lec2_PV__Blackboard_

lec2_PV__Blackboard_ - Present Value Model • Objectives...

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Unformatted text preview: Present Value Model • Objectives – Time value of money – Compound interest – PV model of investment choice Role of Accounting? • Provide information that will facilitate the making of financial decisions • Provide relevant information in a cost effective manner What is Accounting About • Accounting is a measurement and communication process – Activities – Measurement – Communication – User Major Users of Accounting Information • Internal Users – Management – Board External Users • Investors • Creditors • Rating Agencies • Market Regulators • Special Interest Groups Creditors → loan $ → repayment of principal and interest Investors → contribute $ → future dividends Classes of External Decisions Investment Decisions Distribution Decisions Investment decision = sacrificing current wealth for increased wealth in the future. Wealth = command over good and services. Features of Investment Decisions 1. Investment alternatives associated with a stream of expected economic consequences example: 2. Expected consequences are uncertain example: 3. Expected consequences differ in timing and magnitude example: Assumptions Underlying Our Decision Model 1. Expected consequences can be expressed in terms of money flows 2. Expected cash flows are certain 3. No decision constraints (.50-.20) 24,000 (....
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This note was uploaded on 05/24/2008 for the course ACC 203 taught by Professor Choi during the Spring '08 term at NYU.

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lec2_PV__Blackboard_ - Present Value Model • Objectives...

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