Day2 IntroFIN301

Day2 IntroFIN301 - What I want you to learn Time Value of...

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What I want you to learn 1 Time Value of Money* How to value a bond How to value a stock Free Cash Flow reigns! Value of the firm = FCF / 1 + WACC How to value projects (IRR, MIRR, NPV) The miracle of compound Interest A FINANCIAL LITERACY Perspective Vocabulary Calculations
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What’s an ATM? 2
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Four “levels” of learning 3 1. Conceptual level 2. Mathematical level § Formulas – are provided on the exam 3. Calculator level 4. Excel level This class provides you financial “models” in a toolbox 1. Timelines 2. Mathematical formulas
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The “Financial System” Mature economic systems are dominated by “financial intermediaries” Stand between savers and borrowers to facilitate the transfer of funds efficiently and effectively Commercial banks Investment banks Savings and Loans Credit Unions Pension funds Insurance companies 4
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What is “the carry”? 5 General Electric story
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What does Finance DO? 7 Guiding Principles of Finance 1. Wealth Maximization 2. Valuation: Time Value of Money 3. Risk/Return Trade-off 4. How do we fund the organization? Balance Sheet Management (Debt vs. Equity: Leverage) 5. Diversification (Portfolio Management)
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Why is Finance SO EASY? 8 It’s all based on Math This is both bad news, and good news Finance is a “Two Trick Pony” 2 fundamental concepts Chapter 9 of the textbook
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Why is finance important to you individually? 9 We all face finance decisions throughout our lives How are you “financing college”? Car loan (buy or lease?) Home mortgage (Fixed rate or ARM?) Retirement (401s, IRAs, SEPs) Household budgets Credit cards (how many, what interest rate?)
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1. The Function of Finance (Wealth Maximization) 10 Sales Revenues Operating Costs and Taxes Required Investments in Operations Financing Decisions Interest Rates Firm Risk Market Risk Free Cash Flows (FCF) Weighted Average Cost of Capital (WACC) Value =                          +                     + …                      
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Day2 IntroFIN301 - What I want you to learn Time Value of...

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