1

Management Accounting Notes by

Ahmed Fawzy
Eslesca 45D

Ahmedfawzy_80@hotmail.com

















2



Relevant and irrelevant information
Operation Budgeting
Time Value of Money
Cost of Capital
Capital Budgeting
Present Value Calculation
Accounting Rate of Return
Notes From Exams









3

Relevant Information in Operational Decision Making

Differential Cost is the difference in total cost between two alternatives.

Differential Revenue is the difference in total revenue between two alternatives

Incremental Costs are additional costs or reduced benefits generated by the proposed alternative

Incremental Benefits are the additional revenues or reduced costs generated by the proposed alternative

Opportunity Cost is the maximum available selection that is passed up, (Due to limited resources)

Outlay Cost is the actual Pay out cash or the cash disbursement.

Mutually Exclusive Projects happened when a selection of one project block
the selection of the other project due to limited resources.

Financial Benefits is the amount of difference between the project I select and the next available project

Irrelevant Information at make of buy decision, they will Not Affect the decision
Any Unavoidable costs are irrelevant cost
Any Sunk Costs are irrelevant cost
Any Depreciation is irrelevant cost
The Book Value is irrelevant cost
The Disposal value is relevant cost (because it is an expected future inflow that usually differs
among alternatives)

Avoidable Costs are costs that will not continue to be ongoing if the ongoing operations are terminated
or cancels or changed .

Unavoidable Costs are costs that will continue even if the operations stopped.

Common Costs are the cost of facilities and services shared between users.

A Limiting Factor or scarce resource restricts or constrains the production or sale of a product or service
, this include labor hours and machine hours that limit production (and hence sales) in manufacturing
firms .

The book value of equipment is not a relevant consideration in deciding whether to replace the
equipment

Depreciation is the periodic allocation of the cost of equipment.

The equipments book value (or net book value) is the original cost less accumulated depreciation








4

Cases Calculations

Opportunity Cost Calculations (sell a machine or use it in production)

When we have multiple selections, first check the effect of each one of the Contribution margin .
Either Direct Selling Cost for assets
Profit , calculated by (Revenue Outlay Cost)
Financial benefits before Opportunity cost
Opportunity cost is the next available maximum

Net Financial Benefits is the different between the correct selection profit and opportunity cost


Make of Buy Decision Calculations

Item Make Buy
Perches Cost X
Direct Material X
Direct Labor X
Variable Factory Overhead X
Fixed factory overhead (Avoidable by Not Making) X
Fixed factory overhead (unavoidable or irrelevant) X X
Total 170 180



Make or Buy and the Use of Facilities Calculations

Item Make Buy and
Leave idle
Buy and
Rent
Buy and Reuse
Rent Revenue 25000
Contribution margin from other
products
55000
Variable cost per unite 170 180 180 180
Net Relevant costs (170) (180) (155) (125)

Given: Rent is 25000$ , Contribution margin if we produce other product 55000$


Any unavoidable or irrelevant costs, to be excluded from calculations
When Calculate delta between make and buy dont include any unavoidable costs

Incremental costs :
Incremental cost of one unit is: The cost associated with one additional unit of production. Also
called marginal cost. (Cost include Direct Labor, Direct material, Variable Overhead) but NOT
fixed overhead Cost. cost per unite , no overhead included



Choose the Decision
with the less total cost



5

Deletion or Addition of Products, Services, or Departments Calculations


Item Total Department1 Department2 Department3
Sales 1,900 1,000 800 100
Variable Expenses (VC) 1,420 800 560 60
Contribution Margins $480 (25%) $ 200 (20%) $240 (30%) $40 (40%)
Fixed Expenses Avoidable 265 150 100 15
Fixed Expenses unavoidable 180 60 100 20
Total Fixed Costs 445 210 200 35
Operation Income (Sales VC FC) 35 (10) 40 5


Department Store Shutdown (Assume Department 1 Closer) Calculations

Item Total Before
Change
Department 1
Dropping Effect
Total After
Change
Sales 1,900 1,000 900
Variable Expenses (VC) 1,420 800 620
Contribution Margins 480 200 280
Fixed Expenses Avoidable 265 150 115
Profit contribution to unavoidable costs 215 50 165
Fixed Expenses unavoidable 180 0 180
Operation Income (Sales VC FC) 35 50 (15)


Department Store Shutdown (Assume Department 1 Closer and Add new department) Calculations

Item Total
Before
Change
Department 1
Dropping
Effect
Add new
Department
Total After
Change
Sales 1,900 1,000 500 1,400
Variable Expenses (VC) 1,420 800 350 970
Contribution Margins 480 200 150 430
Fixed Expenses Avoidable 265 150 70 185
Profit contribution to unavoidable
costs
215 50 80 245
Fixed Expenses unavoidable 180 0 0 180
Operation Income (Sales VC FC) 35 50 80 65












6



Limited Resources Calculations
(Calculate the Contribution margin per Machine Hour (CM/Hour) . the higher the better

Item Product A Product B
Selling price per unite 80 120
Variable costs per unite 60 84
Contribution margin per pair 20 $ 36 $
Contribution margin ratio 25% 30 %
Machine Time 10,000 Hours
Production Rate 10 Unites / Hour 5 / Hour
Production Maximum Capacity 100,000 Unites 50,000 Unites
Maximum Contribution margin 2,000,000 1,800,000



Equipment Replacement Calculations

Suppose a $10,000 machine with a 10-year life span has depreciation of $1,000 per year.
At the end of 6 years, accumulated depreciation is 6 x $1,000 = $6,000,
and the book value is $10,000 $6,000 = $4,000.

