# Calculator and QuickCalc USA

Size: px
Start display at page:

Transcription

1 Investit Software Inc. Calculator and QuickCalc USA TABLE OF CONTENTS Steps in Using the Calculator Time Value on Money Calculator Is used for compound interest calculations involving uniform payments, and can be used to solve a wide variety of financial, mortgage, and loan problems. Similar to the HP10B and Texas Instrument BAII Plus Compounding Annual Growth Calculator Is used to carryout compounding annual growth calculations. Discounted Cash Flow Calculator Is used to calculate the Internal Rate of Return (IRR), the Net Present Value (NPV), and the Modified Rate of Return (MIRR) for a series of cash flows. Standard Mortgage Calculator Is used to produce the mortgage schedules for a standard or conventional mortgage. APR/Effective Interest Rate Calculator Is used to calculate the APR (Annual Percentage Rate) and the Effective True Annual Interest Rate. It can be used to compare several different loan proposals by standardizing their Interest Rates. Mortgage Discount Calculator Is used to determine how much to pay for a mortgage in order to obtain a specified annual return Seller Take-Back Mortgage (Cost or Benefit) Determines the Cost or Benefit of a mortgage provide by the seller to the buyer at an interest either higher or lower the market interest rates for a similar mortgage. Mortgage Take Over (Cost/Benefit) This function is used to calculate the Cost or Benefit to the purchaser of a property incurred by assuming the Seller's mortgage at an Interest Rate that is either higher or lower than the current interest rate for a similar mortgage. Mortgage Renegotiation (Cost/Benefit) This function is used to evaluate the cost or benefit associated with renegotiating your mortgage if interest rates fall. Income Property Financing Calculator This function is used to calculate the loan amount and mortgage payment using the Income and Expenses for the building using the Debt Service Ratio and the Loan to Value Ratio. Residential Building. Breakeven Analysis This function is used to calculate the number of suites that must be rented in order for an apartment building to breakeven. Commercial Building. Breakeven Analysis This function is used to calculate the amount of space (in square feet) that must to be rented in order for the building to breakeven. Imperial/Metric Converter Is used to convert between the Imperial and Metric systems for the following types of measures: Area Calculator Is used to calculate the area of lots, floor plans etc. consisting of one or more shapes.

2 Using Calculator Calculator offers a variety of programs that help you solve real estate and general financial problems enabling you to make wise financial choices. QuickCalc is the same program as Calculator that can be accessed instantly from any Investit Program by clicking on QuickCalc on the menu bar, and then selecting the desired Calculator program. Note: With Calculator, you can save your entries under a Project Name. However, QuickCalc entries and calculations cannot be saved Steps for using Calculator 1. Open Calculator, which will display the Main Calculator Screen. 2. Click on New Project to open a new project or click on Open Project to call up a saved project. 3. Click on the desired Calculator Program. E.g., Time Value of Money 4. Enter the required information. 5. Click on the Compute Button to calculate and display the results. 6. To Print Reports, click on the Print Reports 7. To display the report on the screen, click on Reports on the menu bar and select the desired report. 8. Click on Done to return to the main Calculator screen. Main Calculator Screen

3 Time Value of Money Calculator Is used for compound interest calculations involving uniform payments, and can be used to solve a wide variety of financial, mortgage, and loan problems. The program can solve for: Present Value (PV) Payment Interest Rate Future Value (FV) Time Period The following examples show the different types of financial problems that can be solved by the Time Value of Money Calculator. Example # 1: Present Value Calculation How much should I pay for a property which provides a monthly cash flow of \$6,500 at the beginning of each month for 15 years, if I require an Annual Return of 13% compounded monthly? The value of the Property at the end of 15 years is estimated to be \$4,100,000. Calculate: Present Value Nominal Interest Rate: 13% Future Value: \$4,100,000 Payment: \$6,500 Time Period: 15 years Settings: Payment Frequency: Monthly Payment made at: Beginning of Period Compounding Frequency: Monthly Answer: Present Value: \$1,108, Example # 2: Future Value Calculation If I invest \$2,000 per month at the end of each month at 12% per year, compounded monthly. How much will I have at the end of twenty years? Calculate: Future Value Nominal Interest Rate: 12% Present Value: \$0.00 Payment: -\$2,000 (outflow) Time Period: 20 years Settings: Payment Frequency: Monthly Payment made at: End of Period Compounding Frequency: Monthly Answer: Future Value: \$1,978,510.73

4 Example # 3: Nominal Interest Rate Calculation A lender has loaned \$120,000 and will receive back \$1,200 at the end of each month for 5 years plus \$90,000 at the end of the fifth year. What is the Annual Return, compounded monthly? Calculate: Present Value: Future Value: Payment: Time Period: Settings: Payment Frequency: Payment made at: Compounding Frequency: Nominal Annual Interest Rate -\$120,000 (outflow) \$90,000 (inflow) \$1,200 (inflow) 5 years Monthly End of Period Monthly Answer: Nominal Annual Interest Rate: 7.907% Example # 4: Time Period Calculations If you invest \$300,000 at 9.5% compounded monthly plus \$2,000 per month at the beginning of each month, how long will it take for the investment to grow to \$700,000? Calculate: Time Period Nominal Annual Interest Rate: 9.5% Present Value: -\$300,000 (outflow) Future Value: \$700,000 (inflow) Payment: -\$2,000 (outflow) Settings: Payment Frequency: Monthly Payment made at: Beginning of Period Compounding Frequency: Monthly Answer: Time Period: months

