Making Capital Investment Decision
Continue Chapter 9
Evaluating NPV Estimates
NPV estimates are just that estimates !
A positive NPV is a good start now we
need to take a closer look
Forecasting ri
BUS 350 Principles of Finance
EXAM 2 (Due Tuesday 11/22/11)
FALL 2011
Name: _
ID:
_
Instruction:
Submit your own copy. Working with your cohorts is highly recommended.
Question #1
You are working for
Proofs for the Internal and Sustainable Growth Formulasi
Internal Growth Rate proof when there is no External Financing Needed (EFN),
meaning we use only internal funds to grow. It is typically viewed
Discounted Cash Flow
Valuation
Chapter 5
5. Future Value with Multiple Cash Flows
CF of $2,000 at the end of each year for five years. Using a 10% rate
of interest, what will this cash flow be worth a
BUS 350 Final Exam Review
(Chapters 11-14)
Chapter 11
1) You own the following portfolio of stocks. What is the weight of each stock?
What is the expected return of the entire portfolio?
Stock
Price
A
Arithmetic vs. Geometric
Chapter 10 (continued)
Mean
Arithmetic average return earned in an
average period over multiple periods
Arithmetic average, RA = (R1 + R2 + + RT) / T
Geometric average the av
Principles of Finance 350
Lectures 404 and 405
Richard D. Marcus
University of Wisconsin
Milwaukee, Lubar
School of Business
Fall 2014
[email protected]
Put Finance 350 in
the subject matter of
email
Capital Budgeting and Capital Rationing
Issues
Advantages of IRR
Knowing the IRR is intuitively appealing
It is a simple way to communicate the value of a
project to someone who doesnt know all the
Chapter 3 continued
The DuPont Identity
ROE = NI / TE
ROE = PM * TAT * EM
PM
TAT
EM
= Basic Formula
= DuPont Identity
= Net Income / Sales
= Sales / Total Assets
= Total Assets / Total Equity
NI
Financial Statements, Taxes,
and Cash Flows
Chapter 2 continued
Publicly traded companies must file regular reports
with the Securities and Exchange Commission
(SEC).
These reports are usually filed
Continue Chapter 7 on Stocks
Using the DGM to Find R
Start with the DGM:
D0 (1 g)
D1
P0
R -g
R -g
rearrange to solve for R
D0 (1 g)
D1
R
g g
P0
P0
Div Yield + Growth Rate = Div Yld + Capital Gain Yl
Bond Features, Types, and Yield
Curves
The Bond Chapter 6 Continued
Indenture
Contract between the company and the
bondholders (A Deed of Trust)
The basic terms of the bonds
The total amount of bon
Leverage and
Capital Structure
Chapter 13
Capital restructuring involves changing the
amount of leverage a firm has without changing
the firms underlying assets
Q: Can using more debt or more equity
BUS 350 Final Exam Review
(Chapters 11-14)
Chapter 11
1) You own the following portfolio of stocks. What is the weight of each stock? What
is the expected return of the entire portfolio?
Stock
Price
A
Vol 3, No. 1,
Spring 2011
Page 43~60
Hands in the Cookie Jar?
The Case of Management Buyouts1
Kai Chen,a
Yong-Cheol Kim,b
Richard D. Marcus,b
a. Tillman School of Business, Mount Olive College, Mount
An Optimal
Capital Structure?
Chapter 13 continued from Tuesday last week
Case I Last class assumes
No corporate or personal taxes
No bankruptcy costs
Case II Assumes
Corporate taxes, but no pers
Internal and Sustainable Growth Rates in the
Presence of Scale Economies
Richard D. Marcus, Ph.D.
Associate Professor of Finance
Lubar School of Business
University of Wisconsin Milwaukee
Lubar Hall R
350 Final in Principles of
Finance
Se/Lc
404
405
Date
Dec13
Dec 13
Day
Sat.
Sat.
Time
7:30-9:30am
7:30-9:30am
Enrolled Room and Capacity
127
LAP N103 Last Name A through R (98)
LAP N101 Last Name S th
The Cost of Capital
Chapter 12
We know that the return earned
on assets depends on the risk of
those assets
The return to an investor is the
same as the cost to the
company
Our cost of capital pro
Midterm 1 Review Sheet
BUS ADM 350: Principles of Finance
Chapter 1: Introduction to Financial Management
A.
Business Finance three main areas of concern:
- Capital Budgeting
- Capital Structure
- Wor
Midterm 1 Review Sheet: SOLUTIONS
BUS ADM 350: Principles of Finance
Chapter 1: Introduction to Financial Management
A.
Business Finance three main areas of concern:
- Capital Budgeting
- Capital Stru
Risk and Return
Chapter 11
Expected returns are based on the
probabilities of possible outcomes
In this context, expected means average if
the process is repeated many times.
Pay $1 for a bet, then fl
Interest Rates and Bond Valuation
Objectives:
Chapter 6
Know the important bond features and bond types
Understand bond values and why they fluctuate
And next week we finish Chapter 6 on:
Understa
University of Wisconsin - Milwaukee
School of Business Administration
BUS ADM 350, Fall 2011, SEC 002, 32983, Quiz 2
Name
Student ID
Q1. Instructions: Write down your name and student ID on top of the
Chapter1
FourareasofFinance
CorporateFinance
Investments
FinancialInstitutions
International
FinancialManagementDecisions
CapitalBudgeting:Processofplanningandmanagingafirmslongterminvestments
Capital
Principles of Finance
Bus Adm 350,
Homework 4 (Solution)
Question 1
Bee Ware Company is presented with the following two mutually exclusive projects. The
required return for both projects is 17.5 perc
Principles of Finance
Bus Adm 350,
Instructor: Ujjal Chatterjee
Name:
_
ID:
_
Homework 4 (Due in Class)
Instructions:
Details need to be shown as you solve each question.
Round your results to 2 decim
Principles of Finance
Bus Adm 350, Oct 13, 2011
Instructor: Ujjal Chatterjee
Name:
_
ID:
_
Homework 3 (Due: Oct 20, 2011)
Instructions:
Details need to be shown as you solve each question for partial