Study Guide for Exam 2 Spring 2008

Study Guide for Exam 2 Spring 2008 - Study Guide for Exam 2...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Study Guide for Exam 2 Net Present Value and Other Investment Criteria Be able to use NPV to identify “good” projects or to choose between projects Understand the difference between soft rationing and hard rationing Know how to calculate rate of return, IRR, profitability index and payback Be able to calculate appropriate cash flow to make investment decisions Be able to choose between projects of different expected lives using the equivalent annual annuity approach. Risk and Return (Chapters 10 and 11) Understand the difference between market risk and unique risk Be able to identify the type of risk which can be eliminated by diversification (and which kind can not) Be able to calculate the market risk premium given historical returns on the stock market and a risk free security Know the difference between the market risk premium and the risk premium on an individual stock Know the CAPM formula and how to use it to estimate the expected (required) return for an
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Study Guide for Exam 2 Spring 2008 - Study Guide for Exam 2...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online