5 Example # 5: Payment Calculation An owner of an apartment building feels that he will have to replace all of the appliances in 6 years time at an estimated cost \$39,000. At a Nominal Annual Interest Rate of 4.5%, compounded monthly, how much money will he have to deposit at the beginning of each month in order to have \$39,000 available at the end of 6 years? Calculate: Payment Nominal Annual Interest Rate: 4.5% Present Value: \$0.00 Future Value: \$39,000 Time Period: 6 years Settings: Payment Frequency: Monthly Payment made at: Beginning of Period Compounding Frequency: Monthly Answer: Payment: \$ per month Notes: 1. Mortgage Schedules. You can use Time Value of Money Calculator to solve mortgage problems, but you may find it easier to use the Standard Mortgage function in Calculator (see below) where you can print out the mortgage schedules., 2. Handling uneven cash flows If you are dealing with uneven cash flows, use Discounted Cash Flow Calculator (see below), as Time Value of Money Calculator can only handle uniform payments. The following is an example of an Uneven Cash Flow Uneven Cash Flow Example Year 0 -\$350,000 1 \$40,000 2 \$43,000 3 \$49,000 4 \$54,000 5 \$425,000 Time Value of Money Calculator cannot solve this because the periodic payments yearly are uneven. Use the Discounted Cash Flow Calculator.

6 Compounding Annual Growth Calculator Is used to carryout compounding annual growth calculations. Example: "An Investor has purchased a property for \$600,000, what will it be worth in 15 years time if she thinks the value will increase at 4% per year compounded?" Important Note: The Purchase Price of \$600,000, which is the Present Value, is entered as a negative value because it is an Outflow or payment i.e. the investor is spending \$600,000 which is treated as a negative number. When they sell the property in 15 year time, the receive the money from the sale which is a positive number. Enter the above data as show in the picture above and then press the The program can calculate: Future Value, Present Value, or Annual Compound Growth Rate. Answer: \$1,080,566

7 Discounted Cash Flow Calculator Is used to calculate the Internal Rate of Return (IRR), the Net Present Value (NPV), and the Modified Rate of Return (MIRR) for a series of cash flows. Example: An investor is considering purchasing a rental property for \$900,000, and expects the annual cash flows listed below. In addition, he anticipates that the building will sell for \$1,500,000 at the end of the 5th year. What is the: Internal Rate of Return (IRR)? Net Present Value using a 9% Discount Rate? Modified Internal Rate of Return (MIRR) using a short term borrowing rate of 8% and a short term reinvestment rate of 3.5%? Note: The investment of \$900,000 is entered as a negative number because it is an outflow or payment Enter the above data as show in the picture above and then press the Note: For more complex analysis involving both before and after tax cash flows, use the Investor program.

8 Standard Mortgage Calculator Is used to produce the mortgage schedules for a standard, or conventional mortgage, where the interest rate is fixed for the entire term, and the blended payment of principal and interest is constant. The following results are produced on the screen: Principal and Interest components of each payment Outstanding balance at the end of the term Principal paid-off over the term Interest paid over the term Effective Annual Interest Rate Note: Example: For more complex mortgages with multiple terms, fixed or variable interest rates, and additional payments or borrowing, use the Investor Financier Template. Calculate the payment, Outstanding Balance at the end of the term, and the Effective Interest Rate for the following mortgage: Mortgage Amount: \$175,000 Nominal Annual Interest Rate: 7.500% Amortization Period: 30 years Term: 3 years Mortgage is paid off at the end of 3 years Payment Frequency: Monthly Payment Made: End of Period Compounding Frequency: Monthly Enter the above data as show in the picture above and then press the

9 APR/Effective Interest Rate Calculator Is used to calculate the APR (Annual Percentage Rate) and the Effective Annual Interest Rate. It can be used to compare several different loan proposals by standardizing their Interest Rates. This allows you to compare mortgages using the Effective True Annual Interest Rate and choose the best mortgage which is the one with the lowest Effective True Annual Interest Rate Example: A purchaser of a home has been offered the following mortgage. Calculate the: Amount advanced to the Borrower APR based on Amortization Period APR based on Term Effective Annual Interest Rate Effective True Annual Interest Rate Outstanding Balance at the End of Term Monthly Payments Face Value of Loan: \$325,000 Nominal Annual Interest Rate: 7.500% Amortization Period: 30 years Term: 5 years. Mortgage is repaid at end of 5 years Loan Fees and Costs Discount Point: 1.50% Origination Fee: \$800 Appraisal Fee \$180 Documentation Preparations: \$250 Other Closing Costs: \$0 The entries and results are shown on the next page. Enter the above data as show in the picture above and then press the

10 Mortgage Discount Calculator Is used to determine how much to pay for a mortgage in order to obtain a specified annual return. Example: An investor is considering buying the following mortgage. Nominal Annual Interest Rate 8% Monthly Payment \$3,816 Remaining Term 3 Years Balance at the End of Term \$460,679 How much should she pay for the mortgage to achieve a return of 11% per year, compounded semiannually? Entries; Enter the above data as show in the picture above and then press the button Answer;

