We suggest David using the $500,000 savings solely to support Louis' education first. Conducting a sensitivity test on the rate applied to the savings in 4 years: (Number of Years: 4, Present Value: $500,000) Interest Rate 0% 1% 2% 3% 4% 5% 6% 7% 8%
Chapter 10
MAKING CAPITAL
INVESTMENT DECISIONS
1
Chapter Outline
Project Cash Flows: A First Look
Incremental Cash Flows
Pro Forma Financial Statements and Project Cash Flows
More about Project Cash Flow
Alternative Definitions of Operating Cash Flow
Some
Chapter 16
FINANCIAL LEVERAGE
AND CAPITAL
STRUCTURE POLICY
1
Chapter Outline
The Capital Structure Question
The Effect of Financial Leverage
Capital Structure and the Cost of Equity Capital
M&M Propositions I and II with Corporate Taxes
Bankruptcy Costs
O
Chapter 13
RETURN, RISK, AND
THE SECURITY
MARKET LINE
1
Chapter Outline
Expected Returns and Variances
Portfolios
Risk: Systematic and Unsystematic
Diversification and Portfolio Risk
Systematic Risk and Beta
The Security Market Line
2
Dollar Returns
Total
Chapter 8 Exercises
1. Stock Values [LO1] The next dividend payment by Halestorm, Inc., will be $2.04 per
share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. If
the stock currently sells for $37 per share, what is the re
Chapter 7 Exercises
Student ID No.: _
1. Bond Yields [LO2] Bourdon Software has 6.4 percent coupon bonds on the market
with 18 years to maturity. The bonds make semiannual payments and currently sell for
106.8 percent of par. What is the current yield on
Chapter 09 - Behavioral Finance and Technical Analysis
CHAPTER NINE
BEHAVIORAL FINANCE AND TECHNICAL ANALYSIS
CHAPTER OVERVIEW
The chapter describes the developing area of behavioral finance and describes some types of behavior that
may lead to price move
Chapter 07 - Capital Asset Pricing and Arbitrage Pricing Theory
1
CHAPTER SEVEN
CAPITAL ASSET PRICING AND ARBITRAGE PRICING THEORY
CHAPTER OVERVIEW
This chapter first presents the capital asset pricing model (CAPM), an equilibrium pricing model derived
fr
Chapter 08 - The Efficient Market Hypothesis
1
CHAPTER EIGHT
THE EFFICIENT MARKET HYPOTHESIS
CHAPTER OVERVIEW
This chapter examines the concept of market efficiency. We are asking whether securities are, on
average, fairly priced according to the benefits
Chapter 14 - Financial Statement Analysis
CHAPTER FOURTEEN
FINANCIAL STATEMENT ANALYSIS
CHAPTER OVERVIEW
This chapter discusses the income statement, balance sheet and the statement of cash flows. The textbook
emphasizes the differences between accounting
Chapter 10 - Bond Prices and Yields
CHAPTER TEN
BOND PRICES AND YIELDS
CHAPTER OVERVIEW
This chapter presents various types of bonds, bond characteristics, bond safety and bond ratings, and
pricing and yield calculations. In your first finance course, you
Chapter 11 - Managing Bond Portfolios
1
CHAPTER ELEVEN
MANAGING BOND PORTFOLIOS
CHAPTER OVERVIEW
This chapter discusses active- and passive- bond-portfolio-management strategies. Much of the chapter is
devoted to explaining interest rate risk management.
Chapter 06 - Efficient Diversification
CHAPTER SIX
EFFICIENT DIVERSIFICATION
CHAPTER OVERVIEW
In this chapter, the concept of portfolio formation moves beyond the risky and risk-free asset
combinations of the previous chapter to include combinations of tw
Chapter 01 - 4 - Introduction
CHAPTER 1 4
Introduction:
In Chapter 1 you are introduced to the general concept of investing, which is to forgo
consumption today so that future consumption can be preserved and hopefully increased in the
future. Real assets
Chapter 14
COST OF CAPITAL
1
Chapter Outline
The Cost of Capital: Some Preliminaries
The Cost of Equity
The Costs of Debt and Preferred Stock
The Weighted Average Cost of Capital
Divisional and Project Costs of Capital
2
Why Cost of Capital Is Important
W
FIN2010 Financial Management Test 2 (April 26, 2010) Student: _ Part I: Multiple Choice Questions (50%) 1. Gloria's Boutique recently paid $1.65 as an annual dividend. Future dividends are projected at $1.68, $1.72, $1.76, and $1.80 over the next four yea
You have $10,000 to invest. You will need the money
you expect to earn 8% per year. How much will you h
What are you looking for?
Use the FV formula:
FV(rate,nper,pmt,pv)
Compute
(Notice that the spreadsheet has the same sign conv
the calculators with pos
Chapter 5
INTRODUCTION TO
VALUATION: THE TIME
VALUE OF MONEY
1
Chapter Outline
Future Value and Compounding
Present Value and Discounting
More about Present and Future Values
2
Basic Definitions
Present Value earlier money on a time line
Future Value late
Chapter 5 Exercises
Student ID No.: _
1. Simple Interest versus Compound Interest [LO1] First City Bank pays 8 percent simple
interest on its savings account balances, whereas Second City Bank pays 8 percent interest
compounded annually. If you made a dep
Chapter 1
INTRODUCTION TO
CORPORATE FINANCE
1
Chapter Outline
Corporate Finance and the Financial Manager
Forms of Business Organization
The Goal of Financial Management
The Agency Problem and Control of the
Corporation
Financial Markets and the Corporati
Rule of 72
Earlier, we discussed the Rule of 72, a useful approximation for many interest rates and
periods for the time it takes a lump sum to double in value. We are only concerned with
the time it takes money to double, so the dollar amounts are irrele
Chapter 6
DISCOUNTED CASH
FLOW VALUATION
1
Chapter Outline
Future and Present Values of Multiple Cash
Flows
Valuing Level Cash Flows: Annuities and
Perpetuities
Comparing Rates: The Effect of Compounding
2
Multiple Cash Flows FV
Example 6.1
You think you
Chapter 7
INTEREST RATES AND
BOND VALUATION
1
Chapter Outline
Bonds and Bond Valuation
Bond Ratings
2
Differences Between Debt and Equity
Debt
Not an ownership interest
Creditors do not have voting
rights
Interest is considered a cost
of doing business
You are going to borrow $250,000 to buy a house. W
monthly payment be if the interest rate is .58% per m
borrow the money for 30 years?
PV =
NPER =
RATE =
250,000
360 (30 years * 12 mo
0.58% (Same as .0058)
Monthly Payment =
($1,656.55)
Formula
=PMT(B5,B4
Year
Sales
Variable Costs
Gross Profit
Fixed Costs
Depreciation
EBIT
Taxes
Net Income
Pro Forma Income Statements
0
1
200000
125000
75000
12000
30000
33000
11220
21780
Cash Flows
Operating Cash Flow
Changes in NWC
Net Capital Spending
Cash Flow From Asset