Exam 1: Tuesday October 18 (in class – 80 minutes) Structure: Multiple Choice, True/False: approximately one half of exam Short Answer Questions: approximately one quarter of exam Long Answer Problems (Valuation exercises, analyze Wall Street Journal article): approximately one quarter of exam Topics Covered (everything discussed in class is fair game!): • Financial Crisis Root causes, Incentives provided to firms by implicit and explicit government guarantees, debt vs. preferred stock vs. common stock, downside of leverage, analysis of various gov’t interventions/policies • Basic review Valuation metrics (e.g., NPV, IRR, payback period), CAPM, Modigliani-Miller irrelevance propositions • Stock-Based Compensation Characteristics of employee stock options, trends over time, Which firms use more stock-based compensation (options) and why? How do options affect behavior of workers, of executives, affect payout policy and investment decisions? Stock options vs. restricted stock • Pension Plans
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