What are some differences in the analysis of a new capital-expenditure project versus that for a
When a projects cash flows are calculated, interest charges are not deducted. Why? Explain.
What are the different types of risk
Week 4 Discussion
How do you define and measure risk?
What are the different types of risk affecting the securities and portfolios held by individuals and
What are the different types of risk affecting the operations of corporations?
The Cost of Equity:
Required Rate of
FIN 370 Lecture 4
1. DDM(Dividend Discount Model/the Gordon Growth Model)
2. CAPM Model
Suppose a firm is expected
to increase dividends by 20%
in one year and by 15% for
Principle of Investment
Set Your Financial Goals
Just as in other aspects of your life, setting financial goals is a
tried-and-true way to reach those goals.
You can create a list of your financial goals on your own or
you can work with an investme
Determinants of Intrinsic Value: The Cost of
profit after taxes
in operating capital
Free cash flow
(1 + WACC)1 (1 +
Brent Crude Oil
A simple calculation
Portland Spring Water: $ 0.35/500ml, or $650/ton
Crude Oil: $ 29.5/barrel, or $250/ton
Price of Spring Water > 2* Crude Oil ?!
A bond that matures in six years has a par value of $1,000, an annual coupon payment of
$80, and a market interest rate of 9%. What is its price?
Years to Maturity
Going rate, rd
Value of bond =
A bond that matures
Go to the Yahoo Finance website: http:/finance.yahoo.com/,
then search the tickers of your TWO stocks
AND ALSO the market index(^GSPC)
Then click the Historical Prices
on the Right Column of stock page
Select the correct date range as required by project(
Time Value of Money and Financial Calculator
1. In January 2007, the average price of an asset was $27,658. 7 years earlier, the average
price was $21,408. What was the annual increase in selling price?
Example Introductory Speech
Statement of Specific Purpose: <fill in speech topic here>I want my audience to
understand the three characteristics I share with a can of Sprite.
Attention-Getter: <Open with a very brief
Case Study: Nike, Inc
Financial Statement and Cost of Capital
FIN343 Spring 2016 Marshall University
What is the WACC and why is it important to estimate a firms cost of
capital? Do you agree
with Joanna Cohens
Why or why n
Match each corporate finance function with its related activities:
Selecting projects based on perceived risk and expected return.
Chapter 1The Scope of Corporate Finance
1. _ activities allow corporations to raise capital by selling stock to investors.
Correlation coefficient(r)-measures strength & direction of linear relationship
b/w x & y
or r= (sign of slope)
is b/w -1 and +1
= the pop. Correlation coefficient
=0 no lin. Relationship b/w x & y
& df= n-
QMB Test 2 Extra Notes
Assumptions/Conditions for a CI
Assume the sample is randomly selected and/or representative of the
If n 30, we assume that the population from which the data came is
SD doesnt exist for yes/no
Hypothesis Testing: testing unknown parameters (assume null hypothesis is true)
Step#1-2:get Ho(at most or at least or is/equal) & H1(greater than or less than
or is not)
One tail (upper) test
One tail (lower) test
H0: or <
Population: all people/things of interest Parameter: numerical characteristic of a pop (known)
Sample: small random subset of pop Statistic: numerical characteristic of a sample (known)
Summarizing data: measures if center and measures of spread (aka vari
These slides are for the private use of students in my finance courses at
Fayetteville State University only. Any other uses, including copying,
sharing, circulating, or posting to the internet or other networks are strictly
Fayetteville State University
School of Business and Economics
Department of Accounting, Finance, Healthcare and Information Systems
Principles of Finance (FINC 311-02)
This homework assignment is
TIME VALUE OF MONEY PROBLEMS
1. In how many years $100 will become $265 if k = 11%?
9.33844 9.34 years
2. In how many years will an amount double if k = 7.6%?
3. In how many years will an a
1. Suppose Manij needs $ 138,000 to buy a new kitchen at the end of 2017. Assume that
Manij uses an account earning 2.45% yearly. What does Manij have to deposit at the
beginning of 2012, assuming monthly compounding?
I: BASIC MATHEMATICAL TOOLS
As the reader will see, the study of the time value of money involves substantial use of variables and numbers that
are raised to a power. The power to which a variable is to be raised is called an exponent. For ins
Summer A 2010
1. Suppose 25 years ago your mother deposited $ 14,500 in an account earning 8% each year. Obtain todays value,
assuming semiannual compounding.
e. None of the ab
Examination I Spring 2012
1. Suppose Manij needs $ 138,000 to buy a new kitchen at the end of 2017. Assume that Manij uses an account earning 2.45%
yearly. What does Manij have to deposit at the beginning of 2012, assuming monthly compounding?
THE TIME VALUE OF MONEY WITH MORE THAN ONE COMPOUNDING PER YEAR
Unlike the previous section where the compounding interval was annual (compounded annually), we will now
assume that the compounding intervals are purely arbitrary, say, up to m t
Examination I Version A
1. You inherited $55,000 from Auntie Paris. What is the maximum amount you can withdraw each year forever if the
interest rate is 7.5%?
e. None of the above
2. Suppose you need
Hedging Strategies Using Futures
Under what circumstances are (a) a short hedge and (b) a long hedge appropriate?
A short hedge is appropriate when a company owns an asset and expects to sell that asset in the
Mechanics of Futures Markets
Distinguish between the terms open interest and trading volume.
The open interest of a futures contract at a particular time is the total number of long positions
outstanding. (Equivalently, it is the to