LECTURE3

LECTURE3 - [Part II] [Part Value and Capital Budgeting...

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[Part II] [Part II] Value and Capital Budgeting Value and Capital Budgeting Chapter 3 Chapter 3 Financial market and Net present value (NPV) basic principles of rational decision making two period investment NPV introduced as investment decision making rule - first principle of investment decision making Chapter 4 Chapter 4 Net present Value extend NPV to multiple periods compounding and discounting
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Chapter 5 Chapter 5 How to value bonds and stocks apply NPV to value bonds , stocks and other financial instruments Chapter 7 Chapter 7 NPV and capital budgeting how to estimate cash flows required for capital budgeting incremental cash flows Chapter 6 Chapter 6 Some alternative investment rules Payback rule , Accounting rate of return , IRR Chapter 8 Chapter 8 Strategy and analysis in using NPV assess reliability of the estimates of NPV techniques dealing with uncertain incremental cash flows
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Lecture 3 Lecture 3 Financial Markets and Net Present Value (NPV)
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Financial markets and NPV 1. Inter-temporal consumption opportunities 2. Inter-temporal indifference curves 3. Effect of interest rate increases 4. First principle of investment decision-making 5. Net present value rule Period 1, 2 Consumption 1 c , 2 c Incomes 1 y , 2 y Borrowing in period 1 b Consumption choices over 2 periods
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( 29 ( 29 ( 29 ( 29 ( 29 ( 29 r y y c r y y b y c r y b + + = + + = + = + = 1
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LECTURE3 - [Part II] [Part Value and Capital Budgeting...

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