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

  1. Math Prereqs
  2. Stokey & Zeckhauser Ch. 10, "The Valuation of Future Consequences: Discounting," pp. 159-165
  3. Ryan: "Discounting"
  4. Problems TBA

Workshop

Class 2 internal rate of return, payback; Where do discount rates come from? Caveats and issues

Prep

  1. Stokey & Zeckhauser Ch. 10, "The Valuation of Future Consequences: Discounting," pp. 165-176
  2. Problems TBA

Workshop

Lab NPV and its friends

Prep

  1. TBA

Lab Instructions

Skills

Problems

See also

Portfolio

Problems: