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NPV and other criteria for Capital Budgeting

391 1998 hedge fund london whale bailed out by wall st

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Unformatted text preview: because they want to collect it very soon Think about time period You have no revenue, only can live on investments (almost all portfolio in income generating things, because you can’t afford to lose money) Less in stocks and illiquid assets For a recent college grad? Not too much risk but can afford to take it Want to make sure you can start saving for a house, cash For a low income person? A High net worth person? Low- income would invest in a lot less riskier things If you’re making 25,000 dolalrs a year, you will never accumulate anything so it’s no obvious that lower income people should invest less aggressively. Would a hedge fund add value over time? Over 8,000 hedge funds Charge 2% management fees (manage billion dollars) and get 20% of rate of return of portfolio many hedge fund managers have become billionaires Unless you are particularly adept at picking a hedge fund manager, you are on average going to lose. Basic measures of ri...
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