Chapter 12 Estimating the Cost of Capital
12.1 The Equity Cost of Capital
The Capital Asset Pricing Model (CAPM) is a practical way to estimate.
The cost of capital of any investment opportunity equals the expected return of available
investments with the
FIN630 CH10 Group Assignment
43 points
Use the risk and return workbook / HPR
1) Complete the following return calculations: (holding period return) (4 points)
a. Stock was purchased at $75, over the past two years it has paid $3.86 in
dividends; it curre
Chapter 11 Optimal Portfolio Choice and the Capital Asset Pricing Model
11.1 The Expected Return of a Portfolio
Portfolio Weights
The fraction of the total investment in the portfolio held in each individual
investment in the portfolio
The portfolio weigh
CH02 Group
210 points
FIN630 Chapter Two Group Assignment
1) Enter the last four years annual statements for MSFT / HOG / PFE / WMT / or XON
from www.marketwatch.com . Enter the data into the financial spreadsheet under
financial statement analysis.
2) Fi
FIN630 Ch09
Group 9 points
1) You are investigating a stock. The last dividend paid was 3.75. The dividend paid
12 years ago was 2.00. We are going to assume that the future growth of
dividends will be 4% greater than the historic average. The risk free r
FIN630 Ch08
Group Assignment 24 pts
Go to www.nasdbondinfo.com . Research your companys outstanding bonds. (15 pts)
How many Bonds have been issued?
Sort by largest coupon; sort by longest maturity: complete the table below
Largest Coupon
Longest maturity
Chapter 9 Valuing Stocks
9.1 The Dividend Discount Model
A One-Year Investor
Potential Cash Flows
Dividend
Sale of Stock
Timeline for One-Year Investor
Since the cash flows are risky, we must discount them at the equity cost of capital.
Equity cost of cap
Chapter 8 Valuing Bonds
Bond Valuation
Primary Principle:
Value of financial securities = PV of expected future cash flows
Bond value is, therefore, determined by the present value of the coupon payments
and par value.
Interest rates are inversely related
Chapter 7 Fundamentals of Capital Budgeting
7.1 Forecasting Earnings
Capital Budget
Lists the investments that a company plans to undertake
Capital Budgeting
Process used to analyze alternate investments and decide which ones to
accept
Incremental Earning
Chapter 6 Investment Decision Rules
6.1 NPV and Stand-Alone Projects
Consider a take-it-or-leave-it investment decision involving a single, stand-alone project
for Fredricks Feed and Farm (FFF).
The project costs $250 million and is expected to generate c
Chapter 5 Interest Rates
Interest Rates & Required Returns
The interest rate or required return represents the price of money.
Interest rates represent the compensation that a demander of funds must pay a
supplier.
When funds are lent, the cost of borrowi
Chapter 3 Arbitrage and Financial Decision Making
3.1 Valuing Decisions
Identify Costs and Benefits
May need help from other areas in identifying the relevant costs and
benefits
Marketing
Economics
Organizational Behavior
Strategy
Operations
Using Market
Chapter 2 Introduction to Financial Statement Analysis
Balance Sheet
MV = price * shares
= 188.80 * 4 6.87 = 8,849,056,000
Book Value
Market Value
Income Statement
Dividends are annual
EPS is fully diluted
2.6 Statement of Cash Flows
Three Sections
Operat
Chapter 1
The Corporation
Figure 1.1 Types of U.S. Firms
1.2 Ownership
versus Control of
Corporations
Corporate
Management Team
In a corporation, ownership and direct control are typically separate.
Board of Directors
Elected by shareholders
Have ultimate