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13 12.13 11.35 10.63 9.986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583
14 13.00 12.11 11.30 10.56 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724
15 13.87 12.85 11.94 11.12 10.38 9.712 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847
16 14.72 13.58 12.56 11.65 10.84 10.11 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954
17 15.56 14.29 13.17 12.17 11.27 10.48 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047
18 16.40 14.99 13.75 12.66 11.69 10.83 10.06 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128
19 17.23 15.68 14.32 13.13 12.09 11.16 10.34 9.604 8.950 8.365 7.839 7.366 6.938 6.550 6.198
20 18.05 16.35 14.88 13.59 12.46 11.47 10.59 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259
25 22.02 19.52 17.41 15.62 14.09 12.78 11.65 10.67 9.823 9.077 8.422 7.843 7.330 6.873 6.464
30 25.81 22.40 19.60 17.29 15.37 13.76 12.41 11.26 10.27 9.427 8.694 8.055 7.496 7.003 6.566
Interest Rate per Year
Number
of Years 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30%
1 .862 .855 .847 .840 .833 .826 .820 .813 .806 .800 .794 .787 .781 .775 .769
2 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1.457 1.440 1.424 1.407 1.392 1.376 1.361
3 2.246 2.210 2.174 2.140 2.106 2.074 2.042 2.011 1.981 1.952 1.923 1.896 1.868 1.842 1.816
4 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 2.320 2.280 2.241 2.203 2.166
5 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 2.635 2.583 2.532 2.483 2.436
6 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 2.885 2.821 2.759 2.700 2.643
7 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 3.083 3.009 2.937 2.868 2.802
8 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 3.241 3.156 3.076 2.999 2.925
9 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 3.366 3.273 3.184 3.100 3.019
10 4.833 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 3.465 3.364 3.269 3.178 3.092
11 5.029 4.836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 3.543 3.437 3.335 3.239 3.147
12 5.197 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 3.606 3.493 3.387 3.286 3.190
13 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 3.656 3.538 3.427 3.322 3.223
14 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824 3.695 3.573 3.459 3.351 3.249
15 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 3.726 3.601 3.483 3.373 3.268
16 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 3.751 3.623 3.503 3.390 3.283
17 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 4.059 3.910 3.771 3.640 3.518 3.403 3.295
18 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 3.786 3.654 3.529 3.413 3.304
19 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 3.799 3.664 3.539 3.421 3.311
20 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954 3.808 3.673 3.546 3.427 3.316
25 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 3.834 3.694 3.564 3.442 3.329
30 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 3.842 3.701 3.569 3.447 3.332

e.g., if the interest rate is 10 percent per year, the present value of $1 received in each of the next 5 years is $3.791.
APPENDIX C Present Value Tables
631
632