11 Seller Take-Back Mortgage (Cost or Benefit) Often, the seller of a property provides a mortgage called a "Seller or Vendor Take Back Mortgage" to the buyer of the property. The Interest Rate for the Take Back Mortgage may be different from the current market rate for a similar mortgage. As an example, the Interest Rate for the Take-Back Mortgage is 6.5% and the market rate for a similar mortgage is 7.25%. This function calculates the Cost or Benefit of the Seller Take Back Mortgage to the buyer of property. Example: A purchaser of an Income Property has been offered a vendor s first mortgage which has an interest rate of 7.50%, while the market interest rate for a comparable mortgage is 10.00%. The purchaser would like to know the benefit of the vendor s mortgage. Mortgage Amount: \$1,000,000 Contract Nominal Annual Interest Rate: 7.500% Amortization Period: 15 years Term: 15 years Current Market Interest Rate: % Enter the above data as show in the picture above and then press the Answer;

12 Mortgage Take Over (Cost/Benefit) This function is used to calculate the Cost or Benefit to the purchaser of a property in assuming the Seller's mortgage at an Interest Rate that is either higher, or lower than the current interest rate for a similar mortgage. Example: What is the cost or benefit to the purchaser for assuming the following mortgage? Monthly Payment \$1, Current Outstanding Balance \$144, Remaining Term 3 Years & 7 Months Outstanding Balance at the End of Term \$138, Nominal Annual Interest Rate 8% Current Interest Rate 6.25% Enter the above data as show in the picture above and then press the Answer;

13 Mortgage Renegotiation (Cost/Benefit) This function is used to evaluate the cost or benefit associated with renegotiating your mortgage if interest rates fall. Example: What is the cost or benefit of renegotiating the following mortgage if the interest rate can be reduce from 9.5% to 6.5% by paying a 3 months interest penalty plus legal and other fees of \$ 1,600? Mortgage Amount \$350,000 Nominal Annual Interest Rate 9.5% Amortization Period 30 Years Time Period since Mortgage Commenced 1 Year & 3 Months Term 5 Years Mortgage Settings: Payment Frequency: Monthly Payment made at: End of Period Payment Rounding Up to the nearest Cent Compounding Frequency Monthly New Mortgage Details: Nominal Annual Interest Rate: 6.5% Refinancing Costs: \$1,600 Interest Penalty: 3 Months Entries and results are shown on the next page

14 Enter the above data as show in the picture above and then press the Answer; If the answer was negative consider rejecting the new mortgage When deciding whether to renegotiate a mortgage to lower the interest cost you need to establish the total costs and fees that the lender will charge for redoing the mortgage. The lender will calculate the interest Rate Differential Cost between the contract interest rate and the proposed interest rate which will be paid by the borrower if the loan is renegotiable. In addition there may be other fees and costs charged.

15 Home Financing Calculator Is used to calculate the loan amount and mortgage payment using the family income and expenses, as well as the: Loan to Value Ratio Front End Ratio (Housing Ratio) Back End Ratio (Total Debt Ratio) Example: A family would like to know how much they can borrow for a first mortgage on a home they are planning to purchase. The appraised value of the home is \$435,000. Enter the above data as show in the picture above and then press the

16 Answer; Note: There are a variety of ways to calculate the Front End or Housing Ratio. The program uses the following formula: Housing Ratio = (Principal Interest + Housing Expenses) Gross Monthly Income

17 Income Property Financing Calculator Example: Calculate the loan amount for a rental apartment building based on the following information: Enter the above data as show in the picture above and then press the Answer;

18 Mortgage Rate Buy Down Calculator In marketing new developments, such as a condominium project, the developer may offer the purchaser a first mortgage with an Interest Rate that is less than the current Market Interest Rate. He does this by buying down the interest rate from the lender. This function calculates the Buy Down Mortgage Contract between the Lender and the Developer. Example: A condominium developer wishes to offer a mortgage to the buyers of the units with an interest rate lower than the market interest rate. He does this in an attempt to make the project more marketable. Calculate the mortgage contract between the Lender and the Developer. The financial information is: Enter the above data as show in the picture above and then press the Answer;

19 Residential Building. Breakeven Analysis This function is used to calculate the number of suites that must be rented in order for an apartment building to breakeven, which occurs when the income exactly covers the operating expenses and mortgage payments. Example: An investor is considering purchasing a 45 suite rental apartment building and wants to know how many suites must be rented in order to breakeven. Number of Suites 45 Income Per Suite Per Month \$680 Annual Fixed Operating Expenses \$78,000 Annual Variable Cost Per Suite \$480 Annual Debt Service (Mortgage Payments) \$198,000 Enter the above data as show in the picture above and then press the Answer;

20 Commercial Building. Breakeven Analysis This function is used to calculate the amount of space (in square feet) that must to be rented in order for the building to breakeven, which occurs when the income exactly covers the operating expenses and mortgage payments. Example: An investor is considering purchasing a 75,800 square foot office building and wants to know how many square feet must be rented in order to breakeven. Rentable Area 75,800 Sq Feet Average Income Per Sq Feet Per Year \$23.50 Annual Fixed Operating Expenses \$76,000 Annual Variable Cost Per Sq Foot \$1.25 Annual Debt Service (Mortgage \$958,000 Payments) Enter the above data as show in the picture above and then press the Answer

21 Imperial/Metric Converter Is used to convert between the Imperial and Metric systems for the following types of measures: Length \$ per area Area \$ per cubic measure Volume (cubic measure) Example: Convert \$21.00 per Sq. Ft to \$ per Sq. Meter

