Time Value of Money
Money has a time value. It can be expressed in multiple ways:
A dollar today held in savings will grow.
A dollar received in a year is not worth as much as a dollar received today.
Future Value: Amount to which an investm
A bond is a debt instrument issued by governments or corporations to raise money
The successful investor must be able to:
Understand bond structure
Calculate bond rates of return
Understand interest rate risk
Differentiate between real and n
This chapters introduces valuations techniques for equity (stocks).
The Dividend Discount Model provides an excellent measure of a stocks intrinsic value.
The Stock Market
The two principal stock exchanges in the US are the New York Stock E
Question 20 2 out of 2 points [Extra Credit)
20. In the the Wall Street Journal. looking at the stock transactions on the New York Stock Exchange, the price of a share of
McDonald's stock was: $53.61 You buy the stock. Unfortunater this gets you thinking
Question 25 Needs Grading
Problem 2.5. The Acme Bank and Storm Dood Company (good old "AB&SDC") is trying to determine what rate of interest they
should pay on the new 6 month CDs they are trying to get customers to buy. Looking at the WSJ here's some int
Question 9 2 0
Q. The wealth of the owners of a corporation is represented by
Selected Answer: c. share price
Question 10 3 U
10. The true owner(s) of the corporation is (are)
Selected Answer: c. stockholders
Question 11 2 0
11. The most popular incentive
1. Finance can be dened as
Selected Answer: c_ the art and science of managing moneyr
2. Which of the following legal forms of organization is least expensive to organize?
Selected Answer: a. Sole Propnetorships
3. The rat
need to raise some money this year. The bank loaned them $150,000 at 8% (that interest is due this year). The interest didn't
worry them too much as it was partly oftset by the dividend check they received from McDonalds for $8,000 (hmmmmm I wonder
Net Present Value and other investment Criteria
This chapter presents multiple valuation techniques used during the capital budgeting process.
Net Present Value
Opportunity Cost of Capital - Expected rate of return given up by investi
Source of Funds (Capital)
The Flow of Capital: Public Corporations
Financial Market: Market where securities are issued and traded.
Primary Market: Market for the sale of new securities by corporation
Which of the following was designed to
allow GM to operate ethically in South
Africa as long as the company did not obey
the apartheid laws in its own South African
Identifying Cash Flows: Cash Flow vs. Accounting Income
Discount actual cash flows, not necessarily net income.
Using accounting income, rather than cash flow, could lead to erroneous decisions.
NPV: Accounting Income
A project costs $2
Accounting and Finance
Understanding financial accounting is essential to understanding corporate finance.
Key Components of the Financials:
The Balance Sheet
The Income Statement
The Statement of Cash Flows
The Balance Sheet
The Balance Sheet is a financ
Question 22 Needs Grading
Problem 2-2. A corporation with sales of $250,000 cfw_OK it's a small corporation!) paid $11,250 federal tax on taxable income of
$65,000. They also had an endpfyear party where they ordered 50 Big Macs at $2.79 each. Given the a