I want to talk about interest rates. Remember our NPV calculation, our net present value calculation, or any of our present value calculations? What we have done is we have looked at our future cash flows and we've discounted them based on an interest rate. Now, all of the examples that we've used, I have just come up with an interest rate, said let's suppose it's 8%, let's suppose it's 12%. And in some of the examples we looked at the flow of cash, and we asked what is the interest rate such that the present value, net of expenses, is zero? We're calculating the internal rate of return. So the first set, I'm looking at interest rates and I'm coming up with something, let's call it very random, just giving you a number. The second set, we are calculating a number. The truth is that your company and your industry is going to have an interest rate that makes sense in your setting. They might refer to it as a discount rate, a hurdle rate, an internal rate of return. This is the rate that you have to use to discount your future flows. The question then becomes what is your company's internal rate of return? What is your company's discount rate? What is your company's hurdle rate? Let's discuss these. How do I calculate the hurdle rate for my organization? The hurdle rate, the internal rate of return, your discount rate, this is the cost of your capital and the cost of your equity. Or another way to say it is that the interest rate of my company bears is comprised of two different components, the cost of equity and the cost of capital. In general, what are these things? Equity is my ownership. And the cost of my equity is really a value that I'm giving up. That is if I'm going to take on a project, if I'm going to purchase an asset, that will generate revenue for me, it has to bring me back a particular return. The return for this investment has to be at least as good as if I went out into the universe and bought my own stock, my own equity. So I have to determine the return on my ownership, my equity, as the first place of where my hurdle rate comes from. The second, my debt. Recall that I can go out and borrow money from banks. Go out and borrow money from other financial institutions. I have to pay interest on all that money. What is the interest that I am paying on my debt? I'm going to purchase a new asset and it's going to return me flows of rents. The rate of return has to at least be equal what I'm paying on my own debt, otherwise I should use my money to pay down my debt. I have equity, I have debt. The hurdle rate for an organization has to be a combination of those two things. Let's talk about how we calculate the interest on your equity and the interest on your debt, or the cost of equity and the cost of debt. The cost of equity. There are two methods to determine what the cost of equity is. The first is called the dividend growth model, and the second is called CAPM, also called the capital asset pricing model. They're both very, very helpful, and they're both very easy to use. The dividend growth model is only useful if the organization that you're trying to identify has dividends. So, if your company doesn't give dividends or if the public company that you're looking at doesn't give dividends, you can't use the dividend growth model. Let's look at some companies that do use dividend growth model, calculate their hurdle rate based on the cost of their equity.