How to use it and example.
1. NPV
Cash flow T1=50, T2=50, T3=50
Discount Rate 0.07
Present value?
50/1.07+50/1.07^2+50/1.07^3 and hit "="
2. Annuity
Image is from financeformulas.net
Supposed P = 50, r = 0.05, n=10
Discount rate 5%, Coupon payment $50, for 10 years.
Getting a Present value.
(50/0.05)*(11/1.05^10)
3. Geographic Mean
When you want to have a geographic mean of
2%, 3%, 5% returns,
Just simply
(1.02*1.03*1.05)^(1/3)1
