Fil 240 Exam 2

Front 1

When calculation risk of return when the st. deviation is a lower #...

Back 1

less flexabilty

Front 2

Risk and return
what is the coefficent of variance calculate

Back 2

*used for examining avaibility of sales $

Front 3

risk and return
beta =

Back 3

the slope of the line of the pairing companies

Front 4

When estimating WACC everything has...

Back 4

a cost
ex (raw materials, transporation, warehouse..)

Front 5

when calc WACC what does each letter stand for
D,E,Kd,Ke,Tc

Back 5

D=The market value of the firm’s net debt
E=The market value of the firm’s equity
kD=The pre-tax cost of debt (int. exp/avg. total debt)
kE =The market based opportunity cost of equity= required return (Ks = stocks)
Tc=The marginal tax rate for the firm= tax pay for an extra $ of income

Front 6

What is the discount rate for cash flow to equity holders?

Back 6

Ke in the WACC equation

Front 7

What is the discount rate for cash flow to debt holders?

Back 7

Kd, in the WACC

Front 8

when calc WACC from yahoo balance sheet
short term investments also =

Back 8

marketable securities

Front 9

When bonds pay int. semiannually-- what are the three modifications?

Back 9

1. div the coupon pmt by 2
2. multiply the years maturity by 2
3. divide the nominal int. rate by 2

Front 10

When is a bond more valuable

Back 10

when interest pmt come in faster

Front 11

at what point is the value of the bond= face value

Back 11

when the coupon rate = required rate of return

Front 12

What does it mean when the bond is selling at premium

Back 12

going rate > coupon rate
*more money then the face value

Front 13

wht does it mean when the bond is selling at a discount

Back 13

the bond is selling lower then face value

Front 14

what is it called if the bond is selling at face value

Back 14

bond is at par

Front 15

*** for bonds as the rate goes up....

Back 15

the bond value goes down!

Front 16

what are the assets as cash flow generators?

Back 16

FCF
operating cash flow
capital requirement

Front 17

what is incremental cash flow

Back 17

FCF with project- FCF w/o project
**contribution of the project

Front 18

opportunity cost of a project

Back 18

foregone cash flows as a result of undertaking a project

Front 19

sunk costs

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expenses already made- **will not change whether you undertake a project or not

Front 20

terminal cash flow

Back 20

includes liquidating fixed assets

Front 21

operating cash flows are driven by what?

Back 21

revenue and cash cost

Front 22

capital requirements are driven by what

Back 22

Net working Cap. and fixed assets

Front 23

what are some rev. drivers

Back 23

current market, pricing, and expansion possibilities

Front 24

cost drivers

Back 24

external factors (economy, reliable supplier? market?)
internal factors (major variables and fixed costs, major shifts in cost- labor-, compare costs with competitors

Front 25

net working capital drivers

Back 25

inv. management
accounts recievables mgmt
credit terms from suppliers

Front 26

What does WACC stand for?

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Weighted avg. cost of capital

Front 27

NOPAT stands for?

Back 27

net operating profit after taxes

Front 28

EVA stands for?

Back 28

economic value added

Front 29

cost of debt

Back 29

borrowing money by issuing bonds is the int. rate demanded by the bonds

Front 30

Alternative perspectives in the evaluation of an investment opportunity

Back 30

Stand-alone evaluation
Evaluation relative to current portfolio

Front 31

systematic risk

Back 31

the volatility of the portfolio does not change.

Front 32

diosyncratic risk

Back 32

which is diversified and eliminated as the number of firms in the portfolio increases

Front 33

Typical stocks carry a mix of

Back 33

both types of risk, so that the risk of the portfolio declines as idiosyncratic risk is diversified away, but systematic risk still remains.

Front 34

if B = zero

Back 34

then it = required return is Rf

Front 35

EVA explains

Back 35

having the largest NOPAT doesn’t mean you’ll have the largest EVA

Front 36

what is the firms cost of debt

Back 36

the int.rate of the loan

Front 37

What factors can make the cost of debt change?

Back 37

int. rate ( cost of debt changing)
flotation costs and the amount of expected pref. div

Front 38

** risk of lower cash flows in the down economny

Back 38

** risk of lower cash flows in the down economny

Front 39

Can obtain Rf from

Back 39

www.yahoo.com>view more bonds
Rf =10-year T-bond yield if calculating the wacc

Front 40

Can obtain beta from

Back 40

www.yahoo.com>key statistics

Front 41

where to find the Div. yield

Back 41

big charts. S & P 500

Front 42

where do you find the REAL GDP and inflation rate

Back 42

phil.com latest long term forecast

Front 43

Patient is on carbamazepine What routine workup should be done?

Back 43

LFT's

carbamazepine = anticonvulsant and mood stabilizing drug used primarily in the treatment of epilepsy and bipolar disorder

Front 44

balance sheet shows what to calc WACC

Back 44

Short and long term fin will all come from the key stats page-- balance sheet (debt)

Front 45

where do you find expenses

Back 45

INCOME STATEMENT

Front 46

bond value over time

Back 46

1. the bond is decreasing to the face value of the bond
2. as we get closer to maturity the # of coupon pmts decreasing-

Front 47

when bond selling at a premium

Back 47

the value will go down to FV

Front 48

bond discount-

Back 48

will go up to FV

Front 49

what are the adjustments needed when int. is semi annually for bond

Back 49

period to maturiy * 2
PMT / 2
int. rate / 2

Front 50

a bond is more valueable when..

Back 50

int PMTS come in faster