Discounting Module
A sparrow in thy hand is better than a thousand sparrows flying.
- Ahiqar, 6th century BCE
Discounting
Why exactly is a bird in the hand worth two in the bush? Is this actually true? In this module we will learn how to compute the present value of a stream of costs or revenues so that comparisons can be made between different scenarios in which costs and benefits occur over a span of time.
Class 1 Basics Slides, Handout
Prep
- Math Prereqs
- Stokey & Zeckhauser Ch. 10, "The Valuation of Future Consequences: Discounting," pp. 159-165
- Ryan: "Discounting"
- Problems TBA
Class 2 internal rate of return, payback; Where do discount rates come from? Caveats and issues
Prep
- Stokey & Zeckhauser Ch. 10, "The Valuation of Future Consequences: Discounting," pp. 165-176
- Problems TBA
Lab NPV and its friends
Prep
- TBA
Skills
Problems
See also
Portfolio
Problems: