Finance I - Summary Formulas &
Terms
IBA Year 2 - Midterm I
Chapter 1
I x ,1
PV =¿ Present Value ¿
1+ r
I x ,1=¿the outcome of investment X at t=1
r =¿ interest rate
NPV =¿ Net Present Value ¿ PV −I x ,0
I x ,0 =¿ investment amount at t=0
Hirschleifer model
C1
OG ¿ C 0+ =CF 0+ CF 1 /(1+r )+ NPV =CF 0 +CF 1 /(1+ r)−EA +OF /(1+r )
1+r
OH ¿ C 1+C 0 (1+r )
Line OG ¿ max C 0
Line OH ¿ max C 1
C 0 = Consumption at t=0
C 1 = Consumption at t=1
CF 0 =¿ Cashflow at t=0
CF 1=¿ Cashflow at t=1
EA = Investment in real projects at t=0
OF = real investments at t=1
Terms
IBA Year 2 - Midterm I
Chapter 1
I x ,1
PV =¿ Present Value ¿
1+ r
I x ,1=¿the outcome of investment X at t=1
r =¿ interest rate
NPV =¿ Net Present Value ¿ PV −I x ,0
I x ,0 =¿ investment amount at t=0
Hirschleifer model
C1
OG ¿ C 0+ =CF 0+ CF 1 /(1+r )+ NPV =CF 0 +CF 1 /(1+ r)−EA +OF /(1+r )
1+r
OH ¿ C 1+C 0 (1+r )
Line OG ¿ max C 0
Line OH ¿ max C 1
C 0 = Consumption at t=0
C 1 = Consumption at t=1
CF 0 =¿ Cashflow at t=0
CF 1=¿ Cashflow at t=1
EA = Investment in real projects at t=0
OF = real investments at t=1
