Project Analysis
Chapter 10
FIN 415
Capital Investments
Items for Consideration
Capital Budget A list of investment projects under consideration by a firm
determine the shape of business 10-20 years in the future
carry high price tag
appropriation requ
Leverage and Asset Betas Partial Recap
Consider borrowing money at a fixed interest rate, and investing the money at an uncertain rate
of Return on Assets.
-What would underpin the term favorable (or unfavorable) financial leverage?
-When you borrow money
Capital Structure Partial Recap
Besides debt and equity holders, whose claim to the firms cash flow is impacted when financial
leverage is changed?
Does it make economic sense to talk about a companys being 100% financed with debt; equity?
If RD and RE st
Finance Major and Corporate Finance
Business Finance
FIN 415/416
Corporate Finance
Theory and Examples
~BMA 1st half
FIN 468
Corporate Financial Policy
Structured Applications
~BMA 2nd half
Financial Intermediation
FIN 417
Business Valuation
In-depth R.W.
16. a.
We have a special case where the portfolio is equally weighted, so we can sum the returns of
each asset and divide by the number of assets. The expected return of the portfolio is:
E(Rp) = (.121 + .036) / 2
E(Rp) = .0785, or 7.85%
b.
We need to fin
Question 1, Part 1
1
1
1.034
a) PV40 = 200 K 0.051
.034
40
= $221,241
b) In this problem, we are getting 36 payments, since we get the first payment at t=45 and the last
payment at t=80. Notice that the annuity calculation gives us the present value a
Assignment 2 Solutions
Question 1
a) The monthly interest rate is 18%/12 = 1.5%.
b)
EAY = (1 + 18% / 12)12 1 = 19.56%
c) The present value of your credit card monthly expenses is:
=
1
200
1
= 4000.081
(1 + 0.015)24
0.015
The future value at t=24 of th
Chapter 10
1.
The return of any asset is the increase in price, plus any dividends or cash flows, all divided by the
initial price. The return of this stock is:
R = [($73 64) + 1.20] / $64
R = .1594, or 15.94%
4.
The total dollar return is the change in p
Question 2
Note: Data for this question is to the right.
Part (a)
MSFT
Annual Average Ret
Annual Stdev Ret
GE
0.0993
0.1713
S&P
0.1978
0.1659
0.0957
0.1111
Part (b)
Correlation Matrix
MSFT
MSFT
GE
S&P
GE
1
0.454
0.590
S&P
1
0.730
1
Part (c) and (d)
weight
Lecture 5 Study Guide (Protein)
How many total amino acids are there and how many are essential?
histidine, isoleucine, leucine, lysine, methionine, phenylalanine, threonine, tryptophan
and valine.
What are the two food groups (from the pyramid) that hav
Lecture 6 Study Guide (Digestion and Absorption)
Identify the sphincters locations
Pyloric Cardiac/lower esophageal Oddi Ileocecal What
4 hormones are involved in the digestion of fat, protein, and carbohydrates?
Gastrin
Secretin
Cholecystokinin (CCK)
Ga
Lecture 7 Study Guide (Life Cycle Nutrition)
For infants, what are the potential micronutrient deficiencies?
Iron
vitamin D - only an issue if breastfed
Fluoride - depends on fluoride content of water, adequate stores for the first 6 months,
more of an
Q. A start-up is not expected to pay its first dividend until four years from today. That first
dividend of $2 is then expected to grow at a 2% rate for the very long run. Your required return is
10%.
a. $_= the market price of the share today with the sp
Name _
Student ID _
(PLEASE PRINT - LEGIBLY)
University of Kansas
School of Business
Finance 410
Investment Theory and Applications
Instructor: G. Bittlingmayer
Fall 2014
EXAM II
Part I Multiple Choice. Ten questions, 3 pts. each, 30 pts. in all.
