MBA 702 Module 4
Risk, present - answer value of the firm is the ___ adjusted ___ value of all the
expected future available to the providers of financing.
interest, FCF - answer Although the financial decision does affect the cash flow through
the ____ expense and possibly other cash flows, it does not affect ___
free cash flow - answer____ is the money available after operations and taxes that
belongs to creditors and owners.
debt, equity, capital, WACC - answer We will always show the effect of changing ___
and ___ on value by adjusting the cost of ___, often taken to be the ___
WACC - answer____ is the discount rate for finding the value now of those cash flows
w(d) r(d) (1-t) + w(s) r(s) – answer WACC = _____
weight, debt, equity – answer WACC is where the w is the ___ of ____ (d) and ____ (s)
used
tax cost – answer WACC is where r is the before ____ of each type of debt and equity
tax rate - answerWACC is where t is the firm's marginal ____
w - answerThe financial decision is choosing the ___ of each, debt and equity.
valuation, decreasing - answerSince WACC is in the denominator of the ____ equation,
we can increase firm value by _____ WACC.
minimize, maximize, ceteris paribus - answerIf we ____ WACC, we ____ VALUE, ____.
related - answerThe problem is that changing the weights seems to simultaneously
change the ____ r(s) and r(d).
precisely - answerTo make it even worse, no one has shown a way to ____ predict the
size of the changes in the respective costs (r(s) and r(d)).
Why? - answerWe just can't definitively say that a particular firm should use a particular
amount of debt financing.
, residual cash, dividends, reinvest - answerAnother part of this financial decision is the
question of how much of ____ flow do we pay as ____ and how much do we ____ in
the firm to provide funding for the investment decision?
Net income - answer_____ is used to either pay dividends or support assets with
retained earnings.
retained earnings - answerSince ____ affect w(s) (and hence w(d)) and WACC, we do
not really have a definitive answer for how large the dividends should be.
capital structure, dividend decisions - answerHow financing decisions may affect value;
____ and ____
business risk, tax effects, information effects - answerCapital structure include: ___,
___, and ____
Business risk, FCF - answer____ refers to the predictability of the firm's operating cash
flows, in effect the predictability of ____
investment - answerBusiness risk is the risk of the ____ decision.
what, how, where, business risk - answerWhen a firm makes major strategic decisions
about ___ goods and services to produce, ___ to produce them, and ___ to try to sell
them, they are locking into a relatively narrow range of ____.
business, financial - answerThe total risk of the firm would then depend on a
combination of the ___ and ____ risk
financial risk - answer____ the risk of our choice of w(d) and w(s)).
business, financial - answerIf the firm has unpredictable operating cash flows (high ___
risk), adding a lot of ____ risk by using a high level of debt, a "large w(d)", is probably a
bad idea.
debt, financial - answerFirms with low business risk, especially those in heavily
regulated industries like utilities and financial institutions, can afford to add more ___
and ___ risk without becoming perceived by the market as too risky overall.
cash flow, assets - answer(Tax Effects) Firm valuation is based on the ___ provided by
the firm's ____
assets, funding - answerGiven the fact that the firm's balance sheet has to balance, if
we know the market value of the ___, we also know what the collective market value of
the sources of ____ has to be.
Risk, present - answer value of the firm is the ___ adjusted ___ value of all the
expected future available to the providers of financing.
interest, FCF - answer Although the financial decision does affect the cash flow through
the ____ expense and possibly other cash flows, it does not affect ___
free cash flow - answer____ is the money available after operations and taxes that
belongs to creditors and owners.
debt, equity, capital, WACC - answer We will always show the effect of changing ___
and ___ on value by adjusting the cost of ___, often taken to be the ___
WACC - answer____ is the discount rate for finding the value now of those cash flows
w(d) r(d) (1-t) + w(s) r(s) – answer WACC = _____
weight, debt, equity – answer WACC is where the w is the ___ of ____ (d) and ____ (s)
used
tax cost – answer WACC is where r is the before ____ of each type of debt and equity
tax rate - answerWACC is where t is the firm's marginal ____
w - answerThe financial decision is choosing the ___ of each, debt and equity.
valuation, decreasing - answerSince WACC is in the denominator of the ____ equation,
we can increase firm value by _____ WACC.
minimize, maximize, ceteris paribus - answerIf we ____ WACC, we ____ VALUE, ____.
related - answerThe problem is that changing the weights seems to simultaneously
change the ____ r(s) and r(d).
precisely - answerTo make it even worse, no one has shown a way to ____ predict the
size of the changes in the respective costs (r(s) and r(d)).
Why? - answerWe just can't definitively say that a particular firm should use a particular
amount of debt financing.
, residual cash, dividends, reinvest - answerAnother part of this financial decision is the
question of how much of ____ flow do we pay as ____ and how much do we ____ in
the firm to provide funding for the investment decision?
Net income - answer_____ is used to either pay dividends or support assets with
retained earnings.
retained earnings - answerSince ____ affect w(s) (and hence w(d)) and WACC, we do
not really have a definitive answer for how large the dividends should be.
capital structure, dividend decisions - answerHow financing decisions may affect value;
____ and ____
business risk, tax effects, information effects - answerCapital structure include: ___,
___, and ____
Business risk, FCF - answer____ refers to the predictability of the firm's operating cash
flows, in effect the predictability of ____
investment - answerBusiness risk is the risk of the ____ decision.
what, how, where, business risk - answerWhen a firm makes major strategic decisions
about ___ goods and services to produce, ___ to produce them, and ___ to try to sell
them, they are locking into a relatively narrow range of ____.
business, financial - answerThe total risk of the firm would then depend on a
combination of the ___ and ____ risk
financial risk - answer____ the risk of our choice of w(d) and w(s)).
business, financial - answerIf the firm has unpredictable operating cash flows (high ___
risk), adding a lot of ____ risk by using a high level of debt, a "large w(d)", is probably a
bad idea.
debt, financial - answerFirms with low business risk, especially those in heavily
regulated industries like utilities and financial institutions, can afford to add more ___
and ___ risk without becoming perceived by the market as too risky overall.
cash flow, assets - answer(Tax Effects) Firm valuation is based on the ___ provided by
the firm's ____
assets, funding - answerGiven the fact that the firm's balance sheet has to balance, if
we know the market value of the ___, we also know what the collective market value of
the sources of ____ has to be.
