Final Exam Study Guide

Final Exam Study Guide - FIN 310 FINAL EXAM STUDY GUIDE...

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FIN 310 FINAL EXAM STUDY GUIDE FALL 2010 You will NOT be allowed to have a formula/notes sheet for the FINAL EXAM. I will distribute PV/FV tables. Here are the topics for the exam: VALUATION AND TIME VALUE OF MONEY What is the value of an investment option? NPV Present value and future value calculations Lump sum and annuity Saving for retirement Loan payment/mortgage payment/car payment Study the Midterm RISK AND RETURN What are interest rates? o What do they tell us about risk? o What do they tell us about the value of an investment? Relationship between long-term and short-term interest rates. APR and EAR o What is the relationship? o Convert from one to another. DEBT AND EQUITY Study quiz What is the difference between debt and equity? Characteristics? BONDS o How do you make a return when you invest in bonds? o What are the different rates of return associated with a bond? How do you use them? Coupon rate Current yield Yield to maturity o How do you find the bond price? o Relationship between interest rate and price
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Unformatted text preview: FIN 310 FINAL EXAM STUDY GUIDE FALL 2010 FIN 310 FINAL EXAM STUDY GUIDE FALL 2010 • STOCKS o Preferred vs. common stock: characteristics o How do you make a return when you invest in stocks? o How do you find the stock price? o Relationship between interest rate and price CAPITAL BUDGETING • What is capital budgeting? Why does a company do it? • Terms from first 9 slides of Chapter 11. • What are the three ways to determine value? What are the pros and cons of each method? o Payback o NPV o IRR COST OF CAPITAL • Calculate cost of DEBT o Before tax o After tax • Calculate cost of EQUITY o Dividend method (constant growth and no-growth methods) o CAPM o Pros and cons of each method • Why do we need to consider the weighted average cost of capital (WACC)? • Calculate WACC • How do we make the decision whether or not to make an investment? o Compare Projected returns (Capital Budgeting) to WACC...
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This note was uploaded on 04/25/2011 for the course FIN 310 taught by Professor Ryan during the Winter '08 term at DePaul.

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Final Exam Study Guide - FIN 310 FINAL EXAM STUDY GUIDE...

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