Minimum rate of return that you earn to increase firm value
Minimum rate of return allowable and still meets financing
The WACC is also known as...
Discount Rate
NPV
What are capital components?
Types of capital used by firms to raise mone
Temporarily borrowed funds
What is the firm's cost of debt stated as?
Rd
Rs
What is considered the before-tax cost of debt?
Rd
Rd(1-T)
What does NPV stand for?
Net Present Value
Net Price Value
How long is a Capital Market? Money Market?
Short; Long
Long; Short
What is a common equity component?
Funds contributed by owners
Funds contributed by debt
What is a floatation cost?
Costs of equity adjusted with any floatation costs
Costs of equity adjusted with any underwriting costs
What is the cost of capital?
Minimum rate of return firm's must earn to increase value
Financing activities entirely
Borrowed funds that are cheaper than equity
What formula would you use for the capital asset pricing model?
Rs=rrf+B(rm-rrf)
Rd=(w1*w1 interest)+(w2* w2 interest)
What does capital budgeting mean?
Evaluating and selecting long term investments
Evaluating and selecting short term investments
What is the payback method?
Amount of time for a firm to recover initial investment
Outlay of funds by the firm expecting to produce benefits
How many projects can you accept if they are mutually exclusive?
1
2+
How many projects can you accept if they are independent?
1
All of them
NPV directly measures what?
The increase in value to the firm
The decrease in value to the firm
When choosing between NPV or IRR, which would you choose?
NPV
IRR
Which technique should be used to decide which project to adopt when theyre mutually exclusive?
NPV
IRR
What does PI measure?
The benefit per unit cost
The benefit of PV
Which of the following has problems that MIRR rectifies?
IRR
NPV
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