COMM 101 Lecture Notes - Net Present Value, Risk-Free Interest Rate, Opportunity Cost
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COMM 101 Full Course Notes
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today does not have the same value as in one way. If we"re making a decision involving future cash flows, we want to make sure that we are putting our money to the best possible use. When faced with multiple decisions, we need to have a quantitative method of determining which decision is best. Do we take in divisions over a period of time. We need to compare decisions in terms of present-day dollars (net present value) Net present value: brings the amount to today, determine how much they are worth in todays dollars. An investment that costs and pays in one year. An investment that costs and pays in two years. The risk free rate is 10%, you have 2 possible investments. The first one: we get 90$ in return in one year. The second one: we get 210$ in return in two years -> .
