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7 Cards in this Set
- Front
- Back
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What happens to the cost of debt when a company is less creditworthy? |
Cost of debt increases |
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What happens to cost of equity when the risk is high at a bio tech? |
Your cost of equity increases. Increase risk = increase discount rate |
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What is the IRR? What do you compare it with? |
The effective compounded interest rate on an investment. IRR is the discount rate in which NPV = 0 You compare it to your WAAC. IRR >WAAC then invest IRR < WAAC then do NOT invest |
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If your Discount rate for an investment increases then it means you have better options else where and the value of the firm decreases to you. |
, |
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Firm Value=CF/(r-g) |
, |
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What make let’s say 10% a good return? |
depends: What is the risk or the investment? What other opportunities do you have to invest in? |
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What does discount rate mean? |
It is my opportunity cost or my target yield. |
