Lec 1. Discounted Cash Flow Valuation
• Present Value: If the payments are in the future, they are discounted to reflect the time value of money.• Future Value: The value of an asset at a specific date. • The One-Period Case If you were to invest $10,000 at 5 percent interest for one year, your investment would grow to $10,500. => interest = $500 ($10,000 * .05), principal = $10,000, total due = $10,500 => FV(Future Value) = $10,500..
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