25. Building an Income Statement. Papa Roach Exterminators, Inc., has sales of $432,000, costs of
$210,000, depreciation expense of $25,000, interest expense of $8,000, and a tax rate of 35
percent. What is the net income for this firm?
Sales
Cost
Depreci
Chapter 11 - part 1
11.1 to 11.3
Return and Risk: The Capital Asset
Pricing Model
11-0
Key Concepts and Skills
Know how to calculate expected returns
Know how to calculate covariances,
correlations, and betas
Understand the impact of diversification
U
Lecture Outline
9.1 The Present Value of Common Stocks
9.2 Es1mates of Parameters in the Dividend Discount
Model
Quick reminder:
Balance Sheet Model of the Firm
Total Value of Assets:
Current Assets
Total Firm Value to Investors:
Current
Liabil
Introduction
to Financial
Management
1-0
Key Concepts and Issues
Know the basic types of financial
management decisions and the role of the
Financial Manager
Know the financial implications of the various
forms of business organization
Know the goal of fi
Chapter 8.1
Interest Rates and Bond Valuation
Key Concepts and Skills
Important bond features
Understand bond values and why they
fluctuate
Debt versus Equity
Debt
Not an ownership interest
No voting rights
Interest is tax-deductible
Creditors have leg
Ch 5: NPV and other decision
rules
Learning Objectives:
The net present value rule and why it is the
best decision criteria
The payback rule and its shortcomings
The internal rate of return and its strengths
and weaknesses
8-2
Lecture Outline
1 Net Pr
Chapter 4: Time value of
multiple cash flows
Be able to compute the future value of
multiple cash flows
Be able to compute the present value of
multiple cash flows
Be able to compute loan payments
Be able to find the interest rate on a loan
5-1
Key to
Chapter 11 part 2
11.4 to 11.9
Return and Risk: The Capital Asset
Pricing Model
11-0
Key Concepts and Skills 11.4 to
11.9
Understand the impact of diversification
Understand the systematic risk principle
Understand the security market line
Understand the
Inputs
Standard Deviation
Correlation Coefficient
30.00%
0.2
P o r t f o lio S t a n d a r d D e v ia t io n
Effect of Diversification
12
Key observation: Generally adding
more assets to portfolio lowers portfolio
risk (standard deviation). This is called
Internal Rate of Return
Most important alternative to NPV
Widely used in practice
Intuitively appealing
Based entirely on the estimated cash
flows
Independent of interest rates
8-2
IRR
Definition and Decision Rule
Definition:
IRR = discount rate that m
Interest Rates
Effective Annual Rate (EAR)
The interest rate expressed as if it were compounded
once per year.
Used to compare two alternative investments with
different compounding periods
Annual Percentage Rate (APR) Nominal
The annual rate quoted
III. Working With Financial Statements: Financial Statements Analysis and LongTerm Planning
1. Study Objectives
From this section:
Know how to standardize financial statements for comparison purposes
Know how to compute and interpret important financial r
UNIVERSITY OF MASSACHUSETTS BOSTON
SCHOOL OF MANAGEMENT
Accounting and Finance
MBA AF 620
Prof. Martin K. Konan
Financial Management
LECTURE NOTES
I. Introduction to Corporate (Financial) Management
1. Introduction (Study Objectives)
From this section:
Kn
IV. The Time Value of Money and Discounted Cash Flow Valuation
1. Study Objectives
From this section:
Be able to compute the future value of an investment made today
Be able to compute the present value of cash to be received at some future date
Be able t
II. Financial Statements and Cash Flow
1. Introduction (Study Objectives)
From this section:
Understand the information provided by financial statements
Know the difference between book value and market value
Know the difference between accounting income
Online- MBA 620 Mid-Term Exam
Study Guide
Format: All multiple choice questions. There will be 30 to 35 questions. You
will have three hours to answer the questions.
*Study well Assignment-1 and Assignment-2 that are on the Blackboard.
*Study well example
Chapter 2 Practice Questions - Answers
11. a.
The accounting statement of cash flows explains the change in cash during the year. The accounting
statement of cash flows will be:
Statement of cash flows
Operations
Net income
$95
Depreciation
90
Changes in
Project-1: Capital Budgeting Simulation
Online -MBA AF 620
Objective: The purpose of the Capital Budgeting Simulation project is to explore
the problem of resource allocation within a corporation by looking at many projects
from the senior-management pers
FINANCE SIMULATION
CAPITAL BUDGETING PROJECT
New Heritage Doll Company was a private-held company, which represented approximately 8%
of the $3.1 billion U.S doll industry. In this project, we will assess the performance of the five
projects in the compan
Chapter 13
Risk, Cost of Capital, and Capital
Budge4ng
13-0
Key Concepts and Skills
Know how to determine a rms cost of
equity capital
Understand the impact of beta in determining
the rms cost of equity capital
Know how to determine the rms over