APPENDIX TABLE C.4
ANNUITY TABLE: FUTURE VALUE OF $1 PER YEAR FOR EACH OF t YEARS = [(1 + r)t “ 1]/r

Interest Rate per Year
Number
APPENDIX C Present Value Tables




of Years 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15%
1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2 2.010 2.020 2.030 2.040 2.050 2.060 2.070 2.080 2.090 2.100 2.110 2.120 2.130 2.140 2.150
3 3.030 3.060 3.091 3.122 3.153 3.184 3.215 3.246 3.278 3.310 3.342 3.374 3.407 3.440 3.473
4 4.060 4.122 4.184 4.246 4.310 4.375 4.440 4.506 4.573 4.641 4.710 4.779 4.850 4.921 4.993
5 5.101 5.204 5.309 5.416 5.526 5.637 5.751 5.867 5.985 6.105 6.228 6.353 6.480 6.610 6.742
6 6.152 6.308 6.468 6.633 6.802 6.975 7.153 7.336 7.523 7.716 7.913 8.115 8.323 8.536 8.754
7 7.214 7.434 7.662 7.898 8.142 8.394 8.654 8.923 9.200 9.487 9.783 10.089 10.405 10.730 11.067
8 8.286 8.583 8.892 9.214 9.549 9.897 10.260 10.637 11.028 11.436 11.859 12.300 12.757 13.233 13.727
9 9.369 9.755 10.159 10.583 11.027 11.491 11.978 12.488 13.021 13.579 14.164 14.776 15.416 16.085 16.786
10 10.462 10.950 11.464 12.006 12.578 13.181 13.816 14.487 15.193 15.937 16.722 17.549 18.420 19.337 20.304
11 11.567 12.169 12.808 13.486 14.207 14.972 15.784 16.645 17.560 18.531 19.561 20.655 21.814 23.045 24.349
12 12.683 13.412 14.192 15.026 15.917 16.870 17.888 18.977 20.141 21.384 22.713 24.133 25.650 27.271 29.002
13 13.809 14.680 15.618 16.627 17.713 18.882 20.141 21.495 22.953 24.523 26.212 28.029 29.985 32.089 34.352
14 14.947 15.974 17.086 18.292 19.599 21.015 22.550 24.215 26.019 27.975 30.095 32.393 34.883 37.581 40.505
15 16.097 17.293 18.599 20.024 21.579 23.276 25.129 27.152 29.361 31.772 34.405 37.280 40.417 43.842 47.580
16 17.258 18.639 20.157 21.825 23.657 25.673 27.888 30.324 33.003 35.950 39.190 42.753 46.672 50.980 55.717
17 18.430 20.012 21.762 23.698 25.840 28.213 30.840 33.750 36.974 40.545 44.501 48.884 53.739 59.118 65.075
18 19.615 21.412 23.414 25.645 28.132 30.906 33.999 37.450 41.301 45.599 50.396 55.750 61.725 68.394 75.836
19 20.811 22.841 25.117 27.671 30.539 33.760 37.379 41.446 46.018 51.159 56.939 63.440 70.749 78.969 88.212
20 22.019 24.297 26.870 29.778 33.066 36.786 40.995 45.762 51.160 57.275 64.203 72.052 80.947 91.025 102.444
25 28.243 32.030 36.459 41.646 47.727 54.865 63.249 73.106 84.701 98.347 114.413 133.334 155.620 181.871 212.793
30 34.785 40.568 47.575 56.085 66.439 79.058 94.461 113.283 136.308 164.494 199.021 241.333 293.199 356.787 434.745
Interest Rate per Year
Number
of Years 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30%
1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2 2.160 2.170 2.180 2.190 2.200 2.210 2.220 2.230 2.240 2.250 2.260 2.270 2.280 2.290 2.300
3 3.506 3.539 3.572 3.606 3.640 3.674 3.708 3.743 3.778 3.813 3.848 3.883 3.918 3.954 3.990
4 5.066 5.141 5.215 5.291 5.368 5.446 5.524 5.604 5.684 5.766 5.848 5.931 6.016 6.101 6.187
5 6.877 7.014 7.154 7.297 7.442 7.589 7.740 7.893 8.048 8.207 8.368 8.533 8.700 8.870 9.043
6 8.977 9.207 9.442 9.683 9.930 10.183 10.442 10.708 10.980 11.259 11.544 11.837 12.136 12.442 12.756
7 11.414 11.772 12.142 12.523 12.916 13.321 13.740 14.171 14.615 15.073 15.546 16.032 16.534 17.051 17.583
8 14.240 14.773 15.327 15.902 16.499 17.119 17.762 18.430 19.123 19.842 20.588 21.361 22.163 22.995 23.858
9 17.519 18.285 19.086 19.923 20.799 21.714 22.670 23.669 24.712 25.802 26.940 28.129 29.369 30.664 32.015
10 21.321 22.393 23.521 24.709 25.959 27.274 28.657 30.113 31.643 33.253 34.945 36.723 38.593 40.556 42.619
11 25.733 27.200 28.755 30.404 32.150 34.001 35.962 38.039 40.238 42.566 45.031 47.639 50.398 53.318 56.405
12 30.850 32.824 34.931 37.180 39.581 42.142 44.874 47.788 50.895 54.208 57.739 61.501 65.510 69.780 74.327
13 36.786 39.404 42.219 45.244 48.497 51.991 55.746 59.779 64.110 68.760 73.751 79.107 84.853 91.016 97.625
14 43.672 47.103 50.818 54.841 59.196 63.909 69.010 74.528 80.496 86.949 93.926 101.465 109.612 118.411 127.913
15 51.660 56.110 60.965 66.261 72.035 78.330 85.192 92.669 100.815 109.687 119.347 129.861 141.303 153.750 167.286
16 60.925 66.649 72.939 79.850 87.442 95.780 104.935 114.983 126.011 138.109 151.377 165.924 181.868 199.337 218.472
17 71.673 78.979 87.068 96.022 105.931 116.894 129.020 142.430 157.253 173.636 191.735 211.723 233.791 258.145 285.014
18 84.141 93.406 103.740 115.266 128.117 142.441 158.405 176.188 195.994 218.045 242.585 269.888 300.252 334.007 371.518
19 98.603 110.285 123.414 138.166 154.740 173.354 194.254 217.712 244.033 273.556 306.658 343.758 385.323 431.870 483.973
20 115.380 130.033 146.628 165.418 186.688 210.758 237.989 268.785 303.601 342.945 387.389 437.573 494.213 558.112 630.165
25 249.214 292.105 342.603 402.042 471.98 554.24 650.96 764.61 898.09 1054.79 1238.64 1454.20 1706.80 2002.62 2348.80
30 530.312 647.439 790.948 966.712 1181.88 1445.15 1767.08 2160.49 2640.92 3227.17 3942.03 4812.98 5873.23 7162.82 8729.99

