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#### For this section, use workbook Time

For this section, use workbook Time.xlsx. This section is slightly different in that you have to create the formulas in each worksheet and then answer additional questions. For full credit, I need to see the use of the function and formula features of Excel. You must use the appropriate function/formula to earn full credit and the answers must be in the highlighted cells with a surrounding border.

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## Definitions

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Cash Flow: Earnings before depreciation, etc.

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Discount Rate: Interest rate

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Future Value: The value of an asset at a certain point in the future when its return is a known factor.

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Period: The time span in which certain financial events took place.

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Present Value: The current worth of a future sum of money or stream of cash flows given a specified rate of return

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## Formulas

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#### FUTURE VALUE

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Annuity Future Value: Equals (Payment) * (((1 + (Discount Rate/Period)) ^ (Number of Periods)) - 1) / (Discount Rate/Period)

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Future Value: Equals (Cash Flow) * ((1 + (Discount Rate/Period)) ^ ((Number of Periods) – (Current Period))

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Future Value of Each Cash Flow: Equals (Cash Flow) * ((1 + (Discount Rate/Period)) ^ ((Number of Periods) – (Current Period))

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#### LOAN AMORTIZATION

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Beginning Principal Balance in Year T: Equals (Beginning Principal Balance in year t-1) - (Principal Component in year t-1)

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Interest Component in Year T: Equals (Interest rate/year) * (Beginning Principal Balance in year t)

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Principal Component in Year T: Equals (Payment) - (Interest component)

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#### PRESENT VALUE

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Annuity Present Value: Equals (Payment) * (1 – ((1 + (Discount Rate/Period)) ^ (-Number of Periods))) / (Discount Rate/Period)

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Present Value: Equals (Cash Flow) / ((1 + (Discount Rate/Period)) ^ (Number of Periods))

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Present Value of Each Cash Flow: Equals (Cash Flow) / ((1 + (Discount Rate/Period)) ^ (Period))

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## Future Value

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1. A cash flow of \$747.25 is available now (in Period 0). For this cash flow, the appropriate discount rate/period is 6.0%. What is the period 5 future value? Use worksheet “Single-FV”.
2. An annuity pays \$80.00 each period for 5 periods. For these cash flows, the appropriate discount rate/period is 6.0%. What is the period 5 future value? Use worksheet “Annuity-FV”.

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## Present Value

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1. A cash flow of \$1,000.00 will be received in period 5. For this cash flow, the appropriate discount rate/period is 6.0%. What is the present value of this single cash flow? Use worksheet “Single-PV”.
2. An annuity pays \$80.00 each period for 5 periods. For these cash flows, the appropriate discount rate/period is 6.0%. What is the present value of this annuity? Use worksheet “Annuity-PV”.

## 20.89 USD

### Option 2

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