22 Area Calculator Is used to calculate the area of lots, floor plans etc. consisting of one or more shapes. The Shape options are: Square Semicircle Rectangle ¼ Circle Triangle ¾ Circle Circle Circle Sector Circle Segment You can calculate areas by adding or subtracting the shapes as necessary. Example: Calculate the area of this building To calculate the area, carry out the following steps: 1. Select measurement type E.g., Feet, by pointing and clicking on the "Measurement in "Choice Button to display the measurement options, and then click on the desired option. 2. In the first row click on the Shape Choice Button to display the Shape Options and select the Triangle. 3. Enter the dimensions of the Triangle. i.e., 100 feet, 60 feet, 80 feet. 4. Click on the Add Button to add a new Row. a. Select the Rectangle Option in the Shape Box for the row. b. Enter the dimensions of the Rectangle i.e., 50 feet x 110 feet 5. Click on the Add Button to add a new Row. a. Click on the Action Box in the Row to display the Actions and select Add. b. Select the Rectangle Option in the Shape Box for the row. c. Enter the dimensions of the Rectangle i.e., 30 feet x 60 feet 6. Click on the Compute Button to calculate the total area.

23 Answer: Area 9,700 sq. ft.

### Investit Software Inc. www.investitsoftware.com. HOLD vs. SELL OFFICE BUILDING USA EXAMPLE

INTRODUCTION This example illustrates Hold versus Sell Analysis. HOLD vs. SELL OFFICE BUILDING USA EXAMPLE The Investit Pro Template used is Hold vs. Sell Office Monthly This practice example consists

### Investit Software Inc. www.investitsoftware.com INVESTMENT ANALYSIS USA RENTAL APARTMENT BUILDING EXAMPLE

INVESTMENT ANALYSIS USA RENTAL APARTMENT BUILDING EXAMPLE INTRODUCTION This example uses the Invest Rental Apartment Building example. This practice example consists of two Sections; 1. The input information

### ICASL - Business School Programme

ICASL - Business School Programme Quantitative Techniques for Business (Module 3) Financial Mathematics TUTORIAL 2A This chapter deals with problems related to investing money or capital in a business

### 3. Time value of money. We will review some tools for discounting cash flows.

1 3. Time value of money We will review some tools for discounting cash flows. Simple interest 2 With simple interest, the amount earned each period is always the same: i = rp o where i = interest earned

### GENERAL MATH PROBLEM CATEGORIES AND ILLUSTRATED SOLUTIONS MEASUREMENT STANDARDS WHICH MUST BE MEMORIZED FOR THE BROKER TEST

Chapter 17 Math Problem Solutions CHAPTER 17 GENERAL MATH PROBLEM CATEGORIES AND ILLUSTRATED SOLUTIONS MEASUREMENT STANDARDS WHICH MUST BE MEMORIZED FOR THE BROKER TEST Linear Measure 12 inches = 1 ft

### REVIEW MATERIALS FOR REAL ESTATE ANALYSIS

REVIEW MATERIALS FOR REAL ESTATE ANALYSIS 1997, Roy T. Black REAE 5311, Fall 2005 University of Texas at Arlington J. Andrew Hansz, Ph.D., CFA CONTENTS ITEM ANNUAL COMPOUND INTEREST TABLES AT 10% MATERIALS

### Investit Software Inc. www.investitsoftware.com. OUTSOURCING DECISION EXAMPLE WITH EXPENSES ONLY COMPARISON Example USA

OUTSOURCING DECISION EXAMPLE WITH EXPENSES ONLY COMPARISON Example USA INTRODUCTION This example shows how to compare two investments that; Involves an investment in equipment Incurs operating costs Uses

### Time-Value-of-Money and Amortization Worksheets

2 Time-Value-of-Money and Amortization Worksheets The Time-Value-of-Money and Amortization worksheets are useful in applications where the cash flows are equal, evenly spaced, and either all inflows or

### Chapter 5 & 6 Financial Calculator and Examples

Chapter 5 & 6 Financial Calculator and Examples Konan Chan Financial Management, Spring 2016 Five Factors in TVM Present value: PV Future value: FV Discount rate: r Payment: PMT Number of periods: N Get

### BUSI 121 Foundations of Real Estate Mathematics

Real Estate Division BUSI 121 Foundations of Real Estate Mathematics SESSION 2 By Graham McIntosh Sauder School of Business University of British Columbia Outline Introduction Cash Flow Problems Cash Flow

### Fin 5413 CHAPTER FOUR

Slide 1 Interest Due Slide 2 Fin 5413 CHAPTER FOUR FIXED RATE MORTGAGE LOANS Interest Due is the mirror image of interest earned In previous finance course you learned that interest earned is: Interest

### Investit Software Inc. www.investitsoftware.com. Developer Pro USA 21000 SQ. FT RETAIL CENTER DEVELOPMENT EXAMPLE

Developer Pro USA 21000 SQ. FT RETAIL CENTER DEVELOPMENT EXAMPLE INTRODUCTION This example uses the Quick Proforma Retail template. This practice example consists of three Sections; 1. The input information

### Mortgage Basics Glossary of Terms

Mortgage Basics Glossary of Terms Buying a home is an important financial decision. It is important to familiarize yourself with the features of the different types of mortgages, so that you understand

### 5. Time value of money

1 Simple interest 2 5. Time value of money With simple interest, the amount earned each period is always the same: i = rp o We will review some tools for discounting cash flows. where i = interest earned

### Real Estate. Refinancing

Introduction This Solutions Handbook has been designed to supplement the HP-2C Owner's Handbook by providing a variety of applications in the financial area. Programs and/or step-by-step keystroke procedures

