{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Lecture 6

A yes b no most important idea we want to use the rate

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: y a lower rate of return than what they can get elsewhere investing in “comparable” projects • Is Apple’s decision to pay a dividend bad news for Apple’s future prospects? What “r” should I use for calculating NPV? • What have we seen? Interest rates on Treasury Bonds move a lot (from below 2% to over 15%) • Real (inflation adjusted) interest rates on Treasury Bonds vary too (we will see from 4% to -1%) • Average Rate of return on the stock market (inflation adjusted) is 6.5% or more • • • We will see next class that the interest rates on corporate bonds can vary a lot too So what are we to do? Use the “r” investors are demanding on “comparable” projects • But what makes a project “comparable” ? • When does the project deliver cash to the investors? (Today’s lecture)...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online