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CAPM – Capital Asset Pricing Model

We talked extensively about valuing a stream of cash flows in the previous articles. By building on the idea of present value, we can use it to value more complex investments like stocks. We start our section on valuation with CAPM. The article covers several basic concepts in statistics. If you

Inflation and Interest

In the Net Present Value and Annuities/Perpetuities articles, we spent a lot of time talking about valuing a stream of cash flows. We presented you with formulas and shortcuts that discounted future cash by the appropriate discount rate r. We treated r as a constant in our examples – something

Annuities and Perpetuities

Annuities and perpetuities are financial products where the purchaser of the product receives a stream of future cash flows. Calculating the present value of annuities and perpetuities can be done with the PV formula described in the NPV article, but that can become cumbersome as complexity increases. The formulas introduced

Net Present Value

What is Net Present Value? In short, Net Present Value, or NPV is a method used to calculate the value of something. Typically used by managers for capital budgeting, NPV can also be used in a variety of other circumstances, like deciding between two schools for your MBA. The formula for