Solutions to Chapter 13 The Weighted Average Cost of Capital and Company Valuation 1. The yield to maturity for the bonds (since maturity is now 19 years) is the interest rate (r) that is the solution
What is the after-tax cost of preferred stock that sells for $10 per share and offers a $1.20 dividend when the tax rate is 35% 7.80% 12.00% 8.33% 4.20%
Question 2: (1 point)
How much is added to a fi
Time Value of Money
Examples
Formulas, Financial Calculators and Excel
What Does Time Value of
Money Mean?
This is the idea that money available today is worth more
than the same amount to be received
The Time Value of Money
Lecture Note 2
FIN 751 T. Barkley
LN2.1
The Essence of Finance
What is the essence of finance?
FIN 751 T. Barkley The Time Value of Money
LN2.2
The Essence of Finance
Cash Flo
Cash Flows and Capital
Budgeting
Lecture Note 4
FIN 751 T. Barkley
LN4.1
Cash Flows 3 Basic Principles
Account for cash flows only when they occur
Derive cash flows incrementally
What really matter
Valuation
Lecture Note 3
FIN 751 T. Barkley
LN3.1
Some Important Pricing Formulas
Single cash flow at time n
CFn
n
1 r
Perpetuity
C
r
Ordinary annuity maturing at time n
C
1
1
r 1 r n
FIN 751 T
CAPM and WACC
Lecture Note 5
FIN 751 T. Barkley CAPM and WACC
LN5.1
Risk, Return,
and Cost of Equity
Finance theory makes three
assumptions about investor behavior:
Investors prefer a dollar today t
FIN 751
Corporate Financial Policy &
Strategy
FIN 751 T. Barkley
LN1.1
Corporate Finance Overview
Lecture Note 1
FIN 751 T. Barkley
LN1.2
The Objective
Maximize Firm
Value
Investment
Decision
Financin
Mid-Term Exam Study Topics
Topic
1. Time value of money, including the
pricing of perpetuities, growing
perpetuities, annuities, growing annuities,
and a general stream of cash flows
2. Effective annu
FIN 751 CORPORATE FINANCIAL POLICY & STRATEGY, FALL 2014
INSTRUCTOR: TOM BARKLEY
COURSE PACK
II. The Basics
[1] NOTE Note to the Student: How to Study and Discuss Cases (V. 2.3) Robert F. Bruner,
Dard
Solutions to Chapter 4
Measuring Corporate Performance 1. a. b. c. d. e. f. g. h. i. j. k. Long-term debt ratio Total debt ratio Times interest earned Cash coverage ratio Current ratio Quick ratio Ope
Solutions to Chapter 13 The Weighted Average Cost of Capital and Company Valuation 1. The yield to maturity for the bonds (since maturity is now 19 years) is the interest rate (r) that is the solution
Solutions to Chapter 11
Introduction to Risk, Return, and the Opportunity Cost of Capital
1.
Dividend yield = dividend/initial share price = $2/$40 = 0.05 = 5%
Capital gains yield = capital gain/initi
Solutions to Chapter 7 Valuing Stocks 1. No, this does not invalidate the dividend discount model. The dividend discount model allows for the fact that firms may not currently pay dividends. As the ma
Solutions to Chapter 6 Valuing Bonds 1. a. b. c. Coupon rate = 6%, which remains unchanged. The coupon payments are fixed at $60 per year. When the market yield increases, the bond price will fall. Th