**Author: **

Ross, Westerfield, Jaffe and Jordan

**Publisher: **

**Edition: **

12th

**ISBN: **

Playlists By :

Financial Ratios Liquidity and Leverage Copy

This video explains some of the ways in which you can conduct Financial Statement Analysis (Section 3.1). Specifically, it explains Common-Size Balance Sheets, Common-Seize Income Statements and some of the short-term/liquidity ratios and long-term debt ratios covered in Section 3.2

The DuPont Identity and Problems with Financial Statement Analysis 2 0

This video discusses the DuPont Identity and how to use it to measure firm performance. Also discussed are potential issues with using financial statement analysis, including common size financial statements and financial ratio analysis.

Present Value (PV) and Net Present Value (NPV): The One-Period Case

This video shows how one can use the concepts of Present Value (PV) and NET Present Value (NPV) to decide whether or not to pursue an investment. The setting is a simple one in which the investment requires an upfront investment and yields a SINGLE cash inflow one year after the investment is made. After watching this video, you will also get a good understanding of Example 4.2 in the chapter.

Present Value and Opportunity Cost: Additional Insight

This is an extremely important video. It explains how the discount rate we use to calculate present value must reflect the riskiness of the cash flows. All else equal, risky cash flows must be discounted at a higher discount rate and, therefore, must have a lower present value. After watching this video, you will also get a good understanding of Example 4.2 on "Uncertainty and Valuation" in the chapter.

Present Value of a Perpetuity (aka Ordinary Perpetuity)

This video explains the concept of "ordinary" perpetuities. The textbook just refers to these as perpetuities (without using the term "ordinary"). Nonetheless, it would do you good to think bear this terminology in mind, as later it help you better understanding the difference between "Ordinary Annuities" and "Annuities Due".

Present Value of a Growing Perpetuity (aka Growing Ordinary Perpetuity)

This video shows how to determine the present value of a GROWING perpetuity where cash flows are growing at a constant RATE of g% (forever). Please REALLY understand this formula, as it will help you later in understanding an extremely important concept in finance called "Terminal Value". NOTE: You cannot use the growing perpetuity formula for situations where cash flows are growing by a constant DOLLAR (forever). It has to be growth by a constant PERCENTAGE.

Present Value of a Delayed Perpetuity

This video explain an EXTREMELY IMPORTANT calculation that many students find confusing. The present value of "ordinary" perpetuity formula (PV = C/r) can only be used when the FIRST cash flow is occurring one time-period into the future. However, there can be instances where the perpetuity is "delayed", i.e. the first cash flow occurs MORE than one year into the future (You will see applications of this in more advance finance classes). In such cases, the PV = C/r "ordinary" perpetuity formula needs to be augmented. This video shows you how.

Loan Amortization and Balloon Payments Using MS Excel

Watching this video will not only help you attempt Problem 56 at the end of the chapter but also teach you (a) how to construct an amortization schedule in Excel, and (b) how to determine your outstanding loan balance at a specific point in time during the duration of the loan.

Drawback of IRR Approach to Investment Evaluation: Investing Vs. Financing Decisions

In this video I explain how and why the IRR decision rule needs to be modified when one is considering financing projects, or investments in which cash inflow occurs first and outflows happen later (An example of such an investment would be in the construction industry, where a contractor may receive funds from the customer first and THEN make all the investments later).

Modified Internal Rate of Return (MIRR) And The Multiple IRR Problem

When a project has multiple IRRs, we can modify the original cash flows to calculate a single, "modified" internal rate of return (MIRR) for the project. In this video, I show three different ways in which you can calculate the MIRR to resolve the multiple IRR problem: (a) The Discounting Approach, (b) The Reinvestment Approach, and (c) The Combination Approach. I also show how you can calculate the MIRR in Excel using the =MIRR function in Excel.

Drawback of IRR When Investments are Mutually Exclusive: The Scale Problem

Would you rather make a 100% return on a $1 investment, or a 10% return on a $1 million investment? If you are like most people, you'd choose making 10% on a $1 million investment. And yet, if you had based your decision on IRR, you would have chosen the investment with the higher IRR, which is 100% (as opposed to 10%) on a $1 investment. That, essentially, is the scale problem - if you have to pick between two competing ("mutually exclusive") investments, picking the one with the higher IRR may not be the value-maximizing thing to do.

Drawback of IRR When Investments Are Mutually Exclusive: The Timing Problem

When choosing between competing, mutually exclusive investments, picking the project with the higher IRR may may not be the right thing to do. In this video, I illustrate this point by calculating and comparing the IRR and NPV of two competing project which differ with respect to the timing of their cash flows.

NPV and Other Investment Rules Pt1

This video explains the concept of Net Present Value (NPV) and also sheds on some of alternative investment decision rules, such as the Payback Period. It also briefly touches upon the important concept of Internal Rate of Return (IRR) and how it is related to NPV and NPV Profile.

NPV and Other Investment Rules Pt3

This video wraps up the discussion on IRR, and then discusses the important concepts of MODIFIED IRR (MIRR), Incremental IRR (when dealing with mutually exclusive projects) and Profitability Index. Some useful examples from other sources have been used to drive home important points.

Making Capital Investment Decisions Pt1

It is extremely important for you to understand how to determine a project's INCREMENTAL cash flows. This video explains what are the factors that one should consider when trying to determine a project's incremental cash flows. Important related ideas of operating cash flow, capital expenditures and depreciation are discussed. Where necessary, I have used material/examples from other sources to drive home some points.

Making Capital Investment Decisions Pt2

This video walk you through the process of calculating incremental financial (or free) cash flows of a project. It also discusses the relationship between inflation and capital budgeting, as well as how to decide between projects with unequal lives using the principle of equivalent annual cost (EAC).

Risk Analysis Real Options and Capital Budgeting Pt2

This video covers other risk analysis tools that financial managers can use, including accounting and financial break-even analysis. The video concludes with a discussion and importance of real options (such as option to expand, abandon, etc.) in capital budgeting projects.

Return Risk and CAPM Pt1

This video shows how to calculated expected returns and standard deviation of returns. First it shows how you can do these calculation for individual securities (Section 11.1). Then the principles are extended to portfolios. In the process, the important role of covariance/correlation of returns is also discussed.

Return risk and CAPM Pt2

This video explains the concept of portfolio expected returns and variance/standard deviation in more detail. Specifically, it shows you how to form the "efficient set" of portfolios, first in a world consisting only of risky assets, and then in a world where investors can combine risky portfolios with a risk-free asset. In the process, it also explains the important distinction between systematic and non-systematic risk, and how diversification help reduce the latter.