June 23, 2011
Corporate Finance Roundtable - NPV as the Zelig of Law School
Posted by Trey Drury

From reading the posts (and as I suspected), it appears that you could take each of our corporate finance courses (and whatever cool thing Karl is teaching instead of corporate finance) and learn something completely different from each of them.  However, there does seem to be one thin shred of common ground - finance concepts, and particularly the idea of net present value, are at the heart of this course.  

Even my class, which seems to be the most "law-heavy" of the courses, spends a considerable amount of time on basic concepts of finance, and net present value in particular.  I believe strongly that this is something our discipline can contribute to the broader legal world.  If you don't understand NPV, you cannot negotiate a divorce settlement where, for example, a family business is an asset; you cannot advise your client whether and when to accept a settlement that is paid in installments, or compare a lump sum to an installment payment; you cannot make estate plans that rely on minority or marketability discounts; you cannot make a coherent argument about lost future wages in an employment claim.

The more you look, the more often you find it.  Pretty soon, it appears everywhere, just like one of my favorite Woody Allen characters.  While I applaud and admire my friend Christine for introducing NPV into her torts class, I worry that she is in the distinct minority on that front.  Until more people recognize the essential place for NPV in every lawyer's toolkit, we all do a great service by providing it in our corporate finance classes.

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