Foundations of Finance

01Defining Finance and the Financial System 02Valuation and Management: The Two Challenges 03Stocks, Flows, and the Five Cash-Flow Decisions 04Time, Risk, and the Six Principles of Finance 05How to Learn Finance: Practice and Study Habits Problem set0/10 Problem set 20/10 Practice∞

Present Value

01Information and Price: An Auction and Fannie Mae 02Who Pays for the Fannie and Freddie Guarantee?03What Counts as an Asset: Patents, Secrets, Brands 04An Asset as a Sequence of Dated Cashflows 05The Value Operator and the Cashflow Timeline 06Dates as Currencies: Building Net Present Value 07Discount Factors: Market Prices for Future Dollars 08A Worked Net Present Value and Its Assumptions 09The Opportunity Cost of Capital and Present Value Problem set0/10 Problem set 20/10 MIT problem set0/5 Practice∞

01Does the Currency Change an NPV's Sign?02Moral Hazard and Contagion: Where Bailouts Stop 03The NPV Rule at Work, and Choosing the Rate 04The Perpetuity: Why Cash Forever Is Worth C/r 05Reading the Rate Off a Perpetuity's Price 06The Growing Perpetuity, and When Growth Outruns r 07Building the Annuity from Two Perpetuities 08The Annuity Discount Factor and Mortgage Payments 09APR, the Effective Annual Rate, and Compounding Problem set0/10 Problem set 20/10 MIT problem set0/13 Practice∞

Valuation and Management: The Two Challenges

Why did a sealed package nobody could touch or weigh sell for barely a third of its retail price in a classroom auction?

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Your summary note

1. The decision formula $\textbf{Objectives} + \textbf{Valuations} \Rightarrow \textbf{Decisions}$
  Write the formula, name the two functions all business activity reduces to, and record that valuation stands independent of objectives while management does not, along with which half is hard.
2. Water versus diamonds
  State the pairing — water essential and cheap, diamonds inessential and extraordinarily expensive — and record what that gap demands of any definition of value.
3. The sealed-package auction as price discovery
  Trace the bidding from $1 to its close at $45 on an iPod Nano retailing at $149, note the roughly one-third-of-retail price, and list what information bidders actually held.
4. The four valuation questions and four management questions
  Write out all eight, and record that the first two-thirds of the course takes up valuation while the last third moves into management contexts.
Attempt 1 of 2