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∞

An Asset as a Sequence of Dated Cashflows

How can every asset, from a bond to a brand's reputation, be reduced to a single ordered list of dated cashflows?

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Your summary note

1. The definition $\text{Asset}_t \equiv \{\text{CF}_t, \text{CF}_{t+1}, \text{CF}_{t+2}, \ldots\}$
  State the date the definition is anchored to and which cashflows it leaves out, and record Coca-Cola today, ten years ago and a century hence as three different assets.
2. The fine print: five properties of the definition
  Record each property — real-valued of either sign, a sequence rather than a sum, possibly unknown, shareable between assets, possibly all zeros — with a liability and a worthless patent as examples.
3. Intangibles and contingent assets as cashflow sequences
  Express reputation as the incremental cashflow from a customer choosing you over a competitor, name that goodwill, and state that assets thick with options and contingencies are where the definition matters most.
Attempt 1 of 2