CHAPTER 7
Making Capital Investment Decisions
Multiple Choice Questions:
I.
DEFINITIONS
INCREMENTAL CASH FLOWS
a
1. The changes in a firms future cash flows that are a direct consequence of accepting a project
are called _ cash flows.
a. incremental
b. st
CHAPTER 20
Cash and Liquidity Management
I.
DEFINITIONS
SPECULATIVE MOTIVE
a
1. The need to hold cash to take advantage of additional investment opportunities is
called the _ motive.
a. speculative
b. precautionary
c. transaction
d. float
e. compensating
CHAPTER 16
Raising Capital
I.
DEFINITIONS
VENTURE CAPITAL
a
1. The financing provided for start-up, often high-risk, private business enterprises is
called:
a. venture capital.
b. junk bonds.
c. flotation costs.
d. initial public offerings.
e. financial f
CHAPTER 7
Making Capital Investment Decisions
Multiple Choice Questions:
I.
DEFINITIONS
INCREMENTAL CASH FLOWS
a
1. The changes in a firms future cash flows that are a direct consequence of accepting a project
are called _ cash flows.
a. incremental
b. st
24. Assume that you are using the dividend growth model to value stocks. If you expect the
market rate of return to increase across the board on all equity securities, then you should also
expect the:
A. market values of all stocks to increase, all else c
6
Formulas
Discounted Cash Flow Valuation
1
Key Concepts and Skills
Be able to compute the future value of multiple
Be
cash flows
cash
Be able to compute the present value of multiple
Be
cash flows
cash
Be able to compute loan payments
Be able to find the
CHAPTER 17
Financial Leverage and Capital Structure Policy
I.
DEFINITIONS
HOMEMADE LEVERAGE
a
1. The use of personal borrowing to change the overall amount of financial leverage to
which an individual is exposed is called:
a. homemade leverage.
b. dividen
9
Net Present Value and Other
Net
Investment Criteria
Investment
1
Key Concepts and Skills
Be able to compute payback and discounted
Be
payback and understand their shortcomings
payback
Understand accounting rates of return and their
Understand
shortcomi
FE101: Chapter 1
Corporate Finance and
the Financial Manager
Chapter Outline
Introduction (Class 1)
1.1 Why Study Finance?
1.3 The Financial Manager
1.6 Financial Institutions
Corporations and Financial Markets (Class 10)
1.2 The Four Types of Firms
1.4 T
FE101: Chapter 1.3, 1.6
Chapter 3
Introduction to Finance
Time Value of Money:
An Introduction
FE101: Chapter 1
Corporate Finance and
the Financial Manager
Chapter 1 Finance Overview
Introduction (Class 1)
1.1 Why Study Finance?
1.3 The Financial Manager
FE101: Chapter 4
Time Value of Money:
Valuing Cash Flow Streams
Learning Objectives
Value a series of many cash flows
Value a perpetual series of regular cash flows called a
perpetuity
Value a common set of regular cash flows called an
annuity
Value b
CHAPTER 22
International Corporate Finance
I.
DEFINITIONS
AMERICAN DEPOSITORY RECEIPT
a
1. A security issued in the United States that represents shares of a foreign stock and
allows that stock to be traded in the United States is called a(n):
a. American
Risk, Return and Financial
Risk,
Markets
Markets
We can examine returns in the financial
We
markets to help us determine the appropriate
returns on non-financial assets
returns
Lessons from capital market history
There is a reward for bearing risk
The gre
8
Stock Valuation
1
Key Concepts and Skills
Understand how stock prices depend on future
Understand
dividends and dividend growth
dividends
Be able to compute stock prices using the
Be
dividend growth model
dividend
Understand how corporate directors are
FIN254
Assignment#3 (Based on Chapter 5)
Assignment#3
1. Irfan Shaheb has $7000 to invest. Because he is only 25 years old, he is not concerned about the
length of the investments life. What he is sensitive to is the rate of return he will earn on the
inv
FIN254
Assignment#8 (Based on Chapter 10)
Assignment#8
1. Consider the following income statement:
Sales
876400
Costs
547300
Depreciation 128,000
EBIT
?
Taxes (34%) ?
Net Income ?
Fill in the missing numbers and calculate OCF. What is the depreciation tax
FIN254: Assignment#4 (Based on Chapter 6)
FIN254:
1. Suppose Mr. Raju wants to be a millionaire in 30 years. How much does he have to
save each month if he can earn 12% annual return? How much does he have to save
each month if he starts saving ten years
FIN254
FIN254
Assignment#5 (Based on Chapter 7)
1. If a T-bill is currently paying 7.5% interest rate and average increase in price level
(inflation) is 3.5%, what is the approximate real rate of interest? The exact real rate?
2. Suppose the real rate is
FIN254
Assignment#7 (Based on Chapter 9)
Assignment#7
1. You are thinking about expanding your food business by building a new manufacturing
plant. The plant has an installation cost of $18 million which will be fully depreciated in
4years. If the plant h
CHAPTER 10
Making Capital Investment Decisions
I.
DEFINITIONS
INCREMENTAL CASH FLOWS
a
1. The changes in a firms future cash flows that are a direct consequence of accepting a
project are called _ cash flows.
a. incremental
b. stand-alone
c. after-tax
d.
CHAPTER 21
Credit and Inventory Management
I.
DEFINITIONS
TERMS OF SALE
a
1. The conditions under which a firm sells its goods and services for cash or credit are
called the:
a. terms of sale.
b. credit analysis.
c. collection policy.
d. payables policy.
10
10
Making Capital Investment
Making
Decisions
Decisions
1
Key Concepts and Skills
Understand how to determine the relevant
Understand
cash flows for various types of proposed
investments
investments
Be able to compute depreciation expense
Be
for tax
11
11
Project Analysis and Evaluation
1
Key Concepts and Skills
Understand forecasting risk and sources
Understand
of value
of
Understand and be able to do scenario
Understand
and sensitivity analysis
and
Understand the various forms of breakeven analy
7
Interest Rates and Bond Valuation
1
Key Concepts and Skills
Know the important bond features and bond types
Understand bond values and why they fluctuate
Understand bond ratings and what they mean
Understand the impact of inflation on interest rates
Und
FIN254
FIN254
Assignment#6 (Based on Chapter 8)
1. Unilever has just paid a dividend of TK 4.00 on its stock. The growth rate in dividends is
expected to be a constant 6% per year indefinitely. Investors require a 16% return on the
stock for the first thr