e.g., if the interest rate is 10 percent per year, the future value of $1 received in each of the next 5 years is $6.105.
APPENDIX C Present Value Tables
633
Glossary


between risk and return which states that the expected risk
acquisition: Takeover of a firm by purchase of that firm™s com-
premium on any security equals its beta times the market risk
mon stock or assets.
premium.
additional paid-in capital: Difference between issue price and
capital budget: List of planned investment projects.
par value of stock. Also called capital surplus.
capital budgeting decision: Decision as to which real assets the
agency problems: Conflicts of interest between the firm™s own-
firm should acquire.
ers and managers.
capital markets: Markets for long-term financing.
aging schedule: Classification of accounts receivable by time
capital rationing: Limit set on the amount of funds available for
outstanding.
investment.
annual percentage rate (APR): Interest rate that is annualized
capital structure: Firm™s mix of long-term financing.
using simple interest.
CAPM: See capital asset pricing model.
annuity: Equally spaced level stream of cash flows.
carrying costs: Costs of maintaining current assets, including
annuity due: Level stream of cash flows starting immediately.
opportunity cost of capital.
annuity factor: Present value of an annuity of $1 per period.
cash conversion cycle: Period between firm™s payment for mate-
authorized share capital: Maximum number of shares that the
rials and collection on its sales.
company is permitted to issue, as specified in the firm™s arti-
cash cow: Business that produces a lot of cash but few growth
cles of incorporation.
prospects.
availability float: Checks already deposited that have not yet
cash dividend: Payment of cash by the firm to its shareholders.
been cleared.
CEO: Acronym for chief executive officer.
average tax rate: Total taxes owed divided by total income.
CFO: See chief financial officer.
balance sheet: Financial statement that shows the value of the
chief financial officer (CFO): Officer who oversees the treas-
firm™s assets and liabilities at a particular time.
urer and controller and sets overall financial strategy.
balancing item: Variable that adjusts to maintain the consistency
collection policy: Procedures to collect and monitor receivables.
of a financial plan. Also called plug.
commercial paper: Short-term unsecured notes issued by firms.
bankruptcy: The reorganization or liquidation of a firm that can-
common-size balance sheet: Balance sheet that presents items
not pay its debts.
as a percentage of total assets.
bear market: A market in which stock or bond prices are gener-
common-size income statement: Income statement that presents
ally falling.
items as a percentage of revenues.
beta: Sensitivity of a stock™s return to the return on the market
common stock: Ownership shares in a publicly held corporation.
portfolio.
company cost of capital: Expected rate of return demanded by
bond: Security that obligates the issuer to make specified pay-
investors in a company, determined by the average risk of the
ments to the bondholder.
company™s assets and operations.
book rate of return: Accounting income divided by book value.
compound interest: Interest earned on interest.
Also called accounting rate of return.
concentration banking: System whereby customers make pay-
book value: Net worth of the firm™s assets or liabilities accord-
ments to a regional collection center which transfers funds to
ing to the balance sheet.
a principal bank.
break-even analysis: Analysis of the level of sales at which the
constant-growth dividend discount model: Version of the divi-
company breaks even.
dend discount model in which dividends grow at a constant rate.
bull market: A market in which stock or bond prices are gener-
controller: Officer responsible for budgeting, accounting, and
ally rising.
auditing.
call option: Right to buy an asset at a specified exercise price on
convertible bond: Bond that the holder may exchange for a spec-
or before the exercise date.
ified number of shares.
callable bond: Bond that may be repurchased by the issuer be-
corporation: Business owned by stockholders who are not per-
fore maturity at specified call price.
sonally liable for the business™s liabilities.
capital asset pricing model (CAPM): Theory of the relationship

