Chapter_02Present Value and The Opportunity Cost of Capita(公司金融,英文版)l.pptVIP

Slides by Matthew Will Topics Covered Present Value Net Present Value NPV Rule ROR Rule Opportunity Cost of Capital Managers and the Interests of Shareholders Present Value Present Value Present Value Valuing an Office Building Step 1: Forecast cash flows Cost of building = C0 = 350 Sale price in Year 1 = C1 = 400 Step 2: Estimate opportunity cost of capital If equally risky investments in the capital market offer a return of 7%, then Cost of capital = r = 7% Valuing an Office Building Step 3: Discount future cash flows Step 4: Go ahead if PV of payoff exceeds inves