Answers to Concepts Review and Critical Thinking Questions 2. The recognition and matching principles in financial accounting call for revenues, and the costs associated with producing those revenues,
Chapter 6
Discounted Cash Flow Valuation
Issues:
Valuation of Multiple Cash Flows
Valuation of Level Cash Flows
Understanding how interest rates are quoted
6.1 Multiple cash flows
Present value of mul
Chapter 13
Risk and Return
Diversification effects
Systematic risk principle
SML and CAPM
13.1 Expected Returns and Variances
Expected Returns
Expected returns are based on the probabilities of possib
Chapter 11
Project Analysis and Evaluation
Evaluating NPV Estimates: What-If Analyses
Break-Even Analysis
11.1 Evaluating NPV Estimates
NPV estimates are only estimates:
A positive NPV is a good star
Chapter 7
Bond Valuation
Issues:
How to value Bonds
Interest rate risk and default Risk
Effects of inflation on interest rates
7.1 Valuing Bonds
Bond Definitions
Par value (face value):
The principa
Chapter 8: Stock Valuation
Issues:
Valuing stocks by dividend growth models and multiple
approaches
Features of common and preferred stocks
8.1 Valuing stock: Dividend discount model
Cash Flows to Sto
Chapter 12
Lessons from capital market history
Historical risk-return tradeoff
Efficient Market Hypothesis
RiskReturn Tradeoff
o Two key lessons from capital market history:
There is a reward for bea
Chapter 3
Financial Statement Analysis
Issues:
Standardized financial statements for comparison purposes
Computing and interpreting financial ratios
3.1 Standardized Financial Statements
Hard to dire
BUSS207 Chapter 5
Practice Problems
1. (a) Suppose you need $15,000 in 3 years. If you can earn 6% annually, how much do you need to
invest today?
(b) If you could invest the money at 8%, would you ha
BUSS207 Chapter 6 Practice Problems
1. Answer following questions.
(a) An investment will provide you with $100 at the end of each year for the next 10 years. What is the
present value of that annuity
Chapter 5
Time value of Money
Main Issues:
Future Value and Compounding
Present Value and Discounting
5.1 Future Values and compounding
Future value: the amount of money an investment will grow to ov
Chapter 9
Net Present Value and
Other Investment Criteria
Understand the net present value rule and why it is the best
decision criteria
Understand other investment criteria and their weaknesses
Capit
A
1
2
3
4
5
6
7
8
9
10
11
12
13
B
C
D
E
F
Your Name:
Chapter 2 Mini Case
Situation
Jenny Cochran, a graduate of The University of Tennessee with 4 years of experience as an equities analyst, wa
assist
Answers to Concepts Review and Critical Thinking Questions
1. a. b. c. d. If inventory is purchased with cash, then there is no change in the current ratio. If inventory is purchased on credit, then t
Answers to Concepts Review and Critical Thinking Questions
4. The general method for valuing a share of stock is to find the present value of all expected future dividends. The dividend growth model p
Answers to Concepts Review and Critical Thinking Questions
1. A payback period less than the projects life means that the NPV is positive for a zero discount rate, but nothing more definitive can be s
Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will be used in a project. The relevant cost is w
Answers to Concepts Review and Critical Thinking Questions 2. With a sensitivity analysis, one variable is examined over a broad range of values. With a scenario analysis, all variables are examined f
CHAPTER 15 B-1 Answers to Concepts Review and Critical Thinking Questions 1. 3. It is the minimum rate of return the firm must earn overall on its existing assets. If it earns more than this, value is
Financial Management
Financial Statements
and
Financial Cash Flows
Fall 2017
Woochan Kim
The Balance Sheet
(Statement of Financial Position)
Balance Sheet
Book Value
of Liabilities
Book Value
of Asset
Financial Management
Objective of a Corporation
Fall 2017
Woochan Kim
What is the objective of a
corporation?
Creating maximum value
for all the stakeholders
Who are the stakeholders of a
firm?
Shareh
Financial Management
Corporations
Fall 2017
Woochan Kim
What is a corporation?
Latin origin = corpus
(a group acting as one body)
An artificial person
with many of the legal rights
of a biological per