CIVILEN 3080 Lecture Notes - Lecture 1: Berkshire Hathaway, Savings Account, Origination Fee
2 May 2016
School
Department
Course
Professor
Document Summary
Principle 1: a dollar earned today is worth more than a dollar earned in the future. Interest rate = 10% per year ( today, one year later, two years later) Principle 2: the only thing that matters is the difference between alternatives. Irrelevant items in decision-making (i. e. monthly fuel costs, monthly maintenance in buying a car always the same with buying vs. leasing) Principle 3: marginal revenue must exceed marginal cost. Principle 4: additional risk is not taken without the expected additional return. Lower risk = lower return; higher risk = higher return. million today or an amount that grows by 5% per year (called a gradient) Be able to compare the value of money at different points in time. A method for reducing a sequence of benefits and costs to a single point in time. Money can earn more money over time (earning power) Time value of money is measured in terms of market interest rate.