Keep or Replace the Old Machine?
Old Machine Replacement Machine
Original cost $10,000 $8,000 irrelevant / relevant
Useful life in years 10 10 Relevant
Current age in years 6 0 Relevant
Useful life remaining in
years
4 4 Relevant
Accumulated depreciation 6,000 0 Irrelevant
Book value 4,000 N/A Irrelevant
Disposal value (in cash) now 2,500 N/A Relevant
Disposal value in 4 years 0 0 Relevant
Annual cash operating costs 5,000 3,000 Relevant

The most widely misunderstood facet of replacement decision making is the role of the book value of the
old equipment in the decision.
We often call the book value a sunk cost, which is really just another term for historical or past cost, a
cost that the company has already incurred and, therefore, is irrelevant to the decision-making process.
Nothing can change what has already happened. In deciding whether to replace or keep existing
equipment, we must consider the relevance of four commonly encountered items.

Cost Comparison
Keep Replace
Cash operating costs 20,000 (4*5000) 12,000 (4*3000)
Disposal value (2,500)
New machine acquisition cost 8,000
Total costs 20,000 $ 17,500 $
Prefer to produce Product A ,
although it generate less
Contribution margin per
unite then product B , since
the overall Contribution
margin of A is higher than B


7

Operation Budgeting
Budgeting: The Basis for Planning and Control

Benefits Derived from Budgeting
Enhanced management responsibility
Coordination of activities
Assignment of decision making responsibilities
Performance evaluation

Budget Problems and Solution
Perceived unfair or unrealistic goals. Reasonable and achievable budgets.
Poor management-employee communications. Employee participation in budgeting process.

The Master Budget




Notes :
Prodcution must meet salesRequrements and profive suffecient end of inventory policy
Used materials must also meet requrements for production and end of inventory policy










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Sales
April May June July
Required Number of Unites sales per month 20,000 50,000 30,000 25,000
Budgated sales (assume 10$ per unite) 200,000$ 500,000$ 300,000$ 250,000$

Production :
= Assume 20% of next month sales must be in inventory
= 4000 unite by end march are avilabe inventory
April May June July
Required Number of Unites sales per month 20,000 50,000 30,000 25,000
(+) Disired End of inventory 10,000 6000 5000
(-) Begening of inventory 4000 10,000 6000 5000
Total Unites to Produce 26,000 46,000 29,000


Materials
= Assume 5 pounds of materials for each unite
= 10% of next month inventory must be avilable
=115 K unites are july Production , 13K are Begening of Inventory
April May June July
Total Unites to produce 26,000 46,000 29,000 23,000
(+) Materials needed (* 5 ) 130,000 230,000 145,000 115,000
(+) Desire End of Inventory (10% of next month) 23,000 14,500 11,500
(-)Begening of inventory 13,000 23,000 14,500
Materials Persued 140,000 221,500 142,000


Cash Payement for Materials
= Assume 0.4$ per unite materials
= Payement T&C 0.5 Same month , 0.5 Next month
=Account Payable End of March is 12,000 $
April May June July
Materials Persued 140,000 221,500 142,000
Total Cost (*0.4) 56,000 88.600 56,800
Payement From March 12,000
April purchases 28,000 28,000
May purchases 44,300 44,300
June purchases 28,400 28,400
Total Payments in Month 40,000 $ 72,300 $ 72,700 $


Labor (Direct Labor)
= Assume Each unite need 3 min direct labor (0.05 Hour)
= 10$ per hour is the direct labor cost
April May June July
Total Unites to Produce 26,000 46,000 29,000
Total Hours Required for production (*0.05) 13,000 23,000 14,500
Direct Labor Cost (*10$)
130,000 230,000 145,000









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Labor (Overhead)
= Assume 1$ per unite is Variable overhead
= 50K per month are fixed costs inculed 20K mothly depreciation
April May June July
Total Unites to Produce 26,000 46,000 29,000
(+) Variable Overhead cost (*1 $) 26,000 46,000 29,000
(+) Fixed Overhad cost 50,000 50,000 50,000
= Total Manufactural Cost 76,000 96,000 79,000
(-)Depreciation 20,000 20,000 20,000
= Manufactural overhead Cash Out 56,000 76,000 59,000


Selling and Admin
= Assume 0.5 $ per unite is Variable overhead
= 70K per month are fixed costs inculed 10K mothly depreciation
April May June July
Required Number of Unites sales per month 20,000 50,000 30,000
(+) Variable Overhead cost (*0.5 $) 10,000 25,000 15,000
(+) Fixed Overhad cost 70,000 70,000 70,000
= Total Manufactural Cost 80,000 95,000 85,000
(-)Depreciation 10,000 10,000 10,000
= Selling and Admin Cash Out 70,000 85,000 75,000



Cash Receivable
Payement T&C 0.5 Same month , 0.25 Next month , 0.05
uncollected
Account Receivable End of March is 30,000 $
April May June July
Budgated sales 200,000$ 500,000$ 300,000$

Recived From March Sale (Account Receivable ) 30,000
Recived From April Sale 140,000 50,000
Recived From May Sale 350,000 125,000
Recived From June Sale 210,000 75,000
Total Recived in Month 170,000 400,000 335,000


Comprehensive Cash Budget Additional Information

Assume :
Has a $100,000 line of credit at its bank, with a zero balance on April 1.
Maintains a $30,000 minimum cash balance.
Borrows at the beginning of a month and repays at the end of a month.
Pays interest at 16 percent when a principal payment is made.
Pays a $51,000 cash dividend in April.
Purchases equipment costing $143,700 in May and $48,800 in June.
Has a $40,000 cash balance on April 1.





