Financial Management I 3

Personal Financial Management 3

Investment Decision Rules The net present value rule maximizes the value of the ﬁrm, but some ﬁrms nevertheless use other techniques, such as the payback rule and internal rate of return rule, to evaluate investments and decide which projects to pursue As long as we concert costs and beneﬁts to the same point in me, we can use the Valuaon Principle to make a d

FIN | 320 | Financial Management I 3 | lecture notes | Investment Decision Rules The 

Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. Example 13.3 Estimating the Cost of Equity (3 of 8) Solution: Plan: • The two ways to estimate J&J’s cost of equity are to use the CAPM and the CDGM. 2. The CDGM requires the current stock price, the expected dividend next year, and an estimate of the constant future growth rate for the div

FIN | 320 | Financial Management I 3 | lecture notes | Copyright © 2018  2015  2012 P

Chapter 8 Homework 1) You have an opportunity to invest $ 50,800 now in return for $ 59,900 in one year. If your cost of capital is 8.3%, what is the NPV of this investment? The NPV will be $4509.33 2) Your factory has been oﬀered a contract to produce a part for a new printer. The contract would last for 3 years and your cash ﬂows from the contract would be $4.77 millio

FIN | 320 | Financial Management I 3 | homework | Chapter 8 Homework 1) You have

Interest Rates Interest Rates – price of using money Set by market forces, in parcular the supple of and demand When the supply (savings) is high and the demand (borrowing) is low, interest rates are low, other things being equal Also inﬂuenced by expected inﬂaon and risk Because interest rates may be quotes for diﬀerent me intervals, such as monthly, sem

FIN | 320 | Financial Management I 3 | lecture notes | Interest Rates Interest Rates 

Valuing Cash Flow Streams The cash ﬂow in ﬁnancial investments involve more than one future period; the ﬁnancial manager is faced with the task of trading oﬀ a known up-front cost against a series of uncertain future beneﬁts Stream of Cash Flows – a series of cash ﬂows lasng several periods Most investment opportunies have mulple cash ﬂows that occur at di

All courses in FIN

Popular Documents