### INCOME APPROACH Gross Income Estimate - \$198,000 Vacancy and Rent Loss - \$9,900

INCOME APPROACH The Income Approach considers the return on Investment and is similar to the method that investors typically use to make their investment decisions. It is most directly applicable to income

### Investit Software Inc. www.investitsoftware.com ANALYZER RENTAL APARTMENT BUILDING EXAMPLE USA USA

ANALYZER RENTAL APARTMENT BUILDING EXAMPLE USA USA INTRODUCTION This example shows how to use Analyzer to determine the value or purchase price for a rental apartment building. The owner has provided the

### Prepared by: Dalia A. Marafi Version 2.0

Kuwait University College of Business Administration Department of Finance and Financial Institutions Using )Casio FC-200V( for Fundamentals of Financial Management (220) Prepared by: Dalia A. Marafi Version

### Capital Budgeting: Decision. Example. Net Present Value (NPV) FINC 3630 Yost

Capital Budgeting: Decision Criteria Example Consider a firm with two projects, A and B, each with the following cash flows and a 10 percent cost of capital: Project A Project B Year Cash Flows Cash Flows

### Standard Charge Terms Land Registration Reform Act

Page 1 of 32 Standard Charge Terms Land Registration Reform Act Filed By: Canadian Imperial Bank of Commerce Filing Number: 201610 Filing Date: March 29, 2016 The following set of standard charge terms

### Bank: The bank's deposit pays 8 % per year with annual compounding. Bond: The price of the bond is \$75. You will receive \$100 five years later.

ü 4.4 lternative Discounted Cash Flow Decision Rules ü Three Decision Rules (1) Net Present Value (2) Future Value (3) Internal Rate of Return, IRR ü (3) Internal Rate of Return, IRR Internal Rate of Return

### APPENDIX. Interest Concepts of Future and Present Value. Concept of Interest TIME VALUE OF MONEY BASIC INTEREST CONCEPTS

CHAPTER 8 Current Monetary Balances 395 APPENDIX Interest Concepts of Future and Present Value TIME VALUE OF MONEY In general business terms, interest is defined as the cost of using money over time. Economists

### Present Value Concepts

Present Value Concepts Present value concepts are widely used by accountants in the preparation of financial statements. In fact, under International Financial Reporting Standards (IFRS), these concepts

### ROUND(cell or formula, 2)

There are many ways to set up an amortization table. This document shows how to set up five columns for the payment number, payment, interest, payment applied to the outstanding balance, and the outstanding

### APPENDIX 3 TIME VALUE OF MONEY. Time Lines and Notation. The Intuitive Basis for Present Value

1 2 TIME VALUE OF MONEY APPENDIX 3 The simplest tools in finance are often the most powerful. Present value is a concept that is intuitively appealing, simple to compute, and has a wide range of applications.

Page 1 of 35 Additional Terms and Conditions The following set of additional terms and conditions is attached as Schedule B to Canadian Imperial Bank of Commerce Residential Mortgages in Newfoundland and

### Standard Mortgage Terms

Page 1 of 45 Standard Mortgage Terms Filed By: Canadian Imperial Bank of Commerce Filing Number: MT160006 Filing Date: March 17, 2016 The following set of standard mortgage terms shall be deemed to be

### Property Report : House in Dallas

Property Report : House in Dallas Generated on: Jul 6, 2016 Author: Guest Page 1 of 11 Table of Contents Executive Summary 3 Property Description 4 Operational Effectivness 5 Financial Effectivness 6 Financing

DISCLAIMER: This publication is intended for EDUCATIONAL purposes only. The information contained herein is subject to change with no notice, and while a great deal of care has been taken to provide accurate

### 1. If you wish to accumulate \$140,000 in 13 years, how much must you deposit today in an account that pays an annual interest rate of 14%?

Chapter 2 - Sample Problems 1. If you wish to accumulate \$140,000 in 13 years, how much must you deposit today in an account that pays an annual interest rate of 14%? 2. What will \$247,000 grow to be in

### Integrated Case. 5-42 First National Bank Time Value of Money Analysis

Integrated Case 5-42 First National Bank Time Value of Money Analysis You have applied for a job with a local bank. As part of its evaluation process, you must take an examination on time value of money

### Compound Interest. Invest 500 that earns 10% interest each year for 3 years, where each interest payment is reinvested at the same rate:

Compound Interest Invest 500 that earns 10% interest each year for 3 years, where each interest payment is reinvested at the same rate: Table 1 Development of Nominal Payments and the Terminal Value, S.

### Net Present Value (NPV)

Investment Criteria 208 Net Present Value (NPV) What: NPV is a measure of how much value is created or added today by undertaking an investment (the difference between the investment s market value and

### Loan Comparison. With this program, the user can compare two loan alternatives or evaluate the potential refinancing of an existing loan.

