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5.0
FINANCIAL MODELING EXAM 1 QUESTIONS WITH
DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) /ALREADY GRADED A+
The 3 equivalent ways of calculating the present value of a single cash
flow are:
Ans: 1. PV formula
2. PV function
3. PV timeline
The effect of future value of a single cash flow when you increase the
PV
Ans: an increase in the FV
The effect of future value when you increase the discount rate
Ans: an increase in FV
The effect of future value when you increase the number of periods
Ans: an increase in the FV
Fully explain the formula used for calculating the FV of each cash flow
Ans: Each cash flow is compounded at the Discount Rate for the remaining
periods
Sunday, 02 March 2025
, What is the name of the term that the Present Value is divided by to
get the Payment. Why does this formula give the Payment amount?
Ans: Present Value Interest Factor of Annuity. APV = PMT X PVIFA. So, dividing
by the Present Value Interest Factor undo's the product, and gives you the
PMT.
Show the formula for calculating the Annuity Present Value using the
Annuity Future Value, Discount Rate, and # of Periods in Excel Notation
Ans: APV = AFV/(1+r)^t
State the effect of increasing the payment amount on the APV and
AFV
Ans: APV = increase in FV
AFV = increase in FV
Can the constant discount rate method be used to calculate NPV in
the general case where the discount rate changes over time?
Why/Why not?
Ans: No, because the NPV function & constant discount formula only allow
for one constant discount rate.
Fully explain the NPV function used to calculate the NPV in cell b21
Ans: The NPV function in Excel assumes that Year 0 cash flow occurs at the
end of the year instead of the beginning, so you add it to the NPV of the
remaining years using the NPV function. The NPV function takes the cash
Examstudy - Stuvia US
In today's fast-paced educational landscape, students need reliable resources to excel in their studies.
5.0
FINANCIAL MODELING EXAM 1 QUESTIONS WITH
DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) /ALREADY GRADED A+
The 3 equivalent ways of calculating the present value of a single cash
flow are:
Ans: 1. PV formula
2. PV function
3. PV timeline
The effect of future value of a single cash flow when you increase the
PV
Ans: an increase in the FV
The effect of future value when you increase the discount rate
Ans: an increase in FV
The effect of future value when you increase the number of periods
Ans: an increase in the FV
Fully explain the formula used for calculating the FV of each cash flow
Ans: Each cash flow is compounded at the Discount Rate for the remaining
periods
Sunday, 02 March 2025
, What is the name of the term that the Present Value is divided by to
get the Payment. Why does this formula give the Payment amount?
Ans: Present Value Interest Factor of Annuity. APV = PMT X PVIFA. So, dividing
by the Present Value Interest Factor undo's the product, and gives you the
PMT.
Show the formula for calculating the Annuity Present Value using the
Annuity Future Value, Discount Rate, and # of Periods in Excel Notation
Ans: APV = AFV/(1+r)^t
State the effect of increasing the payment amount on the APV and
AFV
Ans: APV = increase in FV
AFV = increase in FV
Can the constant discount rate method be used to calculate NPV in
the general case where the discount rate changes over time?
Why/Why not?
Ans: No, because the NPV function & constant discount formula only allow
for one constant discount rate.
Fully explain the NPV function used to calculate the NPV in cell b21
Ans: The NPV function in Excel assumes that Year 0 cash flow occurs at the
end of the year instead of the beginning, so you add it to the NPV of the
remaining years using the NPV function. The NPV function takes the cash
Examstudy - Stuvia US
