SMG FE 101 Lecture Notes - Lecture 1: Cash Flow, Opportunity Cost
10 Feb 2016
School
Department
Course
Professor
Document Summary
Chapter 3 time value of money: an introduction. Identify the role of financial managers and competitive markets in decision making. Understand the valuation principle, and how it can be used to identify decisions that increase the value of the firm. Assess the effect of interest rates on today"s value of future cash flows. Calculate the value of distant cash flows in the present and of current cash flows in the future. Make decisions on behalf of the firm"s investors. For good decisions, the benefits exceed the costs. Real-world opportunities are often difficult to quantify and involve using skills from other management disciplines: Any decision in which the value of the benefits exceeds the costs will increase the value of the firm. Suppose a jewelry manufacturer has the opportunity to trade 200 ounces of silver and receive 10 ounces of gold today. To compare the costs and benefits, we first need to convert them to a common unit.
