FINC 3610 Exam 3 Prep Newest Actual
Exam With Complete 100+ Questions
And Correct Detailed Answers (Verified
Answers) |Already Graded A+
primary vs. secondary markets
answers: Primary = new-issue to get proceeds
Secondary = existing shares traded among investors
dealers vs. brokers real life example
answers: dealer: at a car dealership, they OWN the cars/inventory
broker: at a real estate brokerage, they do NOT own the homes, they just
facilitate the transaction
with equity/common stock, there is _ interest
answers: ownership
with equity/common stock, common stockholders for the board of
directors
and other issues
answers: vote
,with equity/common stock, dividends are considered a cost of doing
business
and are __ tax deductible
NOT.
answers: -subject to double taxation
with equity/common stock, dividends are NOT a liability of the
firm and stockholders have no recourse
answers: legal
NPV or NPV related:
answers: Net Present Value (NPV)
- Internal Rate of Return (IRR)
- Modified Internal Rate of Return (MIRR)
- Profitability Index (PI)
NOT related to NPV:
- answers: Payback Rule (PB)
- Discounted Payback Rule (DPB)
- Average Accounting Return (AAR)
, Net Present Value (NPV): WHAT
answers: NPV is a measure of how much value is created or added today by
undertaking an investment (the difference between the investment's
market value and its cost)
NPV: HOW
answers: estimate future cash flows.
-calculate the present value of those cash flows minus the initial cost
NPV: RULE
answers: accept: if NPV is
POSITIVE (+) reject: if NPV is
NEGATIVE (-)
*assumes cash flows are reinvested at the cost of capital
NPV: PROS
1. answers: uses all cash flows
2. adjusts for the time value of money
Bottom line: NPV IS ALWAYS RIGHT!
NPV: CONS
answers: need appropriate discount rate
1. relatively more difficult to communicate
Exam With Complete 100+ Questions
And Correct Detailed Answers (Verified
Answers) |Already Graded A+
primary vs. secondary markets
answers: Primary = new-issue to get proceeds
Secondary = existing shares traded among investors
dealers vs. brokers real life example
answers: dealer: at a car dealership, they OWN the cars/inventory
broker: at a real estate brokerage, they do NOT own the homes, they just
facilitate the transaction
with equity/common stock, there is _ interest
answers: ownership
with equity/common stock, common stockholders for the board of
directors
and other issues
answers: vote
,with equity/common stock, dividends are considered a cost of doing
business
and are __ tax deductible
NOT.
answers: -subject to double taxation
with equity/common stock, dividends are NOT a liability of the
firm and stockholders have no recourse
answers: legal
NPV or NPV related:
answers: Net Present Value (NPV)
- Internal Rate of Return (IRR)
- Modified Internal Rate of Return (MIRR)
- Profitability Index (PI)
NOT related to NPV:
- answers: Payback Rule (PB)
- Discounted Payback Rule (DPB)
- Average Accounting Return (AAR)
, Net Present Value (NPV): WHAT
answers: NPV is a measure of how much value is created or added today by
undertaking an investment (the difference between the investment's
market value and its cost)
NPV: HOW
answers: estimate future cash flows.
-calculate the present value of those cash flows minus the initial cost
NPV: RULE
answers: accept: if NPV is
POSITIVE (+) reject: if NPV is
NEGATIVE (-)
*assumes cash flows are reinvested at the cost of capital
NPV: PROS
1. answers