70. Discounted value. Conceptions of Net present value (npv) and future present value (fv).
Discounted Cash Flow (DCF) is a cash flow summary adjusted so as to reflect the time value of money. With DCF, money to be received or paid at some time in the future is viewed as having less value, today, than than an equal amount that is received or paid today.
Present value (PV) is what the future cash flow is worth today. Futue value (FV) is the value, in non discounted currency units that actually flows in or out at the future time. A $100 cash inflow that will arrive two years from now could, for example, have a present value today of about $94, while its future value is still considered $100. The present value is discounted below the future value.
The longer the time period before an actual cash flow event occurs, the more the present value of future money is discounted below its future value.
The total discounted value (present value) for a series of cash flow events across a time period extending into the future is known as the net present value (NPV) of a cash flow stream.
DCF can be an important factor when evaluating or comparing investments, proposed actions, or purchases. Other things being equal, the action or investment with the larger DCF is the better decision. When discounted cash flow events in a cash flow stream are added together, the result is called the Net Present Value (NPV).
DCF and NPV and related time value of money concepts are more easily understood when explained together and illustrated, along with related concepts such as discount rate,future value (FV), and present value (PV), as shown in the sections below.
The role of Microeconomics
T he Subject Matter of Microeconomics
The use and limitation of Microeconomic theory
Economic methodology and microeconomic models
Equilibrium analysis
Positive and Normative Analysis
Demand Function: Individual Demand Function and Market Demand Function
Change in Quantity Demanded and Change in Demand
Inferior, Normal and Superior Goods
Supply Function. Change in quantity supplied and Change in supply
Market equilibrium
Market Adjustment to Change: shifts of Demand and shift of Supply
Changes in Both Supply and Demand
Cobweb theorem as an illustration of stable and unstable equilibrium
Government regulation of a market
Price ceiling and Price floor
Impact of a tax on price and quantity
Demand elasticity. Price Elasticity Coefficient and Factors affecting price elasticity of demand
Impact of demand elasticity on price and total revenue
Income elasticity of demand (YED) and Cross elasticity of demand (CED)
Price elasticity of supply
Market adaptation to Demand and Supply changes in long-run and in short-run
Three parts and three assumptions of consumer behavior theory
Consumer Choice and Utility
Total Utility (TU) and Marginal Utility (MU)
Indifference curves
Budget Constraint
The effects of changes in income and prices
Equimarginal Principle and Consumer equilibrium
Income Consumption Curve. Engel Curves
Price Consumption Curve and Individual Demand curve
Income and Substitution Effects
The process of production and it’s objective
Production Function
Time and Production. Production in the Short-Run
Average, Marginal and Total Product. Law of diminishing returns
Producer’s behavior
Isoquant
Isocost
Cost minimization (Producer’s choice optimisation)
The treatment of costs in Accounting and Economic theory
Fixed and variable costs
Average costs. Marginal Cost
Long run average cost. Returns to Scale
Different market forms
P- Competition
Economic profit in TRTC-model and in MRMC-model
Firm and industry demand in P-competitive market
Economic strategies of the firm in P-competitive market
Long run equilibrium
Definition of Monopoly Market. Causes of monopoly.
Monopoly Demand and Marginal Revenue
Monopoly Profit Maximization
Monopoly Inefficiency
"Natural" Monopoly
Imperfect competition and Monopolistic competition
Profit Maximization in Monopolistic Competition
Oligopoly
Firms behavior in Oligopoly
Kinked Demand Model
Competitive factor markets
The Demand for Inputs
Supply of Inputs
Equilibrium in a Market for Inputs
Labor market: labor demand and supply of labor.
The Marginal productivity approach to demand for labor.
Equilibrium and disequilibrium on labor market.
Particularities of Land market. Differential rent. Marginal productivity of land.
Main characteristics of Asset market. Demand for capital. Interest rate.
Discounted value. Conceptions of Net present value (NPV) and future present value (FV).