Introduction to Corporate Finance

Ross et al.: Fundamentals

of Corporate Finance, Sixth

Edition, Alternate Edition

III. Valuation of Future

Cash Flows

5. Introduction to
   Valuation: The Time Value
   of Money

(^158) © The McGraw−Hill
Companies, 2002
VALUATION OF FUTURE CASH FLOWS

PART THREE

CHAPTER 5 Introduction to Valuation: The Time Value of Money One of the most important

questions in finance is: What is the value today of a cash flow to be received at a later date? The answer

depends on the time value of money, the subject of this chapter.

CHAPTER 6 Discounted Cash Flow Valuation This chapter expands on the basic results from

Chapter 5 to discuss valuation of multiple future cash flows. We consider a number of related topics,

including loan valuation, calculation of loan payments, and determination of rates of return.

CHAPTER 7 Interest Rates and Bond Valuation Bonds are a very important type of financial

instrument. This chapter shows how the valuation techniques of Chapter 6 can be used to determine

bond prices. We describe essential features of bonds and how their prices are reported in the financial

press. Interest rates and their influence on bond prices are also examined.

CHAPTER 8 Stock Valuation The final chapter of Part Three considers the determinants of the

value of a share of stock. Important features of common and preferred stock, such as shareholder rights,

are discussed, and stock price quotes are examined.

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