FIL 240 Lecture 11 Outline of Last Lecture I Probability distribution a Contribution of operating leverage b Contribution of financial leverage II Volatility a Standard deviation equation b Alternate SD equation c Fixed expenses d Percent chance III Time series IV Coefficient of variation a Measure of risk b Contribution format income statement c How to calculate the coefficient of variation Outline of Current Lecture I Lowering Fixed Costs II Time Value of Money a Definition b Future Value Equation c Present Value Equation d Finding k and n e FV Annually f FV Semiannually g Effective Yield Current Lecture Volatility I II Lowering fixed costs more FC more risk a Outsourcing b Cutbacks lay off employees c Turn fixed costs into variable costs d Dynamic efficiency technological advances such as 3D printers instead of mechanical production Time value of money core of financial system These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute a Money today is worth more money than in the future 1000 today is not the same as 1000 next year there must be an incentive to delay receiving the money now b Future value FV present value PV 1 k n c Present value PV FV 1 k n OR FV 1 k n d k n depend on the compound interest rate e FV of 50 in 6 years at 8 compounded Annually FV 500 1 08 6 793 44 f Semiannually FV 500 1 08 2 6 2 500 1 04 12 800 52 g Effective yield 1 annual k comp comp 1 1 08 2 2 1 8 16
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