## Difference between Overbought and Oversold

Overbought Position Overbought means that a bank’s assets and purchases of a particular foreign currency exceed its liabilities and sales of that currency. Oversold Position Oversold means that a bank’s…

## Difference between Interest Rate and Exchange Rate

Interest Rate and Exchange Rate The question of interest rate arises when currencies are borrowed or lent; whereas exchange rates are involved when different currencies are being bought or sold. The…

## Difference Between Hedging and Speculating

What is the difference between Hedging and Speculating? What is hedging? Hedging means avoiding or covering foreign exchange risk. The need of hedging arises because exchange rate fluctuates continuously. Accordingly,…

## Sensitivity Analysis Accounting

Sensitivity Analysis Today I want to turn to sensitivity analysis. In other words, having set up our DCF and having completed all the inputs, now, let's push it around a little bit…

## Decision criteria and free cash flow

Decision criteria and free cash flow Last time we applied our forecast drivers to our free cash flow formula to forecast free cash flows for our tablet project. Today I want to take…

## Forecasting free cash flows

Forecasting free cash flows Today, I want to apply the forecast drivers to the free cash flow formula to forecast free cash flows into the future for the tablet project. Today…

## Free Cash Flow Computation

Free Cash Flows Today I want to talk about free cash flows, a critical element in implementing any of those decision rules. Remember, there are two components to NPV. There are Free…

## Forecast components of free cash flow

Components of free cash flow What I want to do in this lecture is talk about forecast drivers, or the assumptions required to forecast each component of the free cash flow formula…

## Return on investment – ROI

Return on investment - ROI Today I want to talk about return on investment and in particular, what I want to discuss is the strengths and weaknesses of the internal rate of…

## Term structure of interest rates

Term structure of interest rates Last time we talked about interest rates. In particular, we talked about how interest rates are quoted versus how interest rates are used to discount cash flows. We…

## APR and EAR

In this topic, interest rates, I want to start off by talking about interest rate quoting conventions and I want to talk about how to compute the present value and future value…

## Impact of inflation on time value of money

Impact of inflation on time value of money I want to talk about inflation and its impact on our real returns or our consumption. Let's get started. Hey, everybody. Welcome back to…

## Why does money have a time unit?

Why does money have a time unit and why do we need to account for it? The answer is that there is an opportunity cost associated with not having money…

## EVA a good measure of value creation

Is EVA a good measure of value creation? We have one more thing to do here, and that thing is let' s agree for just a minute that EVA is a good measure…

## EVA Example

EVA Example But very simple example just to round up the idea of the, you know, whether a company's creating or destroying value. Let us consider a company that is generating a…