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Finance 1000 Cheat Sheet (DRAFT) by

Midterm review good luck

This is a draft cheat sheet. It is a work in progress and is not finished yet.

Time Value of Money

Discount rate = (1 + R) ^T
exchange rate of time. R is the discount rate, T is is the # of periods
Moving money into the future; T > 0 ; Result is called future value
Moving money to the past; T < 0 ; Result is present value
Present Value =
Value in the future/ (1 +R) ^ T
Money today is worth more than money tommorow bc money today can be invested
Steps to apply time value of money
1. Draw a timeline and put cash flows on the line 2. Move cash flows to same period by using discount factor. 3. Once all cash flows are in the same period, we can add/ subtract them
Finite cashflows; Equal magnitude; (CF/R) x (‰1 −(1 +R)^-T) Ž