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April May June
$40,000 $30,000 $30,000
170,000 400,000 335,000
$210,000 $430,000 $365,000
$40,000 $72,300 $72,700
13,000 23,000 14,500
56,000 76,000 59,000
70,000 85,000 75,000
0 143,700 48,800
51,000 0 0
$230,000 $400,000 $270,000
($20,000) $30,000 $95,000
50,000 0
0 0 -50,000
Interest 0 0 -2000
$30,000 $30,000 $43,000
Comprehensive Cash Budget
Beginning cash balance
Cash receipts
Cash available
Cash payments:
Materials Budget
Balance before Financing
Borrowing
Principal repayment
Ending Cash Balance
Labor Budget
Manufacturing OH Budget
S&A Expense Budget
Equipment Purchases
Dividends
Total cash payments



Note: Principal repayment = $50,000 .16 3/12 = $2,000



















11

Time Value of Money

The Role of Time Value of Money in Finance
The financial manager makes decisions based on cash flows that are expected to occur at various
points in time. Therefore, special emphasis should be given to the timing of the cash flow as well
as its amounts.
Simply: the value of 100 EGP today is different from the value of 100 EGP in 2020.
In discussing the time value concept; we deal with cash flows.

Time Lines : Analytical tool used in time value analysis.
Outflow (minus sign): a cash deposit, cost, amount paid & Inflow (plus sign): a cash receipt.

Future Value
Future Value is the value of a present amount at a future date found by applying compound
interest over a specified period of time
Compound Interest is interest earned on a given deposit that has become part of the principal at
the end of a specified period
Principal is the amount of money on which interest is paid

Future Value Calculation : FVn = PV * (1+k)
n


Future Value Calculation Compounding : FVn = PV * (1+k/m)m*n
Compounding :The interest is added several times during one period.

Present Value
Present Value is the current dollar value of a future amount. The amount of money that would
have to be invested today at a given interest rate over a specified period to equal the future
amount
Discounting Cash Flows is the process of finding present values; the inverse of compounding
interest

Present Value Calculation : PV = FVn / (1+k)n

FVn = the future value at the end of period n
PV = the initial principal, or present value
M= the number of times per year interest is compounded

K= the annual rate of interest paid &
n = the number of periods-typically years- the money is left
on deposit.



Annuities : is a series of payments of an equal amount at fixed intervals, for a specified number of
periods.
Ordinary (Deferred) Annuity: the payments occur at the end of each period.
Annuity Due: the payments occur at the beginning of each period.

Nominal vs. Effective Interest Rates
Nominal Interest Rates (Stated) is a contractual rate of interest charged by a lender or promised by
a borrower
Effective (true) interest rate is the rate of interest actually paid or earned; normally called
ANNUAL PERCENTAGE RATE (APR)
APR it basically reflects the impact of compounding frequency



12

Cost of Capital

Basic Concepts & Definitions
To Finance a company: Debt and / or Equity.
Capital Components: various types of debt + preferred stock + common equity.
Each component has a cost.
Each component has a weight in the financial structure of the firm.

Cost of Debt
It is generally the interest paid over debts.
we need to take into consideration that the interest paid generates tax savings.
Consequently; we calculate after-tax cost of debt.
After Tax Cost of Debt =
= Interest Rate Tax Savings = I-(I*T) = I*(1-T)
Cost of Retained Earnings
The rate of return required by stockholders on a firms common stock.
For simplicity: Required Rate of Return = risk-free rate + risk premium

Weighted Average Cost of Capital (WACC)
A weighted average of the component costs of debt, preferred stock, and common equity.
WACC = Fraction of debt * interest rate * (1- tax rate)
+ Fraction of retained earning* cost of retained earning
+ Fraction of common equity * cost of equity


Capital Budgeting

Capital Budgeting Analysis
Capital budgeting is a required managerial tool.
It Involves choosing investments with satisfactory cash flows and rates of return. Therefore, a
financial manager must be able to decide whether an investment is worth undertaking and be able
to choose intelligently between two or more alternatives.
Capital budgeting is investment decision-making as to whether a project is worth undertaking.
Capital budgeting is basically concerned with the justification of capital expenditures.

Capital is a Limited Resource
In the form of either debt or equity, capital is a very limited resource. There is a limit to the
volume of credit that the banking system can create in the economy.
The argument that capital is a limited resource is true of any form of capital, whether debt or
equity (short-term or long-term, common stock) or retained earnings, accounts payable or notes
payable, and so on.
The firm will either be denied more credit or be charged a higher interest rate, making borrowing
a less desirable way to raise capital.
In reality, any firm has limited borrowing resources that should be allocated among the best
investment alternatives.







13

Capital Expenditures
Whenever we make an expenditure that generates a cash flow benefit for more than one year, this
is a capital expenditure.
Examples include the purchase of new equipment, expansion of production facilities, buying
another company, acquiring new technologies, launching a research & development program, etc.,
etc., etc.
Capital expenditures often involve large cash outlays with major implications on the future values
of the company.
Additionally, once we commit to making a capital expenditure it is sometimes difficult to back-
out.
Therefore, we need to carefully analyze and evaluate proposed capital expenditures.