Loan Comparison With this program, the user can compare two loan alternatives or evaluate the potential refinancing of an existing loan. Fast Tools & Resources Loans may differ in their interest rates,

### Investment Appraisal INTRODUCTION

8 Investment Appraisal INTRODUCTION After reading the chapter, you should: understand what is meant by the time value of money; be able to carry out a discounted cash flow analysis to assess the viability

### 14 Financial. Functions. Financial Functions 14-1. Contents

14 Financial Functions Contents Getting Started: Financing a Car... 14-2 Getting Started: Computing Compound Interest... 14-3 Using the TVM Solver... 14-4 Using the Financial Functions... 14-5 Calculating

### 14.4 Mortgage Loans: Additional Topics

14.4 Mortgage Loans: Additional Topics A mortgage loan sometimes involves costs in addition to interest charges. In this section, you will learn how to incorporate these additional costs into an overall

### Introduction to the Hewlett-Packard (HP) 10BII Calculator and Review of Mortgage Finance Calculations

Introduction to the Hewlett-Packard (HP) 10BII Calculator and Review of Mortgage Finance Calculations Real Estate Division Sauder School of Business University of British Columbia Introduction to the Hewlett-Packard

### Selecting the Mortgage Term: How to Compare the Alternatives

Currently, 15-year mortgages are available at more attractive rates than 30-year terms, but they also entail higher monthly payments. Which is better? A look at the analysis. Selecting the Mortgage Term:

### Basic Concept of Time Value of Money

Basic Concept of Time Value of Money CHAPTER 1 1.1 INTRODUCTION Money has time value. A rupee today is more valuable than a year hence. It is on this concept the time value of money is based. The recognition

### Chapter 6. Discounted Cash Flow Valuation. Key Concepts and Skills. Multiple Cash Flows Future Value Example 6.1. Answer 6.1

Chapter 6 Key Concepts and Skills Be able to compute: the future value of multiple cash flows the present value of multiple cash flows the future and present value of annuities Discounted Cash Flow Valuation

### Chapter 6. Learning Objectives Principles Used in This Chapter 1. Annuities 2. Perpetuities 3. Complex Cash Flow Streams

Chapter 6 Learning Objectives Principles Used in This Chapter 1. Annuities 2. Perpetuities 3. Complex Cash Flow Streams 1. Distinguish between an ordinary annuity and an annuity due, and calculate present

### Chapter F: Finance. Section F.1-F.4

Chapter F: Finance Section F.1-F.4 F.1 Simple Interest Suppose a sum of money P, called the principal or present value, is invested for t years at an annual simple interest rate of r, where r is given

### Main TVM functions of a BAII Plus Financial Calculator

Main TVM functions of a BAII Plus Financial Calculator The BAII Plus calculator can be used to perform calculations for problems involving compound interest and different types of annuities. (Note: there

### Income Capitalization Analysis Re: Example Property By: Your Name of Your Company Name

Income Capitalization Analysis Re: Example Property By: Your Name of Your Company Name To obtain a reliable indication of a property's Market Value from the Income Capitalization Approach, it is necessary

### Practice Problems. Use the following information extracted from present and future value tables to answer question 1 to 4.

PROBLEM 1 MULTIPLE CHOICE Practice Problems Use the following information extracted from present and future value tables to answer question 1 to 4. Type of Table Number of Periods Interest Rate Factor

### PART C *14.4 Mortgage Loans: Additional Topics

PART C *14.4 Mortgage Loans: Additional Topics A mortgage loan sometimes involves costs in addition to interest charges. In this section you will learn how to incorporate these additional costs into an

### Helpful Information for a First Time Mortgage

Helpful Information for a First Time Mortgage Getting Started Many people buying their first home are afraid lenders don't really want to work with them. But that's simply not true. Without you, there

### Continue this process until you have cleared the stored memory positions that you wish to clear individually and keep those that you do not.

Texas Instruments (TI) BA II PLUS Professional The TI BA II PLUS Professional functions similarly to the TI BA II PLUS model. Any exceptions are noted here. The TI BA II PLUS Professional can perform two

ANSWERS TO STUDY QUESTIONS Chapter 17 17.1. The details are described in section 17.1.1. 17.3. Because of its declining payment pattern, a CAM would be most useful in an economy with persistent deflation

### Time Value of Money. 2014 Level I Quantitative Methods. IFT Notes for the CFA exam

Time Value of Money 2014 Level I Quantitative Methods IFT Notes for the CFA exam Contents 1. Introduction...2 2. Interest Rates: Interpretation...2 3. The Future Value of a Single Cash Flow...4 4. The

### DISCOUNTED CASH FLOW VALUATION and MULTIPLE CASH FLOWS

Chapter 5 DISCOUNTED CASH FLOW VALUATION and MULTIPLE CASH FLOWS The basic PV and FV techniques can be extended to handle any number of cash flows. PV with multiple cash flows: Suppose you need \$500 one

### Mortgage Basics 101. Talk to your CIBC Mobile Mortgage Advisor today.

Mortgage Basics 101 Mortgages are big investments that require financial stability and dedication. Start the process on the right foot by familiarizing yourself with different types of mortgages and rates,

### Chapter 4 Time Value of Money ANSWERS TO END-OF-CHAPTER QUESTIONS

Chapter 4 Time Value of Money ANSWERS TO END-OF-CHAPTER QUESTIONS 4-1 a. PV (present value) is the value today of a future payment, or stream of payments, discounted at the appropriate rate of interest.

