Chapter 8 Cost of Capital 122
What Is the Best Proxy for the Risk Free Rate?
While three month treasury bills have been generally used as proxies for the risk free rate,
long term treasury bonds are gaining support, primarily because they, like s
Chapter 2 Markets, Value and the Firm 16 3
that this is nothing more than the NPV criteria for capital budgeting introduced in a common / ,> 1
sense way. )_ H
Because estimating the value of the cash ows of a project is integral to wealth creation
Finding the Required Rate of Return for an Investment
Risk and Return
The trade-off between risk and return is almost intuitive: We instinctively understand
that if we are going to invest in a bond of United Airlines that we would do so only if we
Chapter 4 Time is Money
7. An annuity has a nite number of cash ows, whereas a perpetuitys cash flows go on
forever, at least conceptually. Annuities due have payments at the beginning of each period. .
Ordinary annuities have payments at the end of ea
Decomposition of Risk
There are lots of ways of sub-dividing people. For example, there are men and women; old and young;
ethnicity; race; language-spoken; intelligence; height; etc. etc. . Risk is the same thing. When you hear
someone speak of risk, it c
Calculator Keystrokes for the TI Business Analyst Calculator
Note that I did not tend to round here. Also, you can refer to your calculators
Here are a couple of general things you should do with your calculator.
First, set your register to
Chapter 1 A Financial Model of the Corporation
Answers To Questions
1. Managers are employees of stockholders, the corporation's owners. The job of managers is to
maximize the wealth of shareholders.
a) Fixed claims are legally-enforced. If they are no
Chapter 5 Time ii'cntre zilppi'icnrfem': Security Vmunon and Expected Return 69
maturity-matching financiai rule of thumb.
Solving For Expected Returns
The expected return for a share of stock, the yields to maturity for a bond, and the internal
rate of r
Chapter 1- Time is fwoney 47
Q'Wull 113% ii
This appendix begins by setting, out a tow hints that will help students avoid common
mistakes. These include setting, one s calculate: to show more than two places behind the
decimai. 17 his