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50 Cards in this Set
- Front
- Back
When calculation risk of return when the st. deviation is a lower #...
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less flexabilty
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Risk and return
what is the coefficent of variance calculate |
*used for examining avaibility of sales $
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risk and return
beta = |
the slope of the line of the pairing companies
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When estimating WACC everything has...
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a cost
ex (raw materials, transporation, warehouse..) |
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when calc WACC what does each letter stand for
D,E,Kd,Ke,Tc |
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 |
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What is the discount rate for cash flow to equity holders?
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Ke in the WACC equation
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What is the discount rate for cash flow to debt holders?
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Kd, in the WACC
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when calc WACC from yahoo balance sheet
short term investments also = |
marketable securities
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When bonds pay int. semiannually-- what are the three modifications?
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1. div the coupon pmt by 2
2. multiply the years maturity by 2 3. divide the nominal int. rate by 2 |
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When is a bond more valuable
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when interest pmt come in faster
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at what point is the value of the bond= face value
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when the coupon rate = required rate of return
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What does it mean when the bond is selling at premium
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going rate > coupon rate
*more money then the face value |
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wht does it mean when the bond is selling at a discount
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the bond is selling lower then face value
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what is it called if the bond is selling at face value
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bond is at par
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*** for bonds as the rate goes up....
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the bond value goes down!
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what are the assets as cash flow generators?
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FCF
operating cash flow capital requirement |
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what is incremental cash flow
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FCF with project- FCF w/o project
**contribution of the project |
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opportunity cost of a project
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foregone cash flows as a result of undertaking a project
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sunk costs
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expenses already made- **will not change whether you undertake a project or not
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terminal cash flow
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includes liquidating fixed assets
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operating cash flows are driven by what?
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revenue and cash cost
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capital requirements are driven by what
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Net working Cap. and fixed assets
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what are some rev. drivers
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current market, pricing, and expansion possibilities
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cost drivers
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external factors (economy, reliable supplier? market?)
internal factors (major variables and fixed costs, major shifts in cost- labor-, compare costs with competitors |
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net working capital drivers
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inv. management
accounts recievables mgmt credit terms from suppliers |
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What does WACC stand for?
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Weighted avg. cost of capital
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NOPAT stands for?
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net operating profit after taxes
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EVA stands for?
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economic value added
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cost of debt
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borrowing money by issuing bonds is the int. rate demanded by the bonds
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Alternative perspectives in the evaluation of an investment opportunity
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Stand-alone evaluation
Evaluation relative to current portfolio |
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systematic risk
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the volatility of the portfolio does not change.
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diosyncratic risk
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which is diversified and eliminated as the number of firms in the portfolio increases
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Typical stocks carry a mix of
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both types of risk, so that the risk of the portfolio declines as idiosyncratic risk is diversified away, but systematic risk still remains.
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if B = zero
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then it = required return is Rf
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EVA explains
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having the largest NOPAT doesn’t mean you’ll have the largest EVA
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what is the firms cost of debt
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the int.rate of the loan
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What factors can make the cost of debt change?
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int. rate ( cost of debt changing)
flotation costs and the amount of expected pref. div |
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** risk of lower cash flows in the down economny
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** risk of lower cash flows in the down economny
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Can obtain Rf from
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www.yahoo.com>view more bonds
Rf =10-year T-bond yield if calculating the wacc |
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Can obtain beta from
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www.yahoo.com>key statistics
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where to find the Div. yield
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big charts. S & P 500
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where do you find the REAL GDP and inflation rate
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phil.com latest long term forecast
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Patient is on carbamazepine What routine workup should be done?
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LFT's
carbamazepine = anticonvulsant and mood stabilizing drug used primarily in the treatment of epilepsy and bipolar disorder |
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balance sheet shows what to calc WACC
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Short and long term fin will all come from the key stats page-- balance sheet (debt)
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where do you find expenses
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INCOME STATEMENT
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bond value over time
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1. the bond is decreasing to the face value of the bond
2. as we get closer to maturity the # of coupon pmts decreasing- |
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when bond selling at a premium
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the value will go down to FV
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bond discount-
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will go up to FV
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what are the adjustments needed when int. is semi annually for bond
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period to maturiy * 2
PMT / 2 int. rate / 2 |
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a bond is more valueable when..
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int PMTS come in faster
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