Lecture2Present Value(公司金融讲义(北大).pdf

Principles of Corporate Finance 2. Present Value Seventh Edition Richard A. Brealey Stewart C. Myers Slides by Matthew Will Slides Edited by Minggao Shen 2- 2 Topics Covered Present Value Net Present Value NPV Rule ROR Rule Opportunity Cost of Capital Managers and the Interests of Shareholders McGraw Hill/IrwinIrwin/McGraw Hill Copyright ©Copyright © 2003 by The McGraw-Hill Co2003 by The McGraw-Hill Companies, Inc. All rights reservedmpanies, Inc. All rights reserved 2- 3 An Example Suppose a bank offers an annual interest rate of 10% year 0 year 1 || Case 1: $100 $110 Case 2: $90.91 $100 McGraw Hill/IrwinIrwin/McGraw Hill Copyright ©Copyright © 2003 by The McGraw-Hill Co2003 by The McGraw-Hill Companies, Inc. All rights reservedmpanies, Inc. All rights reserved 2- 4 Present Value Present Value = PV PV = discount factor C 1 McGraw Hill/IrwinIrwin/McGraw Hill Copyright ©Copyright © 2003 by The McGraw-Hill Co2003 by The McGraw-Hill Companies, Inc. All rights reservedmpanies, Inc. All rights reserved 2- 5 Present Value Discount Factor = DF = PV of Future $1 DF 1 ( 1r )t Forward Looking: r is the interest rate or rate of return Backward Looking: r is the discount rate McGraw Hill/IrwinIrwin/McGraw Hill Copyright ©Copyright © 2003 by T