FM212
Qualitative Questions
Michalmas Term

Assumptions of CAPM
1. Investors have preferences over mean & variance of wealth
2. Perfect information
3. Frictionless markets
Alternatives: e.g. Fama French Model: rrf: considers market, size, book to market
FM212 Quiz Questions
Quiz 1: Capital Budgeting
A firm has a generalpurpose machine, which has a book value of $300,000 and is sold for $500,000 in the
market. If the tax rate is 35%, what is the opportunity cost of using the machine in a project?
Select
Quiz 1:
Rate of return= discount rate = hurdle rate = opportunity cost of capital
NPV rule: accept investments that have +ve NPV
Financial goal of corporation is NOT to maximize profits
If the present value of $480 to be paid at the end of one year is $40
FM212 Quiz Questions
Quiz 1: Capital Budgeting
A firm has a generalpurpose machine, which has a book value of $300,000 and is sold for $500,000 in the
market. If the tax rate is 35%, what is the opportunity cost of using the machine in a project?
Select
Quiz 1:
Rate of return= discount rate = hurdle rate = opportunity cost of capital
NPV rule: accept investments that have +ve NPV
Financial goal of corporation is NOT to maximize profits
If the present value of $480 to be paid at the end of one year is $40
FM212
Qualitative Questions
Michalmas Term

Assumptions of CAPM
1. Investors have preferences over mean & variance of wealth
2. Perfect information
3. Frictionless markets
Alternatives: e.g. Fama French Model: rrf: considers market, size, book to market
FM212 Solutions to Class Exercises Lent Term 2009/10
Solutions to Class Exercise 10
1. Hedging & MM Modigliani and Miller would say that both financing and risk management are irrelevant in perfect capital markets because any changes in capital structure
FM212 Solutions to Class Exercises Lent Term 2009/10
Solutions to Class Exercise 1
Mr. Cyrus Clops 1. a. Because Project A requires a larger capital outlay, it is possible that Project A has both a lower IRR and a higher NPV than Project B. (In fact, NPVA
FM212 Principles of Finance Class Assignments MT 2010/11 Class 2 (Chapters 3 and 4.5)
6. You have just received a windfall from an investment you made in a friends business. He will be paying you $10,000 at the end of this year, $20,000 at the end of the
FM212/FM492 Principles of Finance
Revision for 2010 final exam
Review for final: outline
Time and place Exam format Topics covered Dont forget your calculator Overview of topics Formulas Exam taking strategies Office hours
FM212 Principles of Corporate F