Purchase a bond with a SHORTER time to maturity and a HIGHER coupon rate Pay $10,000 a year for 8 years if the initial investment is $60,000 required return = 8% Minimize interest rate risk --> Fisher Equation sunk costs?

Minimize interest rate risk -->

NPV = 0 = - [cash flow / (1+i)^t] + [cash flow / (1+i)^t2] - initial investment + = accept - = reject Best criteria for evaluating investments Standard Deviation Operating cash flow in each of the 3 periods OCF = (Operating Cash Flow)

Best criteria for evaluating investments

Finance 301 Final Exam

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Finance - Personal Finance

michael1tekrzp Created by 10 mon ago

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written contract; contract bylaw

Purchase a bond with a SHORTER time to maturity and a HIGHER coupon rate

dividend yield + capital gains yield

PV ratio (Contribution margin / Sales revenue) x 100) CM = $ - variable Sales Revenue = units sold x sales price

an agent, substitute; a written permission allowing one person to act in another's place - vote share w/o going to meeting

NPV = 0 = - [cash flow / (1+i)^t] + [cash flow / (1+i)^t2] - initial investment + = accept - = reject

determine required rate of return for given project. IRR > required rate return, accept IRR < required rate return, reject

(FV/PV)^1/n - 1

a set of projects where only one can be accepted

IGNORE THEM!!

allows us to analyze each project in isolation from the firm simply by focusing on incremental cash flows

Include it! (Financial asset erosion refers to the loss of value of financial assets over time. Financial assets are instruments and securities held for financial purposes.)

the possibility that errors in projected cash flows will lead to incorrect decisions - bad assumptions

the determination of what happens to NPV estimates when we ask what-if questions - Best Case - Worst Case - Base Case

16.3 - 3.4 = 12.9%

A capital market in which market prices fully reflect all information available to the public.

annual coupon / bond face value --> 32 / 100 (Always use 1,000 for face value unless stated otherwise)

real interest rate = nominal interest rate - inflation rate

(Coupon Payment / (1 + YTM)^Year) + Face Value / (1 + YTM)^Maturity Year = Purchase Price - Check Notes

PV = FV / (1+r)^t 33.6 of 1,000 = $336 336 = 1,000/(1 + x)^20 = 5.6%

R ~ r + h R ~ 7.69 + 3 --> 10.69% 1 + R = (1.0769) (1.03) R = 10.92

Po = [ Do (1 + g) ] / (r-g) r = 10%

shares needed = 1 / (n + 1)% + 1 share 1/3 = 0.333 * (33) +1 = 111 Shares 111- 91 = 20 Need to buy 20 more

EBIT + Depreciation - Taxes

earnings before interest and taxes

NPV = -60,000 + 10,000 [ 1-(1/1.08)^8/0.08] = 2,533.61

notes

notes sales - cost - D = EBIT - taxes

1 + R = (1 + r) * ( 1 + h) 1 + .1448 = (1+r) * (1.06)

a measure of variability that describes the average distance of every score from the mean - turn everything into decimals first

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Finance 301 Final Exam

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