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1、LEARNINGOBJECTIVESAfterstudyingthischapter,youshouldunderstand:LO1HowtodeterminethefutureandDISCOUNTEDpresentvalueofinvestmentswithmultiplecashflows.LO2HowloanpaymentsareCASHFLOWcalculatedandhowtofindthe6interestrateonaloan.LO3HowloansareamortizedorVALUATIONpaidoff.LO4Howinter
2、estratesarequoted(andmisquoted).THESIGNINGOFBIG-NAMEATHLETESisoftenasheisknowntofans,whosignedforastatedvalueaccompaniedbygreatfanfare,butthenumbersareof$275million.Thisamountwasactuallypayableoftenmisleading.Forexample,in2007,catcherJorgeoverseveralyearsandconsistedof$2mill
3、ionimmedi-PosadareachedadealwiththeNewYorkYankees,ately,alongwith$28millioninthefirstyearplussigningacontractwithareportedvalueof$52.4million.$245millioninfuturesalarytobepaidintheyearsNotbad,especiallyforsomeonewhomakesaliving2009through2017.Jorge’sandTony’spaymentswereusing
4、the“toolsofignorance”(jockjargonforacatcher’ssimilarlyspreadovertime.Becauseallthreecontractsequipment).Anotherexampleisthecontractsignedbycalledforpaymentsthataremadeatfuturedates,wequarterbackTonyRomooftheDallasCowboys,whichmustconsiderthetimevalueofmoney,whichmeanshadasta
5、tedvalueofabout$67.5million.noneoftheseplayersreceivedthequotedamounts.ItlookslikeJorgeandTonydidprettywell,butthenHowmuchdidtheyreallyget?ThischaptergivesyoutherewasJorge’steammateAlexRodriguez,orA-Rodthe“toolsofknowledge”toanswerthisquestion.Mastertheabilitytosolveproblems
6、inthischapterbyusingaspreadsheet.AccessExcelMasteronthestudentWebsitewww.mhhe.com/rwj.Inourpreviouschapter,wecoveredthebasicsofdiscountedcashflowvaluation.However,sofar,wehavedealtwithonlyValuationofFutureCashFlowsPART3singlecashflows.Inreality,mostinvestmentshavemultiplecashfl
7、ows.Forexample,ifTargetisthinkingofopeninganewdepartmentstore,therewillbealargecashoutlayinthebeginningandthencashinflowsformanyyears.Inthischapter,webegintoexplorehowtovaluesuchinvestments.Whenyoufinishthischapter,youshouldhavesomeverypracticalskills.Forexample,youwillknowhow
8、tocalculateyourowncarpaymentsorstudentloanpayments.Youwillalsobeabletodeter
