Introduction

to Corporate Finance MOOC: Module 1 Notes

Valuation Basics Net Present Value
Rate of Return Net Present Value
The gain experienced over a period of time The present value of all the cash flows
expressed in terms of the initial investment. including all the costs.
Future Value (FV) Net Present Value Formula
The value of a given amount of money today at .,
some point in the future. -$" = ./ + ⋯
(1 + *)1
Present Value (PV) PV = Present Value
The amount of money today. ./ = Initial Investment
Ct = Cash Flow at Time t
Future Value (FV) Formula r = rate
!" = $" × (1 + *) T = time
FV = Future Value Perpetuity
PV = Present Value A cash flow stream in which all the cash flows
r = rate
are the same and go on forever.
Compounding Perpetuity Formula
Earning a return on past returns .
General Future Value Formula $" =
*
!" = $" × (1 + *), PV = Present Value
FV = Future Value C = Cash Flow
PV = Present Value r = rate
r = rate Annuity
t = time
A cash flow stream in which all cash flows are
Discounting the same and last for a fixed number of
The process of computing the present value of a periods
future cash flow.
Annuity Formula
Present Value (PV) Formula . 1
!" $" = 21 − 4
$" = * (1 + *)1
(1 + *), PV = Present Value
FV = Future Value C = Cash Flow
PV = Present Value r = rate
r = rate T = time
t = time
Growing Perpetuity
Valuation Cash flows growing at a constant rate and last
Appraising or estimating the worth of something forever.
having economic or monetary value.
Growing Perpetuity Formula
.
$" =
*−5
PV = Present Value
C = Cash Flow
r = rate
g = growth rate of cash flows