Stages of Capital Budgeting Analysis
Budgeting Analysis is a process of evaluating how we invest in capital assets; i.e. assets that provide cash
flow benefits for more than one year. We are trying to answer the following questions:
o Will the future benefits of this project be large enough to justify the investment given the risk
involved?
o It has been said that how we spend our money today determines what our value will be
tomorrow.
o Therefore, we will focus much of our attention on present values so that we can understand
how expenditures today influence values in the future.
o A very popular approach to looking at present values of projects is discounted cash flows or
DCF.

The Three Stages of Capital Budgeting Analysis
We will include three stages within Capital Budgeting Analysis:
1) Decision Analysis for Knowledge Building
2) Option Pricing to Establish Position
3) Discounted Cash Flow (DCF) for making the Investment Decision

KEY POINT Do not force decisions to fit into Discounted Cash Flows! You need to go through a
three-stage process: Decision Analysis, Option Pricing, and Discounted Cash Flow.
This is one of the biggest mistakes made in financial management.

Stage 1: Decision Analysis
Decision-making is increasingly more complex today because of uncertainty.
Additionally, most capital projects will involve numerous variables and possible outcomes.
For example, estimating cash flows associated with a project involves working capital
requirements, project risk, tax considerations, expected rates of inflation, and disposal values.

Stage 2: Option Pricing
The uncertainty about our project is first reduced by obtaining knowledge and working the
decision analysis.
The second stage in this process is to consider all options or choices we have or should have for
the project.
Therefore, before we proceed to discounted cash flows we need to build a set of options into our
project for managing unexpected changes.
In financial management, consideration of options within capital budgeting is called option
pricing.




14


For example, suppose you have a choice between two boiler units for your factory. Boiler A uses
oil and Boiler B can use either oil or natural gas. ,
Based on traditional approaches to capital budgeting, the least costs boiler was selected for
purchase, namely Boiler A. However, if we consider option pricing; Boiler B may be the
best choice because we have a choice or option on what fuel we can use.
Suppose we expect rising oil prices in the next five years. This will result in higher
operating costs for Boiler A, but Boiler B can switch to a second fuel to better control
operating costs.
Consequently, we want to assess the options of capital projects.

Three common sources of options are:
Timing Options: The ability to delay our investment in the project.
Abandonment Options: The ability to abandon or get out of a project that has gone bad.
Growth Options: The ability of a project to provide long-term growth despite negative values.
For example, a new research program may appear negative, but it might lead to new product
innovations and market growth. We need to consider the growth options of projects

Stage 3: Discounted Cash Flows
So we have completed the first two stages of capital budgeting analysis:
1. Build and organize knowledge.
2. Recognize and build options within our capital projects.

We can now make an investment decision based on Discounted Cash Flows or DCF.
Unlike accounting, financial management is concerned with the values of assets today; i.e. present
values.
Since capital projects provide benefits into the future and since we want to determine the present
value of the project, we will discount the future cash flows of a project to the present.
Discounting refers to taking a future amount and finding its value today.
Future values differ from present values because of the time value of money.
Financial management recognizes the time value of money because of inflation, uncertainty, and
opportunity cost.

Inflation reduces values over time; i.e. $ 1,000 today will have less value five years from now due to
rising prices (inflation).

Uncertainty in the future; i.e. we think we will receive $ 1,000 five years from now, but a lot can happen
over the next five years.

Opportunity Costs of money; $ 1,000 today is worth more to us than $ 1,000 five years from now
because we can invest $ 1,000 today and earn a return or Interest.












15

Present Value Calculation
Present values are calculated by referring to tables or we can use calculators and spreadsheets for
discounting. The discount rate we will use is based on the WACC calculation.

Example Calculate the Present Value of Cash Flows ?
You will receive $ 500 at the end of next year. If you could invest the $ 500 today, you estimate that you
could earn 12%. What is the Present Value of this future cash inflow?

$ 500 x 0.893 (Exhibit 1) = $ 446.50

Present Value Calculation : If we were to receive the same cash flows year after year into the future, then
we could use the present value tables for an annuity.

Example
Calculate the Present Value of Annuity Type Cash Flows
You will receive $ 500 each year for the next five years. Your opportunity costs for this
investment is 10%. What is the present value of this investment?
$ 500 x 3.791 (Exhibit 2) = $ 1,895.50
We now understand discounting of cash flows (DCF) and the three reasons why we
discount future cash flows: Inflation, Uncertainty, and Opportunity Costs.

Present Value Calculation
So far, we have covered present values and relevancy within capital budgeting.
We now can proceed to calculate the present value of relevant cash flows.
Once we have determined the present value of cash flows, we will have a basis for comparing our
initial investment.
Both values (future cash flows and initial investment) will be expressed in current values.
The net of these two amounts will tell us how much value we will create or destroy by investing
in a project.








16

Calculating the Present Value of Two Cash Flows
Our next step is to calculate present values of our two cash flow streams.
We will use our cost of capital to discount the cash flows.
We will assume that our cost of capital is 12%. We will use the present value tables in Exhibits 1
and 2 for finding the appropriate discount factor per the life of our cash streams and the 12% cost
of capital.

