Present Values 3
- Lecture1.1
  
  Introduction
- Lecture1.2
  
  Solutions
- Lecture1.3
  
  List Comprehension Review
NPV vs. IRR 4
- Lecture2.1
  
  Introduction
- Lecture2.2
  
  The Functions Part 1
- Lecture2.3
  
  The Functions Part 2
- Lecture2.4
  
  Testing NPV vs. IRR
Other Profit Measures 4
- Lecture3.1
  
  Introduction
- Lecture3.2
  
  Measures Part 1
- Lecture3.3
  
  Measures Part 2
- Lecture3.4
  
  Investment Timing
Depreciation 4
- Lecture4.1
  
  Introduction
- Lecture4.2
  
  The Basic Problem
- Lecture4.3
  
  Creating the Depreciation Equation
- Lecture4.4
  
  The Tax Shield
Cash Flow Challenges 9
- Lecture5.1
  
  Introduction
- Lecture5.2
  
  Total Cash Flows
- Lecture5.3
  
  Solution 1
- Lecture5.4
  
  Solution 2
- Lecture5.5
  
  Solution 3
- Lecture5.6
  
  Solution 4
- Lecture5.7
  
  Solution 5
- Lecture5.8
  
  Solution 6
- Lecture5.9
  
  Solution 7
Capital Asset Pricing Model 3
- Lecture6.1
  
  Introduction
- Lecture6.2
  
  The Equation
- Lecture6.3
  
  Graphing CAPM
Risky Debt 3
- Lecture7.1
  
  Introduction
- Lecture7.2
  
  Adjusting Debt for Risk
- Lecture7.3
  
  Solution
Unlevering Equity 3
- Lecture8.1
  
  Introduction
- Lecture8.2
  
  The r for Equity
- Lecture8.3
  
  Including Taxes
Weighted Average Cost of Capital 4
- Lecture9.1
  
  Introduction
- Lecture9.2
  
  The Equation
- Lecture9.3
  
  Taxes
- Lecture9.4
  
  Solution
Debt Effect Analysis 2
- Lecture10.1
  
  Introduction
- Lecture10.2
  
  The Effect of Debt on Equity
WACC Challenge 2
- Lecture11.1
  
  Introduction
- Lecture11.2
  
  Solution
Relative Valuation 4
- Lecture12.1
  
  Introduction
- Lecture12.2
  
  Financial Concept
- Lecture12.3
  
  Solving Systems of Equations
- Lecture12.4
  
  Arbitrage
Forward Contract Valuation 3
- Lecture13.1
  
  Introduction
- Lecture13.2
  
  Forward Contract Basics
- Lecture13.3
  
  Forward Contracts

The Basic Problem

Let’s say you bought a machine for $15,000 in period 0, and you make $10,000 dollars from it for three years. If the tax rate were 20%, what would you pay in taxes each year?

Period	Cash Flow	Taxes
0	-15,000	0
1	10,000	2,000
2	10,000	2,000
3	10,000	2,000

Adding this up you would get 10,000*3-15,000-2,000*3=9,000. Now, the question is this: is it fair that you have to take a huge hit in period 0 for the machine you bought, when you really use it over the next three years? Accounting practices allow you to spread the cost of a machine over the lifetime of the machine.

Straight-line Depreciation

Straight-line depreciation is the most basic depreciation method. You take the starting value of your equipment, and depreciate it every year until the end of its lifetime. You do not necessarily depreciate it to 0 every time, though. You depreciate it down to a salvage value, which is the value of the machine after its used up (you could potentially sell it for parts to another company for example, so we include that as part of depreciation).

The equation for depreciation charge per year is:

Equation

Depreciation Charge Per Year = (Initial Value – Salvage Value)/Number of Years

Challenge

Create the function that finds the yearly charge for depreciation. If that’s too easy, try plotting the depreciation of the above example’s equipment with 0 salvage value, and 3 years.

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Finance

Equation

Challenge

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Finance

Present Values 3

NPV vs. IRR 4

Other Profit Measures 4

Depreciation 4

Cash Flow Challenges 9

Capital Asset Pricing Model 3

Risky Debt 3

Unlevering Equity 3

Weighted Average Cost of Capital 4

Debt Effect Analysis 2

WACC Challenge 2

Relative Valuation 4

Forward Contract Valuation 3

The Basic Problem

Straight-line Depreciation

Equation

Challenge

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