Презентация на тему Discounted cash flow applications

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2. Net present value (NPV)Net present value is
3. Internal rate of return (IRR)*The IRR rule
4. NPV vs. IRRIf projects are independent, the
5. Portfolio return measurement
6. Money-weighted Rate of returnThe money-weighted rate of
7. Time-Weighted Rate of returnTime-weighted rate of return
8. TWR vs. MWRMoney-weighted returns place greater weight
9. Differing Money market YieldsInstruments that mature in
10. Bank discount yieldBy convention, Treasury instruments of
11. Holding period yield (HPY)*Treasury bill, HPY = D/P0
12. Effective annual yield (EAY)
13. Money market yieldThis convention makes the quoted
14. Yield conversionsWe can convert back and forth
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Net present value (NPV)Net present value is the sum of the present values of all the positive cash flows minus the sum of the present values of all the negative cash flows.Decision rule: Accept positive NPV

Discounted cash flow applications By Dias Kulzhanov

Internal rate of return (IRR)*The IRR rule can be affected by problems

NPV vs. IRRIf projects are independent, the decision to invest in one

Money-weighted Rate of returnThe money-weighted rate of return is the internal rate

Time-Weighted Rate of returnTime-weighted rate of return is the standard in the

TWR vs. MWRMoney-weighted returns place greater weight on those periods in which

Differing Money market YieldsInstruments that mature in less than a year a

Bank discount yieldBy convention, Treasury instruments of less than a year in

Holding period yield (HPY)*Treasury bill, HPY = D/P0

Money market yieldThis convention makes the quoted yield on a T-bill comparable

Yield conversionsWe can convert back and forth using holding period yield, which

Bond-equivalent yield (BEY)An annualized periodic yield wherein the process of annualizing is

Слайды презентации

Слайд 2 Net present value (NPV)
Net present value is the

Net present value (NPV)Net present value is the sum of the

sum of the present values of all the positive

cash flows minus the sum of the present values of all the negative cash flows.
Decision rule: Accept positive NPV projects ? they increase shareholder wealth

Слайд 3 Internal rate of return (IRR)
*The IRR rule can

Internal rate of return (IRR)*The IRR rule can be affected by

be affected by problems of scale and timing of

cash flows.

Слайд 4 NPV vs. IRR
If projects are independent, the decision

NPV vs. IRRIf projects are independent, the decision to invest in

to invest in one does not preclude investment in

the other.
NPV and IRR will yield the same investment decisions.
Projects are mutually exclusive if the selection of one project precludes the selection of another project ? project selection is determined by rank.
NPV and IRR may give different ranks when
The projects have different scales (sizes)
The timing of the cash flows differs
If projects have different ranks ? use NPV

Слайд 5 Portfolio return measurement

Слайд 6 Money-weighted Rate of return
The money-weighted rate of return

Money-weighted Rate of returnThe money-weighted rate of return is the internal

is the internal rate of return on a portfolio,

taking account of all cash flows.
Money-weighted rate of return can be appropriate if the investor exercises control over additions and withdrawals to the portfolio.

Слайд 7 Time-Weighted Rate of return
Time-weighted rate of return is

Time-Weighted Rate of returnTime-weighted rate of return is the standard in

the standard in the investment management industry.
The time-weighted rate

of return removes the effects of timing and amount of withdrawals and additions to the portfolio and reflects the compound rate of growth of one unit of currency invested over a stated measurement period.

Слайд 8 TWR vs. MWR
Money-weighted returns place greater weight on

TWR vs. MWRMoney-weighted returns place greater weight on those periods in

those periods in which investment is higher and, therefore,

give a “better” picture of the actual investor experience.
Time-weighted returns remove the effect of inflows and outflows to the portfolio and are, therefore, a better indicator of managerial skill.

Слайд 9 Differing Money market Yields
Instruments that mature in less

Differing Money market YieldsInstruments that mature in less than a year

than a year a known as money market instruments
There

are a number of different conventions for calculating yields on money market instruments.
Bank discount yield
Holding period yield
Effective annual yield
Money market yield