Simon Benninga Financial Modeling 4th Edition - [Free] Simon Benninga 4th Edition [PDF] [EPUB] This paper examines the stock market. I've found earlier editions of Simon Benninga's Financial Modeling to be a great reference, and I've used them often. The fourth edition again offers helpful tips. financial models acquired in the prerequisite courses using Excel. Simon Benninga, Financial Modeling: Fourth Edition, The MIT Press, Cambridge.
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Library of Congress Cataloging-in-Publication Data Benninga, Simon. Financial modeling / Simon Benninga.—Fourth edition. pages cm Includes bibliographical . Library of Congress Cataloging-in-Publication Data. Benninga, Simon. Financial modeling / Simon Benninga.—Fourth edition. pages cm. Editorial Reviews. Review. I've found earlier editions of Simon Benninga's Financial Modeling Financial Modeling (The MIT Press) - Kindle edition by Simon Benninga. Download it This long-awaited fourth edition maintains the “ cookbook” features and Excel dependence that have made the previous editions so popular.
The cash receipts or cash flows, as we will call them may be certain or uncertain. In this chapter we analyze the values of nonrisky cash flows—future receipts that we will receive with absolute certainty. The basic concept to which we will return over and over is the concept of opportunity cost. Opportunity cost is the return that would be required of an investment to make it a viable alternative to other, similar, investments. When we calculate the internal rate of return, we compare the calculated return to the investment's opportunity cost to judge its value. When it is applied to risky cash flows as in the next chapter , we will sometimes call the opportunity cost the risk-adjusted discount rate RADR or the weighted average cost of capital WACC.
A substantially revised edition of a bestselling text combining explanation and implementation using Excel; for classroom use or as a reference for finance practitioners. Financial Modeling is now the standard text for explaining the implementation of financial models in Excel.
As in previous editions, basic and advanced models in the areas of corporate finance, portfolio management, options, and bonds are explained with detailed Excel spreadsheets. Sections on technical aspects of Excel and on the use of Visual Basic for Applications VBA round out the book to make Financial Modeling a complete guide for the financial modeler. The new edition of Financial Modeling includes a number of innovations.
A new section explains the principles of Monte Carlo methods and their application to portfolio management and exotic option valuation.
A new chapter discusses term structure modeling, with special emphasis on the Nelson-Siegel model. The discussion of corporate valuation using pro forma models has been rounded out with the introduction of a new, simple model for corporate valuation based on accounting data and a minimal number of valuation parameters. New print copies of this book include a card affixed to the inside back cover with a unique access code.
Access codes are required to download Excel worksheets and solutions to end-of-chapter exercises. If you have a used copy of this book, you may download a digitally-delivered access code separately via the Supplemental Material link on this page.
Arun Sundararajan. Boris Groys. Olaf Sporns. Simon Benninga. Bernd Becher. Colin McGinn. Chris Bernhardt.
Alan J. Sue Taylor. Christine L. Kenji Ekuan. Peter Dauvergne.
Ignacio Palacios-Huerta. Harry Collins. Bruce McKern. Gwen Allen. Manfredo Tafuri. Hod Lipson. Yossi Sheffi. Note that you could also use the Goal Seek tool to solve this problem. For simple problems such as this one, there is not much difference between the Solver and Goal Seek; the one not inconsiderable advantage of the Solver is that it remembers its previous arguments, so that if you bring it up again on the same spreadsheet, you can see what you did in the previous iteration.
In later chapters we will illustrate problems that cannot be solved by Goal Seek and where the use of the Solver is a necessity. Now suppose that the bank pays you 2. As n increases, this amount gets larger, converging rather quickly, as you will soon see to e0. When n is infinite, we refer to this process as continuous compounding. This emphasizes the compounding process.
The following picture shows the graph's x-axis marked and the relevant dialog box right-click after marking the axis and go to Format Axis. What was your percentage return?
Although the answer may appear obvious, it actually depends on the compounding method. In general, if there are n compounding periods per year, you have to solve multiply the result appropriately. All of this may seem somewhat esoteric. However, continuous compounding and discounting are often used in financial calculations.
In this book, continuous compounding is used to calculate portfolio returns Chapters 7—12 and in practically all of the options calculations Chapters 13— There's another reason to use continuous compounding—its ease of calculation. What's the annualized rate of return? The easiest —and most consistent—way to answer this question is to calculate the continuously compounded annual return. Since one year and nine months equals 1.
If the appropriate discount rate for the asset is 8 percent, should you download it? What is the IRR of the asset? Payments at the end of each year are flat equal in every year at an interest rate of 15 percent. Calculate the appropriate loan table, showing the breakdown in each year between principal and interest.
You are offered an investment with the following conditions: n The cost of the investment is 1, If your discount rate is 15 percent, calculate the smallest X that would entice you to download the asset.
The following cash-flow pattern has two IRRs.
Use Excel to draw a graph of the NPV of these cash flows as a function of the discount rate. Would you invest in this project if the opportunity cost were 20 percent? In this exercise we solve iteratively for the internal rate of return.
Consider an investment that costs and has cash flows of , , , , in years 1—5 see cells A8:B13 in the following spreadsheet. Setting up the loan table shows that 10 percent is greater than the IRR because the return of principal at the end of year 5 is less than the principal at the beginning of the year.
Setting the IRR? By changing the IRR? An alternative definition of the IRR is the rate that makes the principal at the beginning of year 6 equal to zero. Using the Goal Seek function of Excel, find this rate we illustrate how the screen should look. Of course, you should check your calculations by using the Excel IRR function. The 48 payments to be made at the end of each of the next 48 months are all equal. Calculate the monthly payment on the loan. In a loan table, calculate, for each month, the principal remaining on the loan at the beginning of the month and the split of that month's payment between interest and repayment of principal.
Show that the principal at the beginning of each month is the present value of the remaining loan payments at the loan interest rate use the PV function. You are considering downloading a car from a local auto dealer.
Assuming that 1. What is the effective interest rate being charged by the dealer? Do this calculation by preparing a spreadsheet like this only part of the spreadsheet is shown—you have to do this calculation for all 30 months : Now calculate the IRR of the numbers in column F; this is the monthly effective interest rate on the deferred payment plan. If the plan offers an interest rate of 10 percent, how much will you accumulate at the end of year 5?
Do this calculation by completing the following spreadsheet. This spreadsheet does the calculation twice— once using the FV function and once using a simple table that shows the accumulation at the beginning of each year.
Redo the calculation of exercise 10, this time assuming that you make five deposits at the beginning of this year and the following four years. How much will you accumulate by the end of year 5? Assuming that these deposits were made at the beginning of each month for a period of months, calculate the effective annual return fund investors got.
Hint Set up the following spreadsheet, and then use Goal Seek The effective annual return can then be calculated in one of two ways: 1.
You have just turned 35, and you intend to start saving for your retirement. Calculate how much you would have to save between now and age 65 in order to finance your retirement income. Make the following assumptions: n All savings draw compound interest of 10 percent per year.
Your financial analyst suggests that solution b is better. His calculations are illustrated in the following spreadsheet. Show that this logic is wrong.
If you think about it, it couldn't be preferable to take a 6 percent loan when you are getting 5 percent interest from the bank. However, the explanation for this may not be trivial. In the next two chapters we show how to use integrated accounting-based financial models for the firm to calculate the firm's free cash flows.
Discounting these cash flows at an appropriately risk-adjusted discount rate will give us the value of the firm. In this chapter we discuss how to calculate the firm's cost of capital, the discount rate applied to future cash flows.