Basic Financial

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Chapter 1
Basic Financial Calculations

Mila Getmansky Sherman
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Topics Covered

• Non-risky (certain) Cash Flows
• Opportunity Cost
• Financial Calculations (PV, NPV, IRR, FV,
  Continuous Discounting, Continuous Compounding)
• Chapter1.xls

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Opportunity Cost

• Opportunity Cost is the return that would be
  required of an investment to make it a viable
  alternative to other, similar, investments.
• Synonyms discount rate, cost of capital, and
  interest rate.

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Financial Calculations

• NPV
• IRR
• Multiple IRR
• When do we have multiple IRR?
• Chapter1.xls

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Financial Calculations

• Flat Payment Schedules
• Future Value
• Retirement Problem
• Continuous Compounding
• Continuous Discounting
• Chapter1.xls