FIN 345 1nd Edition Lecture 11Current LectureReview of Exam 21. Objective of the firm is Cash Flow, not net income2. Double taxation is not a limitation of proprietorships3. Interest paid by a corporation is a tax deduction for the paying corporation but dividendspaid are not deductible. This treatment, other things held constant, tends to encourage the use of debt financing by corporations.4. Wealth maximization is a long-term goal5. A firms current value is related to its future growth opportunities6. Current assets (made up of cash and accounts receivable) divided by current liabilities Chapter 91. Objectivesa. Identify various types of cash flow patterns (streams) that are observed in businessb. Compute (a) the future values and (b) the present values of different cash flow streams and explain the resultsc. Compute the return (interest rate) and the present values of different cash flow streams and explain the resultsd. Explain the difference between the annual percentage rate and the effective annual rate and explain when each is more appropriate to usee. Describe an amortized loan and compute amortized loan payments and the balance on an amortized loan at a specific point during its life2. Time value of moneya. The principles and computations used to revalue cash payoffs at different times so they are stated in dollars of the same time periodb. The most important concept in finance used in nearly every financial decisioni. Business and personal finance decisions3. Cash flow patternsa. Lump sum amount: a single payment paid or received in the current period or some future periodb. Annuity: a series of equal payments that occur at equal time intervalsc. Uneven cash flow stream: multiple payments that are not equal, do not occur at equal intervals, or both conditions existThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.4. Cash flow timelines: graphical representations used to show timing of cash flows5. Future value: the amount to which a cash flow or series of cash flows will grow over a period of time when compounded at a given interest ratea. How much would you have at the end of one year if you deposit $700 in a bank account that pays 10% interest each year?i. FVn=FV1=PV + INTii. =PV+PV( r )iii. =PV (1 + r)iv. =$700(1+0.10)=$100(1.10)=$7706. Three ways to solve time value of money problemsa. Use equationsb. Use financial calculatorc. Use electronic spreadsheet7. Numerical equationa. FVn=PV(1+r)^ni. Already programmed in financial