Example Calculate Present Value of Cash Flows
Annual Project Cash Flows $ 5,788
Discount Factor per Exhibit 2 x 3.605
Present Value of Annual Flows $ 20,866

Terminal Cash Flow $ 3,250
Discount Factor per Exhibit 1 x .567
Present Value of Terminal Flow $1,843
Total Present Value $ 22,709

Calculating Net Investment
Now that we have the current value of $ 22,709 for our cash flows, we need to compare this to our
investment amount.
Our investment is the total cash outlay we must make today and it includes:
All cash paid out to invest in the project and place it into service, such as installation,
transportation, etc.
Net proceeds from the disposal of any old equipment that will be replaced by the new
equipment.
Any taxes paid and/or tax benefits received from making the investment.

Example Calculate Net Investment

Acquisition Costs $ 25,000
Installation Costs 2,000
Increase in Working Capital 1,000

Proceeds from Sale $ 6,000
Less Taxes @ 35% (2,100)*
Net Proceeds from Sale (3,900)*

Net Investment $ 24,100

So we now have a current value for our cash flows of $ 22,709 and a total net investment of $ 24,100.
These amounts are derived by looking at three different types of cash flows:

o Relevant cash flows during the life of the project.
o Terminal cash flows at the end of the project.
o Initial cash flows (net investment).





We use the Annuity Table since we
have the same cash flows each year
for the next 5 years. If we look at
Exhibit 2 for n = 5 years and 12%,
we find 3.605
We need to discount the terminal
cash flow received five years from
now to the present by using the
Present Value Table in Exhibit 1. for
the next 5 years. If we look at Exhibit
2 for n = 5 years and 12%, we find
3.605


17

Discounted Cash Flows: it is known that money received in the future is worth less than money received
today, the reason for that is the time value of money, The Discounted Cash Flow technique compares the
value of the future cash flows of the project to todays dollars.

Formula for future value calculations: PV = FV / (1 + i) ^n
(FV = Future value), (PV= Present Value), (i= interest rate or cost of capital), (n= number of time periods)

Net Present Value (NPV): The Present value of the total benefits (income or revenue) less the costs.
NPV allows calculating the accurate value of the project

NPV uses the RRR (Required rate of returns)

Net present value (NPV) allows you to calculate an accurate value for the project profit in todays
dollars.
NPV assumes that cash inflows are reinvested at the cost of capital.
o If the NPV calculation is greater than zero, accept the project. =X
o If the NPV calculation is less than zero, reject the project. = (-x)

When you get a positive value for NPV, it means that the project will earn a return at least equal to or
greater than the cost of capital.

Projects with high returns early in the project are better than projects than projects with lower returns
early in the project.

NPV Equation: [Sum of PV of the future cash inflows (n) - Initial Investment]
. {if VE written as (xx) , if +VE written as xx}

Disadvantage: it calculate the profit in a form of an absolute number, not compared to the initial
investment value

Net Present Value
The first criterion we will use to evaluate capital projects is Net Present Value.
Net Present Value (NPV) is the total net present value of the project.
It represents the total value added or subtracted from the organization if we invest in this project.

We can refer back to our previous example and calculate

Example Calculate Net Present Value
Net Investment Outflow: $ (24,100)
Present Value of Inflows 22,709
Net Present Value $ (1,391)

If the Net Present Value is positive, we should proceed and make the investment.
If the Net Present Value is negative (as is the case in the previous example ), then we should not
make the investment.








18

Internal Rate of Return (I RR): The rate at which the project inflows and project outflows are equal.

IRR is the discount rate when NPV = 0. (IRR>>RRR)
IRR is the return rate when the Net Present Value of all future cash inflows equals the original
investment.
Internal Rate of Return is calculated by finding the discount rate whereby the Net Investment
amount equals the total present value of all cash inflows; i.e. Net Present Value = 0.
If the Internal Rate of Return were higher than our cost of capital, then we would accept this
project..
Projects with higher IRR value are profitable.
IRR assumes that cash inflows are reinvested at the IRR value
It is the return rate that would make the present value of all future cash flow , plus the final market
value of the business both equal the current market price
IRR assumes that cash inflows are reinvested at the IRR value.
IRR is called the effective internet rate (overall internet rate for my investment according to the FV
and PV calculation )

IRR is the value of r when : 0 = PV0 + PV1/(1+R)+PV2/(1+R)^2+..PVn/(1+R)^n
PV0 = Initial investment and always in negative value (a money I pay)
PV1 = Present value of the future cash flow
0 = - Initial investment + PV1/(1+R)+PV2/(1+R)^2+..PVn/(1+R)^n

IRR is a percentage, while NPV is a value

Payback Period is the length of time it takes the company to recoup the initial costs of producing the
product, service, or result of the project, this method compares the initial investment to the cash inflows
expected over the life of the product
The payback period is the least precise of all the cash flow calculations

Payback Period= Total Investment / Yearly Income, In our previous example; we could use a simple
payback calculation as follows: $ 24,100 / $ 5,788 = 4.2 years

In case Yearly Income is not the same,
o We add one year after another , until we reach initial investment
o Then we backup one year , check the delta (or the reaming between the value we have and
the initial investment
o Divide this delta with this yearly income , add the value to the number of years we have

Example: An initial investment of $42,000 is expected to generate annual cash flows of $10,000, $15,000,
$15,000, and $12,000, respectively. Assume straight-line depreciation and ignore income taxes. The payback
period is _____.

