Next, we're going to go back, so we'll solve that whole thing with,

we're going to solve Of this whole thing, without considering the time value.

And then next, that's going to help us debug technically

the decision tree, make sure everything.

Works good while we're keeping it simple, right.

And once we feel like it's debugged it's working well in that stuff we're going to

go back and consider the tree with time power view,okay.And

to do that what are we going to have Have to do, we have cash flows in the trees

that are going to happen a year from now, two years from now.

We're going to have to take the present value of all of those, and

once we take the present value of all of our cash flows,

discount them back to their equivalent at t equals 0 or right now,

that's going to give us, instead of what we call the expected value of the project

That's going to give us the expected net present value of the project,

which is awesome, that's what we want in a time value world.

And of course to do this,

to discount back, we're going to need to know our opportunity cost of capital.

Next we're going to apply our risk reward policy and typically

that's going to have a target that we're shooting for and a downside limit.

So we say we want to maximize the expected value of this project But

we want to make sure that no matter what happens we don't loose more than $ 50

million, that would be her downside criteria that type of thing so

we apply both of those, and then we can make our decision.

Do we want to go ahead with this yes or no?

And then finally always good with something like this to consider

the limitations of the model, the fancier we get with

financial models the more simplifying assumptions we have to make and

it's very important that we're aware of what those assumptions are.

Because that tells us where the model may not apply,

where we may not use this model or

where if we're not careful, we may erroneously try to use this model.

So we'll look at that too in the context of an example.Okay,

and here again I have the last Instead of my self-serving,

shameless, and gratuitous plugs.

Helpful material for all of my modules.

Including this module.