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Finance
by
Robert Parrino, Ph.D. & David S. Kidwell, Ph.D.
Created by
Babu G. Baradwaj, Ph.D
Lawrence L. Licon, Ph.D
CHAPTER 6
Quick Links
Multiple Cash Flows
Level Cash Flows: Annuities and
Perpetuities
Cash Flows That Grow at a Constant Rate
The Effective Annual Interest Rate
Exhibits
factor
results in equation 6.1 that can be used to
calculate the annuitys present value
Go to Exhibit 6.4
Chapter 6 Multiple Cash Flows
CF
1
1
(1 i ) n
CF
i
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spreadsheet
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1
1
(1 0)
(1 i)
CF
CF
i
i
CF
i
Chapter 6 Multiple Cash Flows
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Go to Exhibit 6.7
Chapter 6 Multiple Cash Flows
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or growing perpetuities
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CF1
1+g
PVA n =
n 1-
(i - g) 1+i
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annuity forever
Can be derived from equation 6.5 when n tends
CF1
PVA =
(i - g)
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variety of ways
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