EC260 Lecture Notes - Lecture 2: Dividend Discount Model, American Electric Power, Net Present Value
Document Summary
Ec260 lecture #2: the fundamentals of managerial economics. The objective function: maximize profit, revenue, sales, maximize utility, subject to budget, minimize cost, subject to output. Identify goals and constraints: sound decision making involves having well-defined goals leads to making the right decisions in striking to achieve a goal, we often face constraints, constraints are an artifact of scarcity (i. e. budget constraints) Economic vs accounting profits: accounting profits total revenue (sales) dollar cost of producing goods and services reported on the firm"s income statement, overstate economic profits, externalities, economic profits total revenue total opportunity cost. Opportunity cost: accounting costs the explicit costs of the resources needed to produce goods or services, opportunity cost the cost of the explicit and implicit resources that are foregone when a decision is made. The time value of money: present value (pv) of a future value (fv) lump-sum amount to be received at the end of.
