final jeopardy questions

final jeopardy questions - Q3[Page 10-4 rs = rRF β(rM –...

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Kouros Vala Bus 173A Vuorikoski-Bullis Jeopardy Questions Ch. 10: Determining the cost of capital. Q1.) What is the Discounted Cash Flow approach used to estimate the required rate of return for externally raised common equity when flotation costs increase the cost of equity? Q2.) What are the two most important factors which are beyond the firm’s direct control? Q3.) How do you estimate the required rate of return on a stock using CAPM? Q4.) What are five potentially ‘good” ways to use free cash flow? Q5.) What are two forms of distributing cash? Q6.) What is the term used for stock which has been repurchased by the issuing firm? Q7.) What is a perpetuity and how do you calculate its present value? Q8.) What does the interest rate parity imply and how is it expressed? Q9.) What are the two goals of inventor management? Q10.) The IRR is defined as the discount rate that equates the present value of a pro Q1.) [Page 10-5] re = [D1/(Po(1-F)] Q2.) [Page 10-6] (1) interest rates & (2) taxes
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Unformatted text preview: Q3.) [Page 10-4] rs = rRF + β (rM – rRF) or rs = rRF + β (MRP) Q4.) [Page 17-1] (1) pay interest expenses (2) pay down the principal on the debt (3) pay dividends (4) repurchase stock (5) buy non-operating assets; i.e., T-bills or other marketable secs. Q5.) [Page 17-1] (1) cash dividend (2) stock repurchases Q6.) [Page 17-2] treasurey stock Q7.) [Page 28-8] An infinite series of equal payments made at fixed intervals for a specified number of periods (infinite annuity). The present value of a perpetuity is: PV = Payment / Interest rate = PMT / i Q8.) [Page 27-5] Interest Rate Parity holds that investors should expect to earn the same return in all countries after adjusting for risk. IRP is expressed as: Forward Exchange Rate = (1 + r host) Spot Exchange Rate (1 + r foreign) Q9.) [Page 21-7] (1) to ensure that inventories needed to sustain operations are available (2) the average length of time between sales and connections Q10.) Q10.)...
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