A
B
C
D
E
F
G
12/11/08
1
Chapter 8. Risk and Rates of Return
2
The higher a security's risk, the higher its required return. Risk can be thought of in
two ways: (1) Stand-alone risk, where the security is considered in isolation, and (2)
portfolio risk, w
CHAPTER 9
STOCK VALUATION
Answers to Concept Questions
1.
The value of any investment depends on the present value of its cash flows; i.e., what investors will
actually receive. The cash flows from a share of stock are the dividends.
2.
Investors believe
CHAPTER 4
DISCOUNTED CASH FLOW VALUATION
Answers to Concepts Review and Critical Thinking Questions
1.
Assuming positive cash flows and interest rates, the future value increases and the present value
decreases.
2.
Assuming positive cash flows and interes
CHAPTER 10
SOME LESSONS FROM CAPITAL
MARKET HISTORY
Answers to Concepts Review and Critical Thinking Questions
1.
They all wish they had! Since they didnt, it must have been the case that the stellar performance was
not foreseeable, at least not by most.
WEEK 2 Financial Decision Making
Lesson 1: Risk and Return
Lesson 1 Introduction
This lesson introduces you to the concepts of risk and return. Most people are familiar with the idea that the return
on an investment is commensurate with its risk. The main
Question 1
1 out of 1 points
Correct
Which one of these best fits the description of an agency cost?
Selected Answer:
CorrectD. the payment required for an outside audit of the firm
Answers:
A. increasing the dividend payments per share
B. the payment of
WEEK 1 Financial Decision Making
Lesson 1: Introduction to Financial Management
Lesson 1 Introduction
This lesson introduces you to the world of financial management. We begin by discussing the functions performed
by the financial manager, and then consid
Lesson 1 Introduction
Last week, you studied the relationship between risk and return from the perspective of an
investor. One of the main conclusions of that lesson is that the rate of return an investor can
expect to earn on an investment is determined
12-10-08
05 Chapter model
Chapter 5. The Time Value of Money
This model is STRICTLY OPTIONAL. Neither students nor instructors need to go through it. However, if
someone wants to practice with Excel, then the model can be useful. Also, on the tabs we show
1
2
3
4
5
A
B
07 Chapter model
C
D
E
F
G
H
I
12/10/2008
Chapter 7. Bonds and Their Valuation
The value of any financial asset is the present value of the asset's expected future cash flows. The key
inputs are (1) the expected cash flows and (2) the approp
Table 12-1 Cash Flow Estimation and Analysis for Expansion Project S
0
Investment Outlays at Time = 0
Equipment
Net WC
Net Cash Flows Over the Project's Life
Unit sales
Sales price
Variable cost per unit
Sales revenues = Units Price
Variable costs = Units
1
2
3
4
5
A
10 Chapter model
B
C
D
E
F
G
12/12/08
Chapter 10. The Cost of Capital
The cost of capital is a vital element in the capital budgeting process. For a project to be
accepted, it must provide a return that exceeds its cost of capital, or hurdle r
1
2
3
4
A
B
04 Chapter model
C
D
E
F
G
H
I
12/10/08
Chapter 4. Analysis of Financial Statements
5
This model is STRICTLY OPTIONAL. Neither students nor instructors need to go through it. However, if
someone wants to practice with Excel, then the model can
03 Chapter model
12/10/08
Chapter 3. Financial Statements, Cash Flows, and Taxes
This model is STRICTLY OPTIONAL. Neither students nor instructors need to go through it. However,
if someone wants to practice with Excel, then the model can be useful. Also,
09 Chapter model
12/12/08
Chapter 9. Stocks and Their Valuation
This model is similar to the bond valuation models developed in Chapter 7 in that we employ
discounted cash flow analysis to find the value of a firm's stock.
COMMON STOCK VALUATION (Section
14 Chapter model
Chapter 14. Capital Structure and Leverage
In this chapter, we introduce two new dimensions of risk, business risk and financial risk. Business risk
is the risk inherent in the firm's operations, and it would be there even if the firm use
Model for Chapter 11, Basics of Capital Budgeting
On tab #1 we go through the main calculations done in the chapter. We recommend that you see our Excel Tutorial
if you don't understand some of the Excel functions.
Table 11-1. Data on Projects S and L
WAC
CHAPTER 8
INTEREST RATES AND BOND
VALUATION
Answers to Concept Questions
1.
No. As interest rates fluctuate, the value of a Treasury security will fluctuate. Long-term Treasury
securities have substantial interest rate risk.
2.
All else the same, the Trea