Principles of Finance with Excel, 2nd edition Part 1:  Capital Budgeting and Valuation   Note (January 2012):  In my teaching this year, I’m trying something new.  At the beginning of most of the classes, I give a short quiz.  I let the students grade their own quizzes in class.  The scores count for very little in the final grade, but serve to reinforce the material and give me a starting point for my lectures.  I will post these quizzes as I give them; each one roughly covers a chapter of PFE.  The course I’m teaching does Chapters 1-13, so not all chapters will be covered by a quiz. Introduction to accounting—a chapter from PFE1 (I left this out of the second edition, but am making the typescript available) Chapter 1 Introduction to finance 8 principles of finance Building good financial models Adding “Getformula” to your spreadsheet Chapter 2 Time value of money Future value and present value Net present value (NPV) Internal rate of return (IRR) Loan tables, amortization Saving for the future How long will it take to pay off a loan?   Excel functions:  NPV, IRR, FV, PMT, NPER, Goal Seek Chapter 3 What does it cost?  IRR and the time value of money Don’t trust quoted interest rates Computing the effective annual interest rate (EAIR) Calculating the cost of a mortgage Lease or purchase Multi-period compounding and the effective annual interest rate Continuous compounding   Excel functions:  IRR, PMT, IPMT, PPMT, Rate, NPV, PV, Exp, Ln, Sum, Max, Goal Seek Case:  Confusion between APR and actual EAIR ·        ·        ·        Social security problem ·        ·        Car lease:  Volt example ·        · Chapter 4 Intro to capital budgeting NPV rule for choosing investments IRR rule for choosing investments Consider only marginal cash flows The effect of taxes The cost of foregone opportunities Accelerated depreciation   Excel functions:  NPV, IRR, Data Table Case:  Extension of the real estate case of Chapter 4 ·        ·        ·        · Chapter 5 More capital budgeting Problems with IRR Multiple IRRs Choosing between different life spans Lease vs purchasing with taxes Mid-year discounting Inflation and capital budgeting Understanding TIPS   Excel functions:  IRR, NPV, Sum, PMT, If, XNPV, XIRR TIPS case: ·        Case (PDF) ·        Case template (Excel) ·        Case solution (PDF) ·        Case solution (Excel) Chapter 6 Choosing a discount rate Funding cost as discount rate Weighted average cost of capital (WACC) Gordon dividend model Two uses for the WACC   Excel functions:  NPV, IRR, PMT Excel spreadsheet for chapter 6 PPT.  This is a large (~13MB ) file containing many Yahoo screen clips. Chapter 7 Financial planning models and valuation Building a financial planning model Free cash flow prediction Reconciling cash balances Discounted cash flow (DCF) valuations   Excel functions:  NPV, Sum, If, Data Tables, circular references For more advanced valuation models, PowerPoints, and issues, see Chapter 16 materials.