1st midterm review - BUS 281 Midterm Review MIDTERM Part I:...

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BUS 281 Midterm Review
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MIDTERM Part I: Short Answers (~5 questions) Part II: Problems (~6 questions, multiple parts) 2-hour, closed book exam Only simple/scientific calculators are allowed (cell phones, PDAs etc are not allowed)
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Study Strategy Read lecture notes and textbook chapters Check Summary and Conclusions Concepts Review Make sure you know and understand the formulas and what each part of them mean Doing the practice questions at the end of the chapter and solving the examples in the lecture notes is a good practice
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Chapter 1- Introduction to Corporate Finance Corporate finance -main areas of concern Capital Budgeting Capital Structure The Net Working Capital Goal of financial management Corporate Forms of Business Organization sole proprietorship partnership company pros and cons of each Agency problems Controlling and reducing Financial Markets Primary Secondary
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Chapter 5- Introduction to Valuation: The Time Value of Money Future Value and Compounding Present Value and Discounting Interest rate Discount rate Cost of capital Opportunity cost of capital Required return Simple interest Compound interest
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Future Value, Present Value and Compounding i = periodic rate=quoted rate /m (= r s / m ) m=number of compounding periods in a year N or t = time (years) n = number of periods (= mi N = mi t ) There are four variables to this equation: PV, FV, i and n If we know any three, we can solve for the fourth Below eq. is equivalent to the one above! (1 ) n FV PV i = + s 1 r = stated annual rate (quoted rate) m = number of compounding periods in a year mN s r FV PV m = +
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Continuous Compounding 2.7182818 s r N FV PVe e =
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Stated rates do not account for the number of compounding periods, the effective annual rate (EAR) does! discrete compounding
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This note was uploaded on 04/13/2010 for the course BUSINESS engl 102 taught by Professor Seyhanözmenek during the Spring '10 term at Middle East Technical University.

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1st midterm review - BUS 281 Midterm Review MIDTERM Part I:...

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