【正文】 2022 Pearson Education Australia Pty Limited Slide: 1 101 Case study State of economy Recession Normal Boom Probability P Return A B 4% 10% 14% 10% 14% 30% Company B R* = P(R1) x R1 + P(R2) x R2 + … + P(R n) x Rn RB* = x 10% + x 14% + x 30% = 14% Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 97 Interest rate determinants Interest Rates Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 93 19261999： the annual rates of return in American financial market 6 0 4 0 2 0020406026 30 35 40 45 50 55 60 65 70 75 80 85 90 95C o m m o n S t o cksL o n g T B o n d sT B i l l sCopyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 89 ? Calculating Present and Future Values – for single cash flows – for an uneven stream of cash flows – for annuities and perpetuities ? For each problem identify: i, n, PMT, PV and FV Summary Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 85 Retirement Example ?After graduation, you plan to invest $400 per month in the stock market. If you earn 12% per year on your stocks, how much will you have accumulated when you retire in 30 years? 0 1 2 3 . . . 360 400 400 400 400 Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 81 Mathematical Solution: Simply pound the FV of the ordinary annuity one more period: PV = PMT (PVIFA i, n ) (1 + i) PV = 1,000 (PVIFA .08, 3 ) () (use PVIFA table, or) 1 PV = PMT 1 (1 + i)n (1+i) i 1 PV = 1000 1 ( )3 () = 2, Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 77 What about this annuity? ?Same 3year time line, ?Same 3 $1000 cash flows, but ?The cash flows occur at the beginning of each year, rather than at the end of each year. ?This is an “annuity due.” 0 1 2 3 1000 1000 1000 Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 73 ? Example Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 69 Mathematically, (PVIFA i, n ) = We said that a perpetuity is an annuity where n = infinity. What happens to this formula when n gets very, very large? 1 1 (1 + i) n i Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 65 ? Example Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 61 Mathematical Solution: FV = PMT (FVIFA i, n ) FV = 1,000 (FVIFA .08, 3 ) (use FVIFA table, or) FV = PMT (1 + i)n 1 i FV = 1,000 ()3 1 = $ Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 57 The Time Value of Money Compounding and Discounting Cash Flow Streams 0 1 2 3 4 Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 53 Present Value single sums If you will receive $100 5 years from now, what is the PV of that $100 if your opportunity cost is 6%? Mathematical Solution: PV = FV / (1 + i)n = 100 / ()5 = $ PV = FV (PVIF i, n ) = 100 (PVIF .06, 5 ) (use PVIF table) = $ 0 5 PV = ? FV = 100 Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 50 Present Value Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 46 Future Value single sums If you deposit $100 in an account earning i, how much would you have in the account after n years? Mathematical Solution: FVn=PV (1 + i)n = PV (FVIF i, n ) 0 n PV = 100 FV = ? Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 42 Future Value single sums If you deposit $100 in an account earning 6%, how much would you have in the account after 2 year? Mathematical Solution: FV2= FV1 (1+i) 1 =PV (1 + i)2 = 100 ()2 = $ 0 2 PV = 100 FV = ? Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 38 we can MEASURE this opportunity cost by: ? Translate $1 today into its equivalent in the future (COMPOUNDING). ? Translate $1 in the future into its equivalent today (DISCOUNTING). ? ? Today Future Today Future Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 34 End of Chapter 1 Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 31 Primary and secondary markets ? Primary markets – Selling of new securities – Funds raised by governments and businesses ? Secondary markets – Reselling of existing securities – Adds marketability and liquidity to primary markets – Reduces risk on primary issues – Funds raised by existing security holders Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 28 Broking amp。 2022 Pearson Education Australia Pty Limited Slide: 1 24 Comparison of Organisational forms ? Organisation requirements and costs ? Liability of owners ? Continuity of business ? Transferability of ownership ? Management control ? Ease of capital raising ? Ine taxes Copyright 169。 2022 Pearson Education Australia Pty Limited Slide: 1 20 Nature of the anisational forms ? Sole proprietorship – Owned by a single individual – Absence of any formal legal business structure – The owner maintains title to the assets and is pers