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∞

The Value Operator and the Cashflow Timeline

Why is the market price the one valuation you can have immediately, and why does every valuation start with a timeline?

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Your summary note

1. The value operator $V_t(\text{CF}_t, \text{CF}_{t+1}, \ldots)$
  State the operator's input and output, and record the market price at time $t$ as the one example of $V_t$ available at once.
2. Any market will do, and finance versus accounting
  Record the iPod sold at a third of retail as a market that worked without being perfect, and contrast the finance view of an asset with accounting's book value for land.
3. Drawing the timeline before anything else
  Draw dates $0, 1, 2, \ldots, T$ with each cashflow marked where it arrives, and record the error the video blames for nine valuation mistakes in ten.
4. Certainty first: the two cases for $V$
  Name time and uncertainty as the two sources of difficulty, record which case has a complete solution and which only an approximation, and state the order the course takes them.
Attempt 1 of 2