We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 09 February 2017
In Chapter 2, we discussed the major inputs into the NPV formula (equation 2.1): The two obvious inputs are the cash flows and the discount rate (the non-obvious input – the capital structure of the firm – will be discussed in Chapter 4, on capital structure).
The cash flows are given by the characteristics of the asset. Suppose our investor, Galadriel (from Chapter 2, now rescued from the island) expects a cash flow of $100 as a dividend from a popular ring and assorted jewelry firm, Sauron Inc., two years from now. Unfortunately, it is not a certain $100 – there is a 50% probability that the firm will actually pay $200 and a 50% probability that the firm will pay nothing.
To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.
Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.
Find out more about the Kindle Personal Document Service.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.