Question
Equity Betas Partial Recap
Assume your investment portfolio returns 20% next year. For what two factors must you
account before judging that to be a good return?
What single economic factor most influences returns on U.S. Treasury Bills?
Why would you exp
The Value of Common Stocks
Chapter 4
FIN415
Topics Covered
How Common Stocks Are Traded
How Common Stocks Are Valued
Estimating The Cost Of Equity Capital
The Link Between Stock Price and Earnings
per Share
Valuing a Business by Discounted Cash Flow
How
How Corporations Issue
Securities
Chapter 15
FIN 415
Topics Covered
Venture Capital
The Initial Public Offering
Alternative Issue Procedures for IPOs
Security Sales by Public Companies
Rights Issue
Private Placements and Public Issues
Venture Capita
Risk and the Cost of Capital
Chapter 9
FIN 415
Topics Covered
Company and Project Costs of Capital
Measuring the Cost of Equity
Analyzing Project Risk
Certainty Equivalents - Another Way to
Adjust for Risk
Company Cost of Capital
A firms value can be sta
How to Calculate Present Values
Chapter 2
FIN415
Constant Growth Perpetuity
C1
PV0
r g
g = the annual growth rate of the cash flow
NOTE: This formula can be used to value a perpetuity at any point in
time.
C t 1
PVt
r g
Constant Growth Perpetuity
Exampl
Making Investment Decisions
with the Net Present Value Rule
Chapter 6
FIN 415
Topics Covered
Applying the Net Present Value Rule
Example - IM&C Fertilizer Project
Using the NPV Rule to Choose among
Projects
The Investment Timing Problem
The Choice be
Risk and Return
Portfolio Theory
and
the Capital Asset Pricing Model
Chapter 7 & 8
FIN 415
Topics Covered
Over a Century of Capital Market History in
One Easy Lesson
Measuring Portfolio Risk
Calculating Portfolio Risk
How Individual Securities Affect
Net Present Value and Other
Investment Criteria
Ch5
FIN 415
Topics Covered
A Review of The Basics
Payback
Internal (or Discounted-Cash-Flow) Rate of
Return
Choosing Capital Investments When
Resources Are Limited
NPV and Cash Transfers
Every possible
Risk and Return
Portfolio Theory
and
the Capital Asset Pricing Model
Chapter 7 & 8
FIN 415
Topics Covered
Over a Century of Capital Market History in
One Easy Lesson
Measuring Portfolio Risk
Calculating Portfolio Risk
How Individual Securities Affect
Valuing Bonds
Chapter 3 (Exclude pp.54-60)
FIN415
Fortune favors the prepared mind
Topics Covered
Using The Present Value Formula to Value
Bonds
How Bond Prices Vary With Interest Rates
Real and Nominal Rates of Interest
The Risk of Default
Bonds
Term
Capital Budgeting Partial Recap
Can you compute the Payback Period from a series of cash flows? Explain how the payback
techniques addresses:
-the time value of money?
-capital markets?
-cash flows after the project pays back?
-a criterion for making inve
Efficient Capital Markets Partial Recap
When testing whether the capital markets are efficient, why must we account for: (1) Movements
in the market? (2) Risk? (3) Costs?
If an investment strategy has an Expected NPV>0, why is it described as providing ab
Historic Returns and Risks
Will you be pleased if your portfolio returns 20% next year?
Will you be pleased if your portfolio returns 20% next year and the market is up 10%?
What do you need to account for when evaluating performance?
If you find a risk f
Financial Leverage Introduction
What are the two ways we can get financial leverage?
What does it mean to use financial leverage?
Who gets the benefit of using financial leverage?
What is the goal of financial leverage?
Financial Leverage Introduction
Wha
HSES: 269 Introduction to Exercise Science Review
Denitions:
Physiology, kinesiology, exercise science, etc.
Individuals:
Wt, GM, WKCMEHEEQOPCL mm, and Thomas
K. Cureton.
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