$10,000 + $15,000 + $15,000 + $2,000 = $42,000; 3 years + ($2,000 / $12,000) = 3.17 years








19

Discounted Payback Period

However Payback Period does not recognize the time value of money and as we previously
indicated, we must consider the time value of money because of inflation, uncertainty, and
opportunity costs.
Therefore, we will use the discounted cash flows to calculate the payback period (discounted
payback period).


Example Calculate Discounted Payback Period , Referring back to previous Example
Year Cash Flow x P.V. Factor = P.V. Cash Flow Total to Date
1 $ 5,788 .893 $ 5,169 $ 5,169
2 5,788 .797 4,613 9,782
3 5,788 .712 4,121 13,903
4 5,788 .636 3,681 17,584
5 5,788 .567 3,282 20,866
5 3,250 .567 1,843 22,709

Three Economic Criteria for Evaluating Capital Projects
We have completed our three main stages of capital budgeting analysis, including the calculation
of discounted cash flows.
The next step is to apply some economic criteria for evaluating the project.
We will use three criteria:
1) Net Present Value.
2) Internal Rate of Return.
3) Discounted Payback Period.

Why The NPV And IRR Sometimes Select Different Projects
When comparing two projects, the use of the NPV and the IRR methods may give different
results. A project selected according to the NPV may be rejected if the IRR method is used.

Suppose there are two alternative projects, X and Y. The initial investment in each project is
$2,500. Project X will provide annual cash flows of $500 for the next 10 years. Project Y has
annual cash flows of $100, $200, $300, $400, $500, $600, $700, $800, $900, and $1,000 in the
same period.

The IRR of Project X is 17% and the IRR of Project Y is around 13%. If you use the IRR, Project
X should be preferred because its IRR is 4% more than the IRR of Project Y. But what happens
to your decision if the NPV method is used? The answer is that the decision will change
depending on the discount rate you use. For instance, at a 5% discount rate, Project Y has a
higher NPV than X does. But at a discount rate of 8%, Project X is preferred because of a higher
NPV.

The purpose of this numerical example is to illustrate an important distinction: The use of the
IRR always leads to the selection of the same project, whereas project selection using the NPV
method depends on the discount rate chosen.







20

When Are The NPV And IRR Reliable?
Generally speaking, you can use and rely on both the NPV and the IRR if two conditions are met;
If projects are compared using the NPV, a discount rate that fairly reflects the risk of each
project should be chosen. There is no problem if two projects are discounted at two
different rates because one project is riskier than the other. Remember that the result of
the NPV is as reliable as the discount rate that is chosen. If the discount rate is unrealistic,
the decision to accept or reject the project is baseless and unreliable.
If the IRR method is used, the project must not be accepted only because its IRR is very
high.

Management must ask whether such an impressive IRR is possible to maintain. In other words,
management should look into past records, and existing and future business, to see whether an
opportunity to reinvest cash flows at such a high IRR really exists. If the firm is convinced that
such an IRR is realistic, the project is acceptable. Otherwise, the project must be reevaluated by
the NPV method, using a more realistic discount rate.

Basic Steps of Capital Budgeting
1. Estimate the cash flows
2. Assess the riskiness of the cash flows.
3. Determine the appropriate discount rate.
4. Find the PV of the expected cash flows.

Accept the project if
PV of inflows > costs.
IRR > WACC and/or
Payback < expected life time of the project
Summary
The long-term investments we make today determines the value we will have tomorrow.
Therefore, capital budgeting analysis is critical to creating value within financial management.
And the only certainty within capital budgeting is uncertainty.
Therefore, one of the biggest challenges in capital budgeting is to manage uncertainty.

We deal with uncertainty through a three-stage process:
1) Build knowledge through decision analysis.
2) Recognize and encourage options within projects.
3) Invest based on economic criteria that have realistic economic assumptions.

















21

Accounting Rate of Return

Accounting rate of return, also known as the Average rate of return, or ARR is a financial ratio used in
Capital Budgeting. The ratio does not take into account the concept of Time Value of Money.

Accounting rate of return is a non-discounted-cash-flow
Accounting rate of return focus on profitability as an objective

ARR calculates the return, generated from net income of the proposed capital investment. The ARR is a
percentage return. Say, if ARR = 7%, then it means that the project is expected to earn seven cents out of
each dollar invested (yearly).

If the ARR is equal to or greater than the required rate of return, the project is acceptable. If it is less than
the desired rate, it should be rejected. When comparing investments, the higher the ARR, the more
attractive the investment. Over one-half of large firms calculate ARR when appraising projects.


Where










Total Profit = 3000+3500+6000=12500
Avarage Profit = 12500/3 = 4167

Accouting Rate or Return = Avarage profit /initial investemet
= 4167/5000 = 0.84

Avarage rate of return is to highlight the Profitability of the firm





Years Year 1 Year 2 Year 3 Year 4
Cash out - Investment 5000
Cash Out - Operation 0 2000 2500 3000
Total Cash In 5000 2000 2500 3000
Cash In - Sales 0 6000 7000 8000
Cash In Terminal (Disposal) Value 0 0 0 2000
Total Cash Out 0 6000 7000 10000
Net Cash Flow (5000) 4000 4500 7000
Depreciation (Assume Staring Line) 0 1000 1000 1000
Profit 3000 3500 6000


