Management and Organizational Studies 2310A/B Chapter Notes - Chapter 3: Cash Flow, Discounting, Accrued Interest

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Danny Morrison

Document Summary

The valuation principle: the foundation of financial decision making. Marketing: to determine the increase in revenues resulting from an advertising campaign. Economics: to determine the increase in demand from lowering the price of a product. Organizational behaviour: to determine the effect of changes in management structure on productivity. Strategy: to determine a competitor"s response to change in price activity. Operations: to determine production costs after the modernization of manufacturing plant. : the difference in value between money today and money in the future; also, the observation that the two cash flows at two different points in time have two different values. Interest rate(r): the rate at which money can be borrowed or lent over a given period. Interest rate factor (1+r): one plus the interest rate, it is the rate of exchange between dollars today and dollars in the future. Future value: the value of a cash flow that is moved forward in time.