Market Imperfections
(Welch, Chapter 10)
Dror Brenner
Brown University, ECON1720
November 18, 2013
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1/1
Maintained Assumptions
In this chapter, we relax the one remaining assumption:
We
Chapter 13
From Financial Statements
to Economic Cash Flows
Solutions to Questions 13.1 to 13.18 appear in the text.
13.19 Which statements on the firms financial reports are about flows, and which are about stocks?
Answer: The income statement and cash f
ECON 1720 Corporate Finance, Spring 2014
PROBLEM SET 8 DUE IN CLASS ON MAY 1, 2014
Question 1
In this question, you are asked to used options prices for Goldman Sachs (GS). You
can find options prices o
_
1) Suppose you deposit $1,000 today in an account that pays 5% interest at the end of each year. If you withdraw one
half of the year's interest at the end of each year, what is the balance in your account after your third withdrawal? Round
your answer
Capital Budgeting Rules
(Welch, Chapter 04)
Dror Brenner
Brown University, ECON 1720
February 22, 2017
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1/1
Maintained Assumptions
In this chapter, we maintain the assum
Capital Structure: With Corporate Income Taxes
(Welch, Chapter 17)
Dror Brenner
Brown University, ECON 1720
April 26, 2017
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1/1
Is it true that M&M teaches us that manag
Market Imperfections
(Welch, Chapter 10)
Dror Brenner
Brown University, ECON 1720
March 24, 2017
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1/1
Maintained Assumptions
In this chapter, we relax the one remaining
Practice Questions
Short Answer: (12-15 minutes each)
You can expect 4 questions of the type below in the Short Answer section
Question:
In 1993, the Clinton Administration implemented a policy that increased government funds to public high
schools with d
HW8 - Solutions
1) The M&M proposition says that if a firm can be thought of as a tub of whole milk that a farmer can separate into cream
and skim milk and there are no costs of separation or government support programs, then
A) the value of the whole mil
Uncertainty, Default, and Risk
(Welch, Chapter 06)
Dror Brenner
Brown University, ECON 1720
March 10, 2017
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1/1
Maintained Assumptions
In this part (consisting of three
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) A project has the following possible outcomes:
Probability
50%
20%
30%
Value at the end
of the year
$10,000
$20,000
$8,000
Calculate the expected val
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is not a perfect market assumption?
A) There are no transaction costs.
B) There is no uncertainty regarding expected returns.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) A mutual fund has five equally likely outcomes: -5%, 8%, 12%, 15%, and 20%. Calculate the variance of the rate of
return. Round your answer to the ne
Capital Structure: Perfect Markets
(Welch, Chapters 6 and 16)
Dror Brenner
Brown University, ECON 1720
April 19, 2017
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1/1
Main Example
I
Perfect Markets: No Taxes. No X
Corporate Finance
Raising Debt Financing
Lecture 14 03/13/2014
Outline for Today
Last Time:
Financing of rms
Issuance of equity
IPO puzzles
Today:
Importance of debt nancing
Issuance of debt
Features of
Corporate Finance
Hidden Informa2on
Lecture 17 04/08/2014
Outline for Today
Last Time:
Taxes and capital structure
Costs of nancial distress
Op2mal level of debt
Today:
Hidden informa2on
Credit ra2oning
Ro
ECON 1720 Corporate Finance, Spring 2014
PROBLEM SET 3 DUE IN CLASS ON FEBRUARY 25, 2014
Question 1
Consider Facebooks (FB) current stock price as of February 7th: $64.32. Current
earnings per share, EPS =
ECON 1720 Corporate Finance, Spring 2014
PROBLEM SET 5 DUE IN CLASS ON APRIL 10, 2014
Question 1
TacoCorp is considering a first round of venture capital investment. Taco is the
majority shareholder with 1
Corporate Finance
Understanding Op2ons
Lecture 20 04/17/2014
Outline for Today
Last Time:
Payout policy
Role of taxa2on
Role of informa2on
Today:
Op2ons basics
Payos and valua2on
Op2on strategies
Op2ons
Corporate Finance
Introduc0on to Capital Structure
Lecture 12 03/06/2014
Outline for Today
Last Time:
Examples of capital budge0ng
PiHalls and complica0ons
Today:
Sensi0vity analysis
Firm capital structure
Wei
ECON 1720 Corporate Finance, Spring 2014
PROBLEM SET 4 SOLUTIONS
Question 1
Consider two stocks, Coca-Cola Company (KO) and Pepsico (PEP) with expected
returns of 8% and 12% respectively. Assume that the stock
ECON 1720 Corporate Finance, Spring 2014
PROBLEM SET 3 SOLUTIONS
Question 1
Consider Facebooks (FB) current stock price as of February 7th: $64.32. Current
earnings per share, EPS = $0.61
a)
If next years e
Corporate Finance
Capital Asset Pricing Model
Lecture 8 02/20/2014
Outline for Today
Last Time:
Measuring return and risk
SystemaEc and idiosyncraEc risk
PorFolio risk and return
Today:
SystemaEc risk
Capita
HW7: From Financial Statements to Free Cash Flow
Submit in class on Friday, April 28.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following are subtracted from sales in order to ar
Time-Varying Rates of Return, Bonds, Yield Curves
(Welch, Chapter 05)
Dror Brenner
Brown University, ECON 1720
March 3rd, 2017
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1/1
Maintained Assumptions
In this chapte
IN BRIEF
ECON 1720, HW#1
Welch: Chapter 2, The Time Value of Money
Please submit in class (Wilson 102) on: Wednesday,
September 21, 2016
In this assignment you will remind yourself of basic
present value (PV) and Future Value (FV) Calculation. You
will al
IN BRIEF
ECON 1720, HW#2
Welch: Chapter 3, Perpetuities and Anuuities
Please submit in class (Wilson 102) on: Monday,
October 3rd, 2016
In this assignment you will remind yourself of the basic
shortcuts for present value (PV) for perpetuities and
annuitie
ECON1720, Midterm Exam #2, Fall 2016, Brown University.
Name: _
Dror Brenner, Erin OBrien, Samuel Hauser.
Instructions:
Please write your name both on the answer sheet and on the questions sheet.
Choose the one alternative that best completes the statemen
Econ1720, Midterm #1
Practice Exam
Dror Brenner, Erin OBrien, Sam Hauser
Instructions:
Choose the one alternative that best completes the statement or answers the question. Please mark the answer you
choose on the answer sheet.
You are only allowed a simp
IN BRIEF
ECON 1720, HW#3
Welch: Chapter 4, Introduction to Capital Budgeting
Rules
Please submit in class (Wilson 102) on: Friday, October
21st, 2016
In this assignment, you will consider various capital
budgeting rules. You will practice taking decisions
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) If you make an investment that returns 10% the first year, 20% the second year, and 12% the third year, what is your
total 3-year return? Round your
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The Federal Reserve announced that it would lower the discount rate from 4.75% to 4.5%. This represents a
decrease of
A) 250 basis points
B) 25 basis