22

Notes From Exams :
Accounting rate of return is a non-discounted-cash-flows model that has profitability as an
objective.
The payback method of capital budgeting approach to the investment decision highlights the
liquidity of the investment
Discounted cash flow methods for capital budgeting focus on: cash inflows & cash outflows
Net present value is calculated using the required rate of return
Future-value cash-flow method is NOT capital budgeting decisions method
In using the net present value method, only projects with a zero or positive net present value are
acceptable because: the return from these projects equals or exceeds the cost of capital
A key factor in a make-or-buy decision is: whether or not there are idle facilities
The budgeting process is MOST strongly influenced by: the sales forecast
Participation of line managers in the budgeting process helps to create: greater commitment
Costs that CANNOT be changed by any decision made now or in the future are: sunk costs
Inventory cost is not likely to be relevant in a decision concerning the disposal of obsolete
inventory
Incremental cost of one unit is: The cost associated with one additional unit of production. Also
called marginal cost. (Cost include Direct Labor, Direct material, Variable Overhead) but NOT
fixed overhead Cost.
Investment : All outlay cost , until production or project start
Operation : All outlay cost , After production or project start
At NPV equal Zero , IRR is the rate of return
At NPV equal Zero , Accept the project as its predicted to achieve its targets
Avarage rate of return is to highlight the Profitability of the firm
Pay Back Period is to highligh the Liquidity of he firm
Present Value of $1 to be Received at the End of N Periods (PVIF)
Present Value of an Annuity of $1 per Period for N Periods (PVIFA)



23

Period 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25%
1 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800
2 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640
3 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512
4 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.437 0.423 0.410
5 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328
6 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262
7 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210
8 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168
9 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134
10 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107
11 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.103 0.094 0.086
12 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0.092 0.083 0.076 0.069
13 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.068 0.061 0.055
14 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044
15 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035
16 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028
17 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023
18 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018
Period 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25%
1 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800
2 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1.457 1.440
3 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 2.074 2.042 2.011 1.981 1.952
4 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362
5 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689
6 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951
7 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161
8 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329
9 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463
10 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571
11 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656
12 8.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725
13 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780
14 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824
15 10.380 9.712 9.108 8.559 8.061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859
16 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887
17 11.274 10.477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 4.059 3.910
18 11.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928
19 12.085 11.158 10.336 9.604 8.950 8.365 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942
20 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954
Present Value of $1 to be Received at the End of N Periods (PVIF)
Present Value of an Annuity of $1 per Period for N Periods (PVIFA)










Future Value of $1 Invested Today at the End of N Periods (FVIF)
Future Value of an Annuity Due of $1 per Period at the End of N Periods (FVIFAd)



