Chap004

Discounted Cash Flow Valuation

Net Income versus Cash Flows from Operating Activities

4.1 The One-Period Case: Future Value ,[object Object],[object Object],[object Object],[object Object]

4.1 The One-Period Case: Present Value ,[object Object],[object Object],[object Object]

4.1 The One-Period Case: Net Present Value ,[object Object],[object Object],Yes!

4.1 The One-Period Case: Net Present Value ,[object Object],[object Object]

4.2 The Multiperiod Case: Future Value ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Present Value and Compounding ,[object Object],$20,000 PV 0 1 2 3 4 5

4.3 Compounding Periods ,[object Object],For example, if you invest $50 for 3 years at 12% compounded semi-annually, your investment will grow to

4.4 Simplifications ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Perpetuity ,[object Object],… 0 1 C 2 C 3 C

Growing Perpetuity ,[object Object],… 0 1 C 2 C ×(1+ g ) 3 C ×(1+ g ) 2

Growing Perpetuity: Example ,[object Object],[object Object],… 0 1 $1.30 2 $1.30 ×(1.05) 3 $1.30 ×(1.05) 2

Annuity ,[object Object],0 1 C 2 C 3 C T C

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