Introduction to Corporate Finance (Columbia Business School)
Introduction to Corporate Finance https://learning.edx.org/course/course-v1:ColumbiaX+CORPFIN1x+1T2023/home
Basic Finance Concepts Rate of Return Rate,of,returnannual=Initial,investmentReturn−initial,investment=Initial,investmentGain
Ex: Invest £100k, return £50k
Rate,of,returnannual=10050−100=−50
Future Value Future,value=Present,value×(1+rate,of,return)
Compounding Future Value FVt,years=PV×(1+r)t
Ex: Invest £100k, RoR = 10%
FV2=£100k×(1+0.10)2=£121k
Present Value PV=(1+r)tFV
Ex: £150k return in 2 years at 10% RoR
PV=(1+0.10)2£150k=£124k
Opportunity cost of capital = alternative investment RoR
PV=(1+r)1C1+(1+r)2C2+(1+r)3C3+…
Ex: Return of £110 in 1 year, £121 in 2 years, cost of capital = 10%