### Introduction to Real Estate Investment Appraisal

Introduction to Real Estate Investment Appraisal Maths of Finance Present and Future Values Pat McAllister INVESTMENT APPRAISAL: INTEREST Interest is a reward or rent paid to a lender or investor who has

### Time Value of Money. Appendix

1 Appendix Time Value of Money After studying Appendix 1, you should be able to: 1 Explain how compound interest works. 2 Use future value and present value tables to apply compound interest to accounting

### CHAPTER 6. Accounting and the Time Value of Money. 2. Use of tables. 13, 14 8 1. a. Unknown future amount. 7, 19 1, 5, 13 2, 3, 4, 6

CHAPTER 6 Accounting and the Time Value of Money ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems 1. Present value concepts. 1, 2, 3, 4, 5, 9, 17, 19 2. Use

### How To Calculate The Value Of A Project

Chapter 02 How to Calculate Present Values Multiple Choice Questions 1. The present value of \$100 expected in two years from today at a discount rate of 6% is: A. \$116.64 B. \$108.00 C. \$100.00 D. \$89.00

### Math 1332 Test 5 Review

Name Find the simple interest. The rate is an annual rate unless otherwise noted. Assume 365 days in a year and 30 days per month. 1) \$1660 at 6% for 4 months Find the future value of the deposit if the

### Broker Final Exam Review Math

Broker Final Exam Review Math Copyright Gold Coast Schools 1 Minimum Annual Production Page 73 A brokerage office had 200 sales last year. After paying sales commissions to the associates, there was \$229,000

### Chapter 38. Appraising Income Property INTRODUCTION

Chapter 38 Appraising Income Property INTRODUCTION The income appraisal approach estimates the current market value for a real property by projecting and analyzing the income that the property could generate.

### LO.a: Interpret interest rates as required rates of return, discount rates, or opportunity costs.

LO.a: Interpret interest rates as required rates of return, discount rates, or opportunity costs. 1. The minimum rate of return that an investor must receive in order to invest in a project is most likely

### Texas Instruments BAII Plus Tutorial for Use with Fundamentals 11/e and Concise 5/e

Texas Instruments BAII Plus Tutorial for Use with Fundamentals 11/e and Concise 5/e This tutorial was developed for use with Brigham and Houston s Fundamentals of Financial Management, 11/e and Concise,

### Key Concepts and Skills. Multiple Cash Flows Future Value Example 6.1. Chapter Outline. Multiple Cash Flows Example 2 Continued

6 Calculators Discounted Cash Flow Valuation Key Concepts and Skills Be able to compute the future value of multiple cash flows Be able to compute the present value of multiple cash flows Be able to compute

### 5.1 Simple and Compound Interest

5.1 Simple and Compound Interest Question 1: What is simple interest? Question 2: What is compound interest? Question 3: What is an effective interest rate? Question 4: What is continuous compound interest?

### CHAPTER 5. Interest Rates. Chapter Synopsis

CHAPTER 5 Interest Rates Chapter Synopsis 5.1 Interest Rate Quotes and Adjustments Interest rates can compound more than once per year, such as monthly or semiannually. An annual percentage rate (APR)

### FNCE 301, Financial Management H Guy Williams, 2006

Review In the first class we looked at the value today of future payments (introduction), how to value projects and investments. Present Value = Future Payment * 1 Discount Factor. The discount factor

### Chapter 2 Applying Time Value Concepts

Chapter 2 Applying Time Value Concepts Chapter Overview Albert Einstein, the renowned physicist whose theories of relativity formed the theoretical base for the utilization of atomic energy, called the

### Chapter 15 Questions Real Estate Financing: Practice

Chapter 15 Questions Real Estate Financing: Practice 1. Kahlid has been making periodic payments of principal and interest on a loan, but the final payment will be larger than the others. This is a(n)

### Cash Flow Analysis Multi-Family Building For Sale Boston, Massachusetts 02215

Property Report Cash Flow Analysis Presented by: Pantheon Property Group 665 Beacon Street, Suite #305 Boston, Massachusetts 02131 Office: Mobile: (830) 660-5265 Data Analysis Provided by Pantheon Property

### FHA Home Loans 101 An Easy Reference Guide

FHA Home Loans 101 An Easy Reference Guide Updated for loans on or after June 3, 2013 Congratulations on Starting Your Journey to Home Ownership This guide offers a quick look at vital information you

### Chapter 6 Contents. Principles Used in Chapter 6 Principle 1: Money Has a Time Value.

Chapter 6 The Time Value of Money: Annuities and Other Topics Chapter 6 Contents Learning Objectives 1. Distinguish between an ordinary annuity and an annuity due, and calculate present and future values

### Excel Financial Functions

Excel Financial Functions PV() Effect() Nominal() FV() PMT() Payment Amortization Table Payment Array Table NPer() Rate() NPV() IRR() MIRR() Yield() Price() Accrint() Future Value How much will your money

### A lot of information is needed for such a comparison. In next several slides we will present the information, together with some calculations.

Should You Own or Rent? The decision of ownership vs. renting has many aspects, some financial, some non-financial. Here we only consider the financial aspect of this decision. The financial aspect of

### Time Value of Money 1

Time Value of Money 1 This topic introduces you to the analysis of trade-offs over time. Financial decisions involve costs and benefits that are spread over time. Financial decision makers in households

### The Time Value of Money

The Time Value of Money Future Value - Amount to which an investment will grow after earning interest. Compound Interest - Interest earned on interest. Simple Interest - Interest earned only on the original

### Chapter 4. The Time Value of Money

Chapter 4 The Time Value of Money 1 Learning Outcomes Chapter 4 Identify various types of cash flow patterns Compute the future value and the present value of different cash flow streams Compute the return

### Purpose EL-773A HP-10B BA-II PLUS Clear memory 0 n registers

D-How to Use a Financial Calculator* Most personal finance decisions involve calculations of the time value of money. Three methods are used to compute this value: time value of money tables (such as those

### If P = principal, r = annual interest rate, and t = time (in years), then the simple interest I is given by I = P rt.

