Capital budgeting decision: decisions about which real assets a firm should
acquire, also called investment decisions
Financing decisions: decisions on how to raise the money to pay for investments
in real assets
September 21st, 2016
Money has 2 dimensions:
the dollar dimension. How we measure wealth.
The time dimension. You have a choice between getting $1 today or in one year.
You would choose today because its more valuable than in the future because the
Price of preferred stock is calculated as:
Annual dividend payment
Dividend yield is similar as current yield. It ignores the rate of return on the stock itself
Price earnings (P/E) ratio
September 28, 2016
Chapter 5 part I
perpetuity is one that each cash flow increase by a fixed rate.
PVGP=r - g
PV of a growing annuity=
FV of a growing annuity=
But for FVGA, if youre not give r, you have to try solving it by trial and erro