The company cost of capital is the appropriate discount rate for a firm's:
The cost of capital is the same as the cost of equity for firms that are financed:
If a firm uses the same company cost of capital for evaluating all projects, which
situation(s) w
1. Pharmecology is about to pay a dividend of $2.00 per share. Its a mature company, but future
EPS and dividends are expected to grow with inflation, which is forecasted at 3.50% per year.
The nominal cost of capital is 10.25%.
a. What is Pharmecologys c
Chapter 17 Quiz A Student Name _ _ 1.
Student ID _
Which one of the following supports the statement that the cost of equity rises when leverage is increased? a. M&M Proposition I without taxes b. M&M Proposition I with taxes c. M&M Proposition II without
Chapter 07 Quiz A Student Name _ _ 1.
Student ID _
A semi-annual corporate bond has a face value of $1,000, a yield to maturity of 6.9 percent, and a coupon rate of 6.5 percent. The bond matures 8 years from today. This bond: a. pays interest payments of
Chapter 11 Quiz A Student Name _ _ 1.
Student ID _
Which one of the following statements is correct? a. A project is at the cash break-even level of sales when the net present value of the project is equal to zero. b. Hard rationing exists when a firm all
Chapter 09 Quiz A Student Name _ Use the following information to answer questions 1 through 4.
Student ID _
You are analyzing a proposed project and have compiled the following information: Year Cash flow 0 -$135,000 1 $ 28,600 2 $ 65,500 3 $ 71,900 Requ
1.
award:
4.45 out of
5.00 points
Consider the following information:
Project
A
B
C
C0
6,100
1,400
3,900
C1
+2,100
0
+2,100
Cash Flows, $
C2
C3
+2,100
+2,800
+1,000
+3,100
+3,000
+4,100
C4
0
+4,100
+6,100
a. What is the payback period on each of the above
Chapter 08 Quiz A Student Name _ _ 1.
Student ID _
The Morgan Co. has 750,000 shares of stock outstanding with a market price of $41.84 a share. You currently own 46,500 shares. The company has three open positions on their board of directors. You want to
1.
award:
3.34 out of
5.00 points
Mr. Art Deco will be paid $170,000 one year hence. This is a nominal flow, which he discounts at an 10%
nominal discount rate:
PV =
170,000
= 154,545
$
1.10
The inflation rate is 2%.
Calculate the PV of Mr. Decos payment
1. Pharmecology is about to pay a dividend of $2.00 per share. Its a mature company, but future
EPS and dividends are expected to grow with inflation, which is forecasted at 3.50% per year.
The nominal cost of capital is 10.25%.
a What is Pharmecologys cu
Brealey Principles 12e
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Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
Payment in one
FIN 325
Intermediate Finance
Professor: Tim Trombley
Organization of Slides
Every chapter ends with a Key Concepts
slide
It lists the concepts that you are expected to know
for exams & quizzes
2
Todays Lesson
1.
2.
3.
4.
5.
Definition of Corporate Finan
Chapter 4: The Value of Common Stocks
1.
a.
True. This is a condition for equilibrium in well-functioning capital markets.
All stocks in a particular risk class must offer the same rate of return. If a certain stock,
for example, is priced above others in
Chapter 3: Valuing Bonds
1.
2.
a.
Does not change. The coupon rate is set at time of issuance.
b.
Price falls. Market yields and prices are inversely related.
c.
Yield rises. Market yields and prices are inversely related.
a.
If the coupon rate is higher
Appendix 3.
Algebra Review
Working with exponents
The following rules are often applied to mathematical expressions representing economic
concepts.
When working with ratios, a variable can be transferred from the numerator to the
denominator (or from the
Homework 1 Solutions (Introduction to Corporate Finance and Governance of the
Firm)
5.
Separation of ownership and management typically leads to agency problems,
where managers prefer to consume private perks or make other decisions for the
ir private ben
Tax issues with coownership
Co-ownerships
Joint Tenancy w/ROS
Tenancy in Common
Community Property (btw spouses)
Community Property w/ROS
Tenancy by the Entirety (btw
spouses, used in NY)
Joint Tenancy w/ROS
Upon the death of one of the joint tenants, the
FINANCE FORMULAS
Calculate the Number of Payments:
Convert Interest Rate Compounding Bases:
Calculate Effective Interest Rate:
Calculate the Future Value of a Single Sum:
Calculate the Future Value with Compounding
Calculate the Future Value of a Cash Flo
FIN 325
Chapter 6
Making Investment Decisions with the NPV
Rule
Professor: Tim Trombley
Todays Lesson
Well review 4 rules for how to create the cash flows
from a project
How to develop a pro-forma
How to use Equivalent Annual Annuities to value a
proje
FIN 325
Chapter 7
Introduction to Risk and Return
Professor: Tim Trombley
Todays Lesson
How risk and return are measured in capital markets
First, well look at measurements for individual stocks
or individual projects
Then, well look at risk and return
FIN 325
Chapter 3
Valuing Bonds
Professor: Tim Trombley
Todays Lesson
What is a bond?
Important bond features
How do bond values fluctuate?
The basics of the yield curve
Bond ratings
What is a bond?
A bond is a debt instrument that specifies
future
FIN 325
Chapter 4
The Value of Common Stocks
Professor: Tim Trombley
Todays Lesson
A value-based approach to stock prices
We will not review technical valuation in this class this is corporate
finance!
How stock prices depend on future dividends and di
Brealey Principles 12e
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Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
Play cost
$100
Brealey Principles 12e
Pr 8-1
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Assumptions and other problem notes are displayed at the very bottom.
Input variables:
Treasury bills
Brealey Principles 12e
Pr 4-3
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Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
Dividend
Sale
Brealey Principles 12e
Pr 3-3
All input values are shown in yellow. Only these values need changed to review algo versions.
Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
Date 1
Coupon
Brealey Principles 12e
Pr 9-2
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Answers are displayed in red.
Assumptions and other problem notes are displayed at the very bottom.
Input variables:
Debt weight
In
ANNUITY
Present Value and System of Four Annuity Variables
Inputs
Payment
Discount Rate / Period
Number of Periods
Present Value
Annuity
$80.00
8
6.0%
6
5
5
$80.00
$336.99
6
$40.00
$140.00
$120.00
$100.00
Cash Flows
$60.00
Present Value of
Each Cash Flow