OCF
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Recurring Cash Flows
Public Offering
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When a firm offers its shares for sale to the general public.
Unlimited Funds
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The financial situation in which a firm is able to accept all independent
projects that provide an acceptable return.
Inflation Premium (IP)
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A premium equal to expected inflation that investors add to the risk-free
rate of return.
When to Take a Project
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NPV > 0
IRR > WACC
Weighted Average Cost of Capital (WACC)
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The rate of return expected by all investors. Reflects the expected average
future cost of capital over the long run.
Internal Rate of Return (IRR)
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The discount rate that equates NPV of an investment opportunity with zero.
Nominal Rate of Interest
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The actual rate of interest charged by the supplier of funds and paid by the
demander.
Capital Budgeting
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Process of evaluating and selecting long-term investments that are
consistent with the firm's goal of maximizing shareholder wealth.
Normal Yield Curve
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Recurring Cash Flows
Public Offering
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When a firm offers its shares for sale to the general public.
Unlimited Funds
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The financial situation in which a firm is able to accept all independent
projects that provide an acceptable return.
Inflation Premium (IP)
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A premium equal to expected inflation that investors add to the risk-free
rate of return.
When to Take a Project
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NPV > 0
IRR > WACC
Weighted Average Cost of Capital (WACC)
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The rate of return expected by all investors. Reflects the expected average
future cost of capital over the long run.
Internal Rate of Return (IRR)
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The discount rate that equates NPV of an investment opportunity with zero.
Nominal Rate of Interest
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The actual rate of interest charged by the supplier of funds and paid by the
demander.
Capital Budgeting
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Process of evaluating and selecting long-term investments that are
consistent with the firm's goal of maximizing shareholder wealth.
Normal Yield Curve
