FINANCE

• Compound Interest 


  The interest in the first compounding period is added on the principal, which will then be the basis for the interest to be computed for the next period
• Present Value


  IS the amount you have to invest today if you want to have a certain amount of cash flow to the future
• Future Value


  Is the amount to which an investment will after earning interest
• Lump Sum


  A single cash outflow is made, and the total receipts will be at a single future date.
• Annuity


  A periodic stream of equal cash flow at equal time intervals (annually, monthly, etc.)
• Future value of Annuity


  Formula

  
• Present Value of Annuity


  Formula

  
• Mixed Stream


  An unequal periodic cash flows that reflect no particular pattern.
• Capital Budgeting 


  It is the process of evaluating and selecting long-term investments that are consistent with the firm's goal of maximizing owners' wealth
• Capital Expenditure


  Money spent by a business or organization on acquiring or maintaining fixed assets such as land, building, and equipment
• Risk and Return Trade-off


  In making investment decisions, financial managers take note of the risk and returns of the project they are entering
• Simple Interest Formula


  $I=$$P *$$r*$$t$

  Example:

  P= 500

  r= 11% > .11

  t= 2 years

  I= 500 x .11 x 2
• Compound Interest Formula


  Same to Simple interest formula but the first compounding period is added in the principal