E303lect4F09

E303lect4F09 - August 28, 2008 Reading Baye, Ch. 1 pp 19-25...

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August 28, 2008 Reading Baye, Ch. 1 pp 19-25 Lecture 4 Problems: Collect Problem Set 1, Problem Set 2 – due Friday . REVIEW___________________________________________________: I. Chapter 1. The Fundamentals of Managerial Economics B. Components of Effective Decision Making 4. Recognize the Time Value of Money. a. Discounting the Future. b. Calculating Net Present Value of a Project (problem 2) Preview__________________________________________________________ c. The present value of a firm/ Discounting over an infinite horizon. - accounting for indefinite life - adjusting for the timing of the first payment 5 . Appreciate Marginal Analysis. a. Discrete Decisions - Allocating time for a test LECTURE______________________________________________ c. The present value of a firm. The discounting equation can be generalized to value the profitability of a firm, simply by substituting π for FV PV = π t (1+i) t c. Accounting for indefinite life- There is, however, one important complication. Unlike a
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E303lect4F09 - August 28, 2008 Reading Baye, Ch. 1 pp 19-25...

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