24

Period 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25%
1 1.050 1.060 1.070 1.080 1.090 1.100 1.110 1.120 1.130 1.140 1.150 1.160 1.170 1.180 1.190 1.200 1.210 1.220 1.230 1.240 1.250
2 1.103 1.124 1.145 1.166 1.188 1.210 1.232 1.254 1.277 1.300 1.323 1.346 1.369 1.392 1.416 1.440 1.464 1.488 1.513 1.538 1.563
3 1.158 1.191 1.225 1.260 1.295 1.331 1.368 1.405 1.443 1.482 1.521 1.561 1.602 1.643 1.685 1.728 1.772 1.816 1.861 1.907 1.953
4 1.216 1.262 1.311 1.360 1.412 1.464 1.518 1.574 1.630 1.689 1.749 1.811 1.874 1.939 2.005 2.074 2.144 2.215 2.289 2.364 2.441
5 1.276 1.338 1.403 1.469 1.539 1.611 1.685 1.762 1.842 1.925 2.011 2.100 2.192 2.288 2.386 2.488 2.594 2.703 2.815 2.932 3.052
6 1.340 1.419 1.501 1.587 1.677 1.772 1.870 1.974 2.082 2.195 2.313 2.436 2.565 2.700 2.840 2.986 3.138 3.297 3.463 3.635 3.815
7 1.407 1.504 1.606 1.714 1.828 1.949 2.076 2.211 2.353 2.502 2.660 2.826 3.001 3.185 3.379 3.583 3.797 4.023 4.259 4.508 4.768
8 1.477 1.594 1.718 1.851 1.993 2.144 2.305 2.476 2.658 2.853 3.059 3.278 3.511 3.759 4.021 4.300 4.595 4.908 5.239 5.590 5.960
9 1.551 1.689 1.838 1.999 2.172 2.358 2.558 2.773 3.004 3.252 3.518 3.803 4.108 4.435 4.785 5.160 5.560 5.987 6.444 6.931 7.451
10 1.629 1.791 1.967 2.159 2.367 2.594 2.839 3.106 3.395 3.707 4.046 4.411 4.807 5.234 5.695 6.192 6.727 7.305 7.926 8.594 9.313
11 1.710 1.898 2.105 2.332 2.580 2.853 3.152 3.479 3.836 4.226 4.652 5.117 5.624 6.176 6.777 7.430 8.140 8.912 9.749 10.657 11.642
12 1.796 2.012 2.252 2.518 2.813 3.138 3.498 3.896 4.335 4.818 5.350 5.936 6.580 7.288 8.064 8.916 9.850 10.872 11.991 13.215 14.552
13 1.886 2.133 2.410 2.720 3.066 3.452 3.883 4.363 4.898 5.492 6.153 6.886 7.699 8.599 9.596 10.699 11.918 13.264 14.749 16.386 18.190
14 1.980 2.261 2.579 2.937 3.342 3.797 4.310 4.887 5.535 6.261 7.076 7.988 9.007 10.147 11.420 12.839 14.421 16.182 18.141 20.319 22.737
15 2.079 2.397 2.759 3.172 3.642 4.177 4.785 5.474 6.254 7.138 8.137 9.266 10.539 11.974 13.590 15.407 17.449 19.742 22.314 25.196 28.422
16 2.183 2.540 2.952 3.426 3.970 4.595 5.311 6.130 7.067 8.137 9.358 10.748 12.330 14.129 16.172 18.488 21.114 24.086 27.446 31.243 35.527
17 2.292 2.693 3.159 3.700 4.328 5.054 5.895 6.866 7.986 9.276 10.761 12.468 14.426 16.672 19.244 22.186 25.548 29.384 33.759 38.741 44.409
18 2.407 2.854 3.380 3.996 4.717 5.560 6.544 7.690 9.024 10.575 12.375 14.463 16.879 19.673 22.901 26.623 30.913 35.849 41.523 48.039 55.511
19 2.527 3.026 3.617 4.316 5.142 6.116 7.263 8.613 10.197 12.056 14.232 16.777 19.748 23.214 27.252 31.948 37.404 43.736 51.074 59.568 69.389
20 2.653 3.207 3.870 4.661 5.604 6.727 8.062 9.646 11.523 13.743 16.367 19.461 23.106 27.393 32.429 38.338 45.259 53.358 62.821 73.864 86.736
Period 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25%
1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2 2.050 2.060 2.070 2.080 2.090 2.100 2.110 2.120 2.130 2.140 2.150 2.160 2.170 2.180 2.190 2.200 2.210 2.220 2.230 2.240 2.250
3 3.153 3.184 3.215 3.246 3.278 3.310 3.342 3.374 3.407 3.440 3.473 3.506 3.539 3.572 3.606 3.640 3.674 3.708 3.743 3.778 3.813
4 4.310 4.375 4.440 4.506 4.573 4.641 4.710 4.779 4.850 4.921 4.993 5.066 5.141 5.215 5.291 5.368 5.446 5.524 5.604 5.684 5.766
5 5.526 5.637 5.751 5.867 5.985 6.105 6.228 6.353 6.480 6.610 6.742 6.877 7.014 7.154 7.297 7.442 7.589 7.740 7.893 8.048 8.207
6 6.802 6.975 7.153 7.336 7.523 7.716 7.913 8.115 8.323 8.536 8.754 8.977 9.207 9.442 9.683 9.930 10.183 10.442 10.708 10.980 11.259
7 8.142 8.394 8.654 8.923 9.200 9.487 9.783 10.089 10.405 10.730 11.067 11.414 11.772 12.142 12.523 12.916 13.321 13.740 14.171 14.615 15.073
8 9.549 9.897 10.260 10.637 11.028 11.436 11.859 12.300 12.757 13.233 13.727 14.240 14.773 15.327 15.902 16.499 17.119 17.762 18.430 19.123 19.842
9 11.027 11.491 11.978 12.488 13.021 13.579 14.164 14.776 15.416 16.085 16.786 17.519 18.285 19.086 19.923 20.799 21.714 22.670 23.669 24.712 25.802
10 12.578 13.181 13.816 14.487 15.193 15.937 16.722 17.549 18.420 19.337 20.304 21.321 22.393 23.521 24.709 25.959 27.274 28.657 30.113 31.643 33.253
11 14.207 14.972 15.784 16.645 17.560 18.531 19.561 20.655 21.814 23.045 24.349 25.733 27.200 28.755 30.404 32.150 34.001 35.962 38.039 40.238 42.566
12 15.917 16.870 17.888 18.977 20.141 21.384 22.713 24.133 25.650 27.271 29.002 30.850 32.824 34.931 37.180 39.581 42.142 44.874 47.788 50.895 54.208
13 17.713 18.882 20.141 21.495 22.953 24.523 26.212 28.029 29.985 32.089 34.352 36.786 39.404 42.219 45.244 48.497 51.991 55.746 59.779 64.110 68.760
14 19.599 21.015 22.550 24.215 26.019 27.975 30.095 32.393 34.883 37.581 40.505 43.672 47.103 50.818 54.841 59.196 63.909 69.010 74.528 80.496 86.949
15 21.579 23.276 25.129 27.152 29.361 31.772 34.405 37.280 40.417 43.842 47.580 51.660 56.110 60.965 66.261 72.035 78.330 85.192 92.669 100.815 109.687
16 23.657 25.673 27.888 30.324 33.003 35.950 39.190 42.753 46.672 50.980 55.717 60.925 66.649 72.939 79.850 87.442 95.780 104.935 114.983 126.011 138.109
18 25.840 28.213 30.840 33.750 36.974 40.545 44.501 48.884 53.739 59.118 65.075 71.673 78.979 87.068 96.022 105.931 116.894 129.020 142.430 157.253 173.636
19 28.132 30.906 33.999 37.450 41.301 45.599 50.396 55.750 61.725 68.394 75.836 84.141 93.406 103.740 115.266 128.117 142.441 158.405 176.188 195.994 218.045
20 30.539 33.760 37.379 41.446 46.018 51.159 56.939 63.440 70.749 78.969 88.212 98.603 110.285 123.414 138.166 154.740 173.354 194.254 217.712 244.033 273.556
Future Value of $1 Invested Today at the End of N Periods (FVIF)
Future Value of an Annuity Due of $1 per Period at the End of N Periods (FVIFAd)