13 Consumer Mathematics 13.1 The Time Value of Money Start with some Definitions: Definition 1. The amount of a loan or a deposit is called the principal. Definition 2. The amount a loan or a deposit increases

### FinQuiz Notes 2 0 1 5

Reading 5 The Time Value of Money Money has a time value because a unit of money received today is worth more than a unit of money to be received tomorrow. Interest rates can be interpreted in three ways.

### AN INTRODUCTION TO REAL ESTATE INVESTMENT ANALYSIS: A TOOL KIT REFERENCE FOR PRIVATE INVESTORS

AN INTRODUCTION TO REAL ESTATE INVESTMENT ANALYSIS: A TOOL KIT REFERENCE FOR PRIVATE INVESTORS Phil Thompson Business Lawyer, Corporate Counsel www.thompsonlaw.ca Rules of thumb and financial analysis

### To understand and apply the concept of present value analysis in management decision making within the framework of the regulatory process.

Present Value Analysis Effective management decision making means making the best possible choices from the available investment alternatives consistent with the amount of funds available for reinvestment.

### You just paid \$350,000 for a policy that will pay you and your heirs \$12,000 a year forever. What rate of return are you earning on this policy?

1 You estimate that you will have \$24,500 in student loans by the time you graduate. The interest rate is 6.5%. If you want to have this debt paid in full within five years, how much must you pay each

### FINANCIAL MATHEMATICS FIXED INCOME

FINANCIAL MATHEMATICS FIXED INCOME 1. Converting from Money Market Basis to Bond Basis and vice versa 2 2. Calculating the Effective Interest Rate (Non-annual Payments)... 4 3. Conversion of Annual into

### Lease-Versus-Buy. By Steven R. Price, CCIM

Lease-Versus-Buy Cost Analysis By Steven R. Price, CCIM Steven R. Price, CCIM, Benson Price Commercial, Colorado Springs, Colorado, has a national tenant representation and consulting practice. He was

### Chapter 13 The Basics of Capital Budgeting Evaluating Cash Flows

Chapter 13 The Basics of Capital Budgeting Evaluating Cash Flows ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS 13-1 a. The capital budget outlines the planned expenditures on fixed assets. Capital budgeting

### Introduction to Real Estate Investment Appraisal

Introduction to Real Estate Investment Appraisal NPV and IRR Pat McAllister INVESTMENT APPRAISAL DISCOUNTED CASFLOW ANALYSIS Investment Mathematics Discounted cash flow to calculate Gross present value

### Introduction. Turning the Calculator On and Off

Texas Instruments BAII PLUS Calculator Tutorial to accompany Cyr, et. al. Contemporary Financial Management, 1 st Canadian Edition, 2004 Version #6, May 5, 2004 By William F. Rentz and Alfred L. Kahl Introduction

### CALCULATOR TUTORIAL. Because most students that use Understanding Healthcare Financial Management will be conducting time

CALCULATOR TUTORIAL INTRODUCTION Because most students that use Understanding Healthcare Financial Management will be conducting time value analyses on spreadsheets, most of the text discussion focuses

### Methods for Project Evaluation

Methods for Project Evaluation March 8, 2004 1 Alternative Methods Present worth (PW) method Future worth (FW) method Annual worth (AW) method Benefit-cost ratio (BC) method Internal rate of return (IRR)

### Investigating Investment Formulas Using Recursion Grade 11

Ohio Standards Connection Patterns, Functions and Algebra Benchmark C Use recursive functions to model and solve problems; e.g., home mortgages, annuities. Indicator 1 Identify and describe problem situations

### USDA Guarantee + NMTC Equity = Facility Financing for a Start Up Charter School

USDA Guarantee + NMTC Equity = Facility Financing for a Start Up Charter School Berkshire Arts & Technology Public Charter School Adams, MA The BArT Charter School opened its doors in the fall of 2004

### THE TIME VALUE OF MONEY

QUANTITATIVE METHODS THE TIME VALUE OF MONEY Reading 5 http://proschool.imsindia.com/ 1 Learning Objective Statements (LOS) a. Interest Rates as Required rate of return, Discount Rate and Opportunity Cost

### Chapter 9. Year Revenue COGS Depreciation S&A Taxable Income After-tax Operating Income 1 \$20.60 \$12.36 \$1.00 \$2.06 \$5.18 \$3.11

Chapter 9 9-1 We assume that revenues and selling & administrative expenses will increase at the rate of inflation. Year Revenue COGS Depreciation S&A Taxable Income After-tax Operating Income 1 \$20.60

### Discounted Cash Flow Valuation

Discounted Cash Flow Valuation Chapter 5 Key Concepts and Skills Be able to compute the future value of multiple cash flows Be able to compute the present value of multiple cash flows Be able to compute

### The Mathematics of Financial Planning (supplementary lesson notes to accompany FMGT 2820)

The Mathematics of Financial Planning (supplementary lesson notes to accompany FMGT 2820) Using the Sharp EL-733A Calculator Reference is made to the Appendix Tables A-1 to A-4 in the course textbook Investments:

### Appendix C- 1. Time Value of Money. Appendix C- 2. Financial Accounting, Fifth Edition

C- 1 Time Value of Money C- 2 Financial Accounting, Fifth Edition Study Objectives 1. Distinguish between simple and compound interest. 2. Solve for future value of a single amount. 3. Solve for future

### 1.3.2015 г. D. Dimov. Year Cash flow 1 \$3,000 2 \$5,000 3 \$4,000 4 \$3,000 5 \$2,000

D. Dimov Most financial decisions involve costs and benefits that are spread out over time Time value of money allows comparison of cash flows from different periods Question: You have to choose one of