Corporate Finance: Review for Final Exam

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Presentation transcript:

Corporate Finance: Review for Final Exam Professor Scott Hoover Business Administration 221

Financial Statements (review) Financial Statement Analysis Introduction Time Value of Money Basic Intuition: Indifference Present Value vs. Future Value Financial Statements (review) Financial Statement Analysis What questions are important in assessing the health of a firm? The DuPont Relationship Ratios Difficulties with Financial Statement Analysis

Financial Forecasting Importance The Typical Methodology (Percent-of-Sales Forecasting) The Cash Budget What is a cash budget? Basic methodology Growth Management What is the optimal growth rate for a company? The Sustainable Growth Rate

Financing Financial Securities How much debt should a firm have? Benefits of Debt Drawbacks of Debt A Second Look at ROE…. The relationship between interest rates on debt and ROIC FRICTO Analysis Difficulties in determining the optimal level of debt Financial Securities Bonds Derivatives Stock

Capital Budgeting How are projects created? Relevant Cash Flows Capital Expenditures Salvage Cash Flows Operating Cash Flows Changes in Net Working Capital Opportunity Costs Externalities

The Weighted Average Cost of Capital (WACC) Cost of Equity Cost of Debt Cost of Preferred Stock Project Evaluation Techniques NPV IRR mutually exclusive projects

EXAM STRUCTURE Topic # of Problems Points General 4 40 Stocks 1 10 Capital Budgeting 3 50 Type Problem Solving 60 Short Answer/Essay

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