CHAPTER 10
The Fundamentals of Capital Budgeting
Critical Thinking Questions
10.1
Explain why the cost of capital is referred to as the hurdle rate in capital budgeting.
The cost of capital is the min
CHAPTER 8
Bond Valuation and the Structure of Interest Rates
Learning Objectives
1.
Explain what an efficient capital market is and why market efficiency is important to
financial managers.
2.
Describ
Chapter 16
Capital Structure Policy
Learning Objectives
1.
Describe the two Modigliani and Miller propositions, the key assumptions
underlying them, and their relevance to capital structure decisions.
Chapter 9
Stock Valuation
Critical Thinking Questions
9.1
Why does the market price of a security vary from the true equilibrium price?
Let us start by first defining the market equilibrium price of a
Chapter 7
Risk and Return
Learning Objectives
1. Explain the relation between risk and return.
2. Describe the two components of a total holding period return, and calculate this
return for an asset.
Chapter 4
Analyzing Financial Statements
Critical Thinking Questions
4.1
What does it mean when a companys return on assets (ROA) is equal to its return on
equity (ROE)?
When ROA equals ROE, it means
Chapter 21
International Financial Management
Learning Objectives
1.
Discuss how the basic principles of finance apply to international financial
transactions.
2.
Differentiate among the spot rate, th
CHAPTER 14
Working Capital Management
Learning Objectives
1.
Define net working capital, discuss the importance of working capital management,
and be able to compute a firms net working capital.
2.
De
Chapter 13
The Cost of Capital
Learning Objectives
1.
Explain what the weighted average cost of capital for a firm is and why it is often
used as a discount rate to evaluate projects.
2.
Calculate the
Chapter 13
The Cost of Capital
Critical Thinking Questions
13.1
Explain why the required rate of return on a firms assets must be equal to the weighted
average cost of capital associated with its liab
1
CHAPTER 15
How Firms Raise Capital
Learning Objectives
1.
Explain what is meant by bootstrapping and why it is important.
2.
Explain the role of venture capital firms in the economy, and discuss how
1
CHAPTER 18
Business Formation, Growth, and Valuation
Learning Objectives
1.
Explain why the choice of organizational form is important, and describe two
financial considerations that are especially