Finance
Jehlifisch Universität, Herbstsemester 2013
Jehlifisch Universität, Herbstsemester 2013
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Cartes-fiches
The Terminal Value is the PV at the horizon for all CFs after the end of the forecast horizon (H), discounted to today
For high growth firms, FCF can be negative and only turns positive when growth slows down
To calculate the market value of equity from the enterprise value, we will have to subtract the market value of debt
Usually, most of the firm value stems from the terminal value
Business continuation makes sense only if liquidation value exceeds going concern value
If capital structure remains constant, discounting the cash flows to equity at the cost of equity should yield the same results as discounting FCFs at the after-tax WACC and subtracting debt
One key assumption of the APV approach is that the firm actively rebalances in order to maintain its debt ratio
The APV method calculates a series of present values
The APV method is most useful when side-costs are numerous and important
When calculating the flow to equity you have to sum the interest paid and the cash flows
The separation of ownership and control can result in managerial shirking
A company with dual-class equity has two classes of common stock with different voting rights.
The board of directors, large shareholders, and competing management teams / companies are effective monitors
Pyramids allow a wealthy family, for example, to control a group of companies with a relatively small investment.
In developing countries the substandard financial markets do provide a desirable mechanism for diversification and expansion.
There are very small differences in ownership and control between countries that have similar financial systems
Equity holders have an incentive to issue additional debt and “dilute” the value of existing debt holders
More prohibitive takeover laws lead to better corporate governance
Good corporate governance should increase the debt capacity of a firm
In the context of the debt overhang problem, firms with existing senior debt obligations may not be able to finance positive NPV investments
Sustainable growth Formula?
Sustainable growth = RoE × plowback ratio;
Calculate the expected return or the cost of equity capital for the firm - formula?
r = [(D 1 /P0 ) + g]
A high proportion of the value of a growth stock typically comes from:
If the project ends at the end of the fourth year, what is the horizon value of the project?
If the project terminates, there is no horizon value (PVH = 0).
Equity-Value Formula via Equity/Sales-Multiple?
Equity-Value = Equity/Sales-Multiple x Sales
Which of the following investment rules does not use the time value of money concept?
Which of the following investment rules has the value additivity property?
Which of the following investment rules may not use all possible cash flows in its calculations?
Formula: Profitability Index
NPV / Initial investment
A firm owns a building with a book value of $150,000 and a market value of $250,000. If the firm uses the building for a project, then its opportunity cost, ignoring taxes, is:
Nominale Cash Flows werden mit dem nominalen oder realen Zins diskontiert?
when does a project stop if the project has costs that growth constantly?
The project is stopped when costs > revenues, that is, when NPV turns negativ.
If short-sales are not allowed, which of the following statements is correct (4.2)?
For long-term U.S. government bonds, which risk concerns investors the most?
A statistical measure of the degree to which securities' returns move together is called:
The type of the risk that can be eliminated by diversification is called:
Market risk is also called: I) systematic risk; II) undiversifiable risk; III) firm-specific risk.
As the number of uncorrelated stocks in a portfolio is increased:
For a portfolio of N-stocks, the formula for portfolio variance contains:
For a portfolio of N-stocks, the formula for portfolio covariance contains:
