Fin 301 exam - Study guides, Class notes & Summaries

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The objective behind computing a firm's weighted average cost of capital (WACC) is to determine the cost of - Answer-investor supplied financing to the firm. Investor supplied financing comes from 4 component sources: - Answer-1. interest bearing debt 2. preferred stock 3. common stock 4. retained earnings. Spontaneously generated financing like ______ and _______ _______ included in the WACC. - Answer-accounts payable and accruals are not; These items rise and fall with the firm's le...

Which of the following asset classes would you expect to have the highest expected return and standard deviation? Treasury bills Government bonds Corporate bonds Large company stocks Small company stocks - Answer-Small company stocks Calculate the compound annual return on an investment that was purchased at $20 and sold 5 years later for $40. 14.9% 100% 20% 4.6% 16.8% - Answer-14.9% Given the following information, calculate the Fund's alpha: T-Bill Return: ...

Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant? A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage. A bank loan's nominal interest rate will always be equal to or greater than its effective annual rate. If an investment pays 10% interest, compounded quarterly, its effective annual rate will be greater than 10%. Banks A and B offer the same nominal annual...

Finance - Answer-the management of money Corporate Finance - Answer-how companies raise money, how they invest money, how they manage financial resources Capital Markets - Answer-Financial markets where debt instruments and equity securities are bought and sold Investment Decision - Answer-corporate managers need to make sure that the company's money is invested in projects that will be worth more than they cost Financing Decision - Answer-Corporate managers need to decide what comb...

capital budgeting - Answer-the process of planning and managing a firm's long-term investments capital structure - Answer-the specific mixture of long-term debt and equity the firm uses to finance its operations -how much should the firm borrow? -what are the least expensive sources of funds for the firm? working capital - Answer-a firm's short-term assets and liabilities sole proprietorship - Answer-a business owned by a single individual 3 areas of corporate financial managem...

3 general concepts of finance - Answer-(1) more value is preferred to less (2) the sooner cash is received, the more valuable it is (3) less risky assets are more valuable than riskier assets The study of finance consists of four interrelated areas: - Answer-1. Financial institutions and markets 2. Investments 3. Financial services 4. Managerial (business) finance 3 major forms of business organization in the U.S. - Answer-Proprietorship Partnership Corporation Proprietorship - A...

Capital budgeting - Answer-planning and managing a firm's long term investments Ex: deciding to open at new location, or what computer system to use Capital Structure - Answer-mixture of debt and equity maintained by a firm Ex: How much should firm borrow and what are least expensive sources of funds for firm Working Capital Management - Answer-firm's short-term assets and liabilities Ex: day-to-day activities, short term assets like inventory and short term liabilities like money owe...