1 Lecture

1 Lecture - FV=PV(1+r)^n FV= 1,000(1+.03)^3 PV=FV/(1+r)^n...

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Introduction 19:44 Finance I Paul Westbrook, CFP (Certified Financial Planner) paul@westbrook.net Practice Questions What is the cost of capital? The interest rate that you have to pay on it. Most businesses need money to grow their businesses (Issuing bonds, loans, etc.) To maintain or grow your business you need to borrow capital If mortgage rates are 4.5% then the cost of getting capital to purchase a home is 4.5 4 Basic Financial Statements Balance Sheet – Assets on the left and Liabilities and shareholders equity on the right. Income Statement – Revenue/Sales, then Expenses, the bottom line is profit. Shareholder Equity can be its own Financial Statement Statement of Cash Flows can be its own Financial Statement, important to analysis  because it shows whether or not a company is making money or not. Future Value Formula
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Unformatted text preview: FV=PV(1+r)^n FV= 1,000(1+.03)^3 PV=FV/(1+r)^n (discounting) What is the P/E ratio and why is it so prominent in corporate America? P= the price of one share of stock E= earnings per share If P = 10 and E = 2 then the P/E ratio is 5 Earnings are the most important thing to analyze relative to the stock market. If there is one thing that drives the price of a stock up or down is earnings. What increase does stock have if it goes from $18 to $22 by the end of the year? 4$/18$ = 22.2% increase $18 = P zero $22 = P one P one P zero/ P zero Get a business calculator, look for one that calculates npv and irr. Watch Sakai for announcements. List of companies to pick from, team will have to research 2 companies and select which one to invest in. 19:44 19:44...
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This note was uploaded on 02/23/2012 for the course 373 351 taught by Professor Westbrook during the Spring '12 term at Rutgers.

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1 Lecture - FV=PV(1+r)^n FV= 1,000(1+.03)^3 PV=FV/(1+r)^n...

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