635
636 GLOSSARY


exchange rate: Amount of one currency needed to purchase one
costs of financial distress: Costs arising from bankruptcy or dis-
unit of another.
torted business decisions before bankruptcy.
ex-dividend date: Date that determines whether a stockholder is
coupon: The interest payments paid to the bondholder.
entitled to a dividend payment; anyone holding stock before
coupon rate: Annual interest payment as a percentage of face
this date is entitled to a dividend.
value.
expectations theory of exchange rates: Theory that expected
credit analysis: Procedure to determine the likelihood a cus-
spot exchange rate equals the forward rate.
tomer will pay its bills.
face value: Payment at the maturity of the bond. Also called par
credit policy: Standards set to determine the amount and nature
value or maturity value.
of credit to extend to customers.
Fed: See Federal Reserve.
cumulative voting: Voting system in which all the votes one
Federal Reserve (the Fed): The central bank in the United
shareholder is allowed to cast can be cast for one candidate for
States, responsible for setting interest rates.
the board of directors.
financial assets: Claims to the income generated by real assets.
current yield: Annual coupon payments divided by bond price.
Also called securities.
decision tree: Diagram of sequential decisions and possible out-
financial intermediary: Firm that raises money from many
comes.
small investors and provides financing to businesses or other
default premium: Difference in promised yields between a
organizations by investing in their securities.
default-free bond and a riskier bond.
financial leverage: Debt financing amplifies the effects of
degree of operating leverage (DOL): Percentage change in prof-
changes in operating income on the returns to stockholders.
its given a 1 percent change in sales.
financial markets: Markets in which financial assets are traded.
depreciation tax shield: Reduction in taxes attributable to the
financial risk: Risk to shareholders resulting from the use of
depreciation allowance.
debt.
discount factor: Present value of a $1 future payment.
financial slack: Ready access to cash or debt financing.
discount rate: Interest rate used to compute present values of fu-
financing decision: Decision as to how to raise the money to
ture cash flows.
pay for investments in real assets.
diversification: Strategy designed to reduce risk by spreading
fixed costs: Costs that do not depend on the level of output.
the portfolio across many investments.
floating-rate security: Security paying dividends or interest that
dividend: Periodic cash distribution from the firm to its share-
vary with short-term interest rates.
holders.
forex: Abbreviation for foreign exchange; also abbreviated fx.
dividend discount model: Computation of today™s stock price
forward contract: Agreement to buy or sell an asset in the future
which states that share value equals the present value of all
at an agreed price.
expected future dividends.
forward rate of exchange: Exchange rate for a forward transac-
dividend payout ratio: Percentage of earnings paid out as divi-
tion.
dends.
fundamental analysts: Analysts who attempt to find under- or
Dow Jones Industrial Average: Index of the investment per-

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