EXAM#3 Study Guide

EXAM#3 Study Guide - 3. Salvage value = Sale price (Sale...

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BMGT 340 Exam#3 Study Guide A. 1. WACC: = w d r d (1-T%) + w p r p + w c r s -Debt cost = r d (1 – T%) *interest-bearing debt ONLY -Prefer stock cost = r p = D P /P P (per share) -Retain earning cost = r s = r RF + RP = D 1 /P 0 + g = Bound yield + RP, RP = r stock - r bond 2. New CS: r e = D 1 /(P 0 (1-F)) + g 3. g = Retention rate x ROE = (1 – Div%) x ROE 4. RE breakpoint = Add. to RE/Equity fraction 5. MIRR Compute PV of ∑COF (N* = N-1) Compute FV of ∑CIF (terminal value) MIRR = I/Y B. Cash Flow 1. Net operating CF = NONPAT + Derp = (Rev – Cost – Depr) (1– T%) + Depr 2. Net CF = Initial cost + Salvage value + Net operating CF – NOWC – Opp. Cost – Externality
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Unformatted text preview: 3. Salvage value = Sale price (Sale price book value) x T% C. Stock structure 1. Operation leverage breakeven: P x Q = VC x Q + FC EBIT = NI= P x Q (VC x Q + FC) = 0 Q = FV/(P VC) 2. EPS = [(Sales FC VC In/ex)(1 T%)]/#Shares 3. Hamada equation L= U [1 + D/E(1 T%)], r s = r RF + (RP M ) L U = L /[1 + D/E(1 T%)] 4. Debt rate MAX EPS > Debt rate MIN WACC = Debt rate MAX PRICE...
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