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