Gordon growth model - Study guides, Class notes & Summaries

Adventis FMC Level 2 Latest Update Rated A+ what is value what people are willing to pay for (what the buyer pays) who said, "Value is what people are willing to pay for" John Naisbitt 2 primary types of valuation 1. relative valuation 2. intrinsic valuation relative valuation refers to what methods that compare the price of a company to the market value of similar assets intrinsic value refers to what the value of a company through fundamental analysis without reference to its market valu...

Coupon Rate - The interest rate that a company promises to pay on bonds Market Rate - The interest rate on other comparable bonds Par Value - The amount payable on maturity of the bond Market rate - Same as YTM - Yield to Maturity Gordon Growth Model - Assumes stable growth rates and does not incorporate risk CAPM Model - Allows to determine expected return on stocks and incorporates risk How do public companies maximize shareholder value? - By maximizing Earnings Per Share How do private...

C214 WGU Exam Questions with Correct Answers Discretionary Financing Needed Formula - ANSWER Discretionary Financing Needed (DFN) = Projected Total Asset - Projected Total Liabilities - Projected Equity Sustainable Growth Rate Formula - ANSWER Sustainable Growth Rate (SGR) = Return on Equity (ROE) X (1-Divided Payout Ratio) Cash Flow from Operating Activities (CFO) Formula - ANSWER Cash Flow from Operating Activities (CFO) = Net Income + Depreciation +/- Decreas...

Coupon Rate - Answer-The interest rate that a company promises to pay on bonds Market Rate - Answer-The interest rate on other comparable bonds Par Value - Answer-The amount payable on maturity of the bond Market rate - Answer-Same as YTM - Yield to Maturity Gordon Growth Model - Answer-Assumes stable growth rates and does not incorporate risk CAPM Model - Answer-Allows to determine expected return on stocks and incorporates risk How do public companies maximize shareholder value? - Answer...

Coupon Rate - -The interest rate that a company promises to pay on bonds Market Rate - -The interest rate on other comparable bonds Par Value - -The amount payable on maturity of the bond Market rate - -Same as YTM - Yield to Maturity Gordon Growth Model - -Assumes stable growth rates and does not incorporate risk CAPM Model - -Allows to determine expected return on stocks and incorporates risk How do public companies maximize shareholder value? - -By maximizing Earnings Per Share How do ...

DCF EXAM REVIEW QUESTIONS & ANSWERS, GRADED A+/ VERIFIED. A company has a high debt load and is paying off a significant portion of its principle each year, how would we account for that in a DCF. - -We would not because paying off debt shows up in CF from Financing but we only go down to CF from operations and then subtract CAPEX to get FCF. A DCF values a company based on: - -The present value of its cash flows and the present value of its terminal value. Cost of Equity tells us: - -...

Discounted Cash Flow Exam Questions With 100% Correct Answers What's the basic concept behind a Discounted Cash Flow analysis? - answerThe concept is that you value a company based on the present value of its Free Cash Flows far into the future. You divide the future into a "near future" period of 5-10 years and then calculate, project, discount, and add up those Free Cash Flows; and then there's also a "far future" period for everything beyond that, which you can't estimate as prec...

How to calculate WACC? WACC= Cost of Equity * (%Equity) + Cost of Debt * (% Debt) *(1-tax) + Cost of Preferred*(%preferred) How to calculate cost of equity? Cost of equity = Risk-Free Rate + Beta * Equity Risk Premium How to get to Beta in the Cost of Equity Calculation? 1. find Beta for each comparable company, unlever each one, take the media of the set, and lever it based on company's capital structure Unlevered Beta = Levered Beta / (1+((1-Tax Rate)*(Total Debt/Equity))) Levered Beta = U...

Discounted Cash Flow Exam Questions With 100% Correct Answers What's the basic concept behind a Discounted Cash Flow analysis? - answerThe concept is that you value a company based on the present value of its Free Cash Flows far into the future. You divide the future into a "near future" period of 5-10 years and then calculate, project, discount, and add up those Free Cash Flows; and then there's also a "far future" period for everything beyond that, which you can't estimate as prec...

WGU C214 OA Financial Management Pre-Test Exam What is included in the Income Statement and NOT in the Statement of Cash Flows? - Depreciation Expense Computation of Net Income: A co. sold products in 2014 for $120k and collected $100k cash and remainder in 2015. Co. incurred $70k expenses for 2014 and paid $100k which included $30k for expenses incurred in 2013. What is net income for 2014? - Computation of Net Income (R-E=NI) $50,000 Net Income = $120k - $70k = $50k, or Revenues - E...