthly payment on $300,000 mortgage for 20 years at 6% interest = $2,149) USPV example: (Present value of $50,000 per year for 20 years at 7% interest = $529,700) ------- |
Most often, cash flow problems are multi-part. Cash flows must be broken down into components and brought to same point in time. More than one iteration may be required. Example Problem: At 8.2%
interest, what is the present value of
this cash flow? [$Y] = Uniform payments of $1500 each year for 5 years but the
payments start 3 years from now. Also, [$Z] a final payment of $25000 will be
made in the tenth year. Solutions to problems may be subjective
based on the assumptions used. Interest rate must be
established by the evaluator. Risk and taxes are other considerations. 'What ifs' and 'trial and error' calculations may be required. |
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