Mgt 555 Chapter 2 and 3

MGT 555 Financial Management Session 2

If a firm's earning per share grew from 1 to 2 over a 10 year period, the total growth would be 100%, but the annual growth rate would be less than 10%.

TRUE

The above statement is true because annual growth rate is %.

In calculation:

FV PV (11)n The above statement is true because annual growth rate is %.

21 (1I)10 In calculation:

2/1 (1I)10 FV PV (1r)n

(1I)10 2 or, 2 1 (1r)10

(1I)2 (1/10) or, 2/1 (1r) 10

1I or, (1r)10 2

I or, (1 r) 2(1/10)

or, (1 r) 2(0.1)

or, (1 r)

Time Value of Money Assignment

1a PV RATE #PER PMT FV TYPE

50,000 0 10 0 0

(50,)

b 50,000 10 0 0

(81,)

c 50,000 0.1 10 0 0

(129,)

2a -25,000 0 5 0 25,000 0

b -19,588 5 0...