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managing finance study guide

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Net Present Value (NPV) - ANS = cash flow / [(1+ discount rate)^ number of years] profitability index - ANS = present value of future cash flows / initial investment ex-rights price equation - ANS = (value of existing shares + value of new shares) / (# of shares) CAPM - ANS Cost of equity = cost risk free + beta * (cost of market - cost risk free)

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managing finance study guide
Net Present Value (NPV) - ANS = cash flow / [(1+ discount rate)^ number of years]



profitability index - ANS = present value of future cash flows / initial investment



ex-rights price equation - ANS = (value of existing shares + value of new shares) / (# of shares)



CAPM - ANS Cost of equity = cost risk free + beta * (cost of market - cost risk free)



WACC - ANS (weight of equity* cost of equity) + {(weight of debt* cost of debt)*(1 - tax rate)}



cost of equity equation - ANS next years dividends / market price + growth



cost of debt - ANS interest paid / (1- tax rate)
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