1. State Farm State Farm Presentation Review for midterm exam
Overview of company
Insurance companies and investments
State Farm’s investment department
Fixed income investing
Class activities
Review for midterm exam

2. Exam will be during class
Midterm Exam
Tuesday - March 6, 2007
Exam will be during class
215 David Kinley Hall

3. Midterm Exam Details Exam is open book, open note.
You may use calculators, including financial calculators, but not laptops, cell phones or any other communication devices.
Test covers material from lectures 1-13 (including guest speakers and student presentations), assignments 1-2 and the Ben & Jerry’s case.
Keys for the assignments will be posted today (3/1)
Exam tests your ability to perform calculations and to explain corporate finance concepts.

4. Test Taking Advice
First answer all the questions you can without relying extensively on your notes.
Then work on the remaining questions if time permits.

5. Exam Topics Include - 1 Corporations
Roles and Titles of Financial Managers
Principal-Agent Problems
Financial Statements
Balance Sheet (Figure 29.1)
Income Statement (Figure 29.2)
Sources and Uses of Funds (Figure 29.3)
Measuring a Firm’s Financial Condition
Key Financial Ratios
Financial Planning
Introduction to Present Value
Objectives of the Firm
Corporate Governance

6. Exam Topics Include - 2 Calculations Bond Valuation Stock Valuation
Valuing Assets
Perpetuities and Annuities
Compound Interest
Nominal and Real Interest Rates
Bond Valuation
Stock Valuation
How Common Stocks are Traded
Estimating the Cost of Equity Capital
Linking Stock Price and Earnings per Share
Net Present Value
Internal Rate of Return
Alternative Investment Decision Rules

7. Exam Topics Include - 3 Capital Asset Pricing Model
What Discount Rate to Use
Risk and Return
The Market Risk Premium
Capital Asset Pricing Model Considerations
Determining Beta
Arbitrage Pricing Model
Certainty Equivalents
Why Manage Diversifiable Risk?
Types of Risk
Traditional Approach to Risk Management
Enterprise Risk Management

8. Exam Topics Include - 4 Sensitivity Analysis Scenario Analysis
Monte Carlo Simulation
Real Options
Decision Trees
Market Values
Economic Rents and Competitive Advantage
Warren Buffet on Growth and Profitability
Sources of Funds for Corporate Financing
Internal financing
Stock
Debt

9. Pre-Exam Office Hours 311 Wohlers Hall
Monday, March :30 pm