fbe421 midterm outline

fbe421 midterm outline - Course Topics Outline - 421 I....

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Course Topics Outline - 421 I. What is Value? A. Some fundamental factors that affect Value. 1. Time. 2. Place. 3. Individual. 4. Taxes. 5. Laws. 6. Substitutes. 7. Competition. B. Ways Time affects Value. 1. Value can increase with time. 2. Value can decrease over time. 3. Value can jump or fall as a step function with points in time. 4. Value can temporarily rise/fall at a point in time. C. Ex. Joshua Bell. Violinist in the subway. D. Theories of Value. 1. Intrinsic theory (Marxist). i. Objectively determined. ii. Inherent. iii. Labor theory of value 2. Extrinsic value (Capitalist). i. Not inherent. ii. Subjective. E. Famous thinkers of Value Theory. 1. Karl Marx. 2. John Stuart Mill. 3. Ludwig Von Mises. 4. Adam Smith. 5. David Ricardo. F. Why do we need to know value? 1. Value is the basis for exchange. 2. Three requirements for exchange. i. Private property. ii. A notion of relative values. iii. A system of measurement. 3. A common unit of measurement/exchange promotes economic growth. G. Situations where we need to know value. 1. IPO. 2. Private equity. 3. M&A. 4. Goodwill impairment test. 5. Capital budgeting. H. Who needs to know value?
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421 Midterm Topic Outline 2 Keane 1. Investment bankers. 2. Regulators. 3. Research analysts. 4. CFOs. 5. Financial managers. 6. Accountants. 7. Lawyers. I. How to Create (Destroy)Value: Porter Five Forces Model. 1. Bargaining power of suppliers. 2. Bargaining power of customers. 3. Threat of new entrants. 4. Threat of substitute products. 5. Company rivalry within an industry. J. Other creators of value. 1. Management. 2. Bubbles. 3. Media. K. Some Value Types. 1. Market value. 2. Replacement value. 3. Depreciated value. 4. Fair value. 5. Appraised value. 6. Economic value. 7. Distressed value. 8. Liquidated value. 9. Asset value. II. Cash Flow Analysis. A. The Cash Flow Statement. 1. The statements. 1. Income statement. 2. Balance sheet. 3. Cash flow. 2. What ways does a company use cash/generate cash. B. Working capital changes. C. Why the CF statement is important. D. Parts of the CF statement. 1. Operations. 1. Net income. 2. Depreciation. 3. Other non-cash charges. 2. Investing. 1. Capital expenditures. 2. Sales of equipment.
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421 Midterm Topic Outline 3 Keane 3. Acquisitions. 3. Financing. 1. Selling stock. 2. Borrowing/issuing debt. 3. Paying back debt. E. Forecasting Cash Flows. 1. Exclude sunk costs. 2. Exclude sales from cannibalized sales. 3. Managerial bias and overconfidence. 4. Free cash flows. 1. EFCFs. Equity free cash flows. Available to pay stockholders. a. EFCF (unleveraged firm) = EBIT (1-tax) + DA - WC - CAPEX 2. PFCFs. Project free cash flows. Same as EFCF for an unleveraged firm. 3. Wall Street FCF = EBITDA – Capex. 5.
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fbe421 midterm outline - Course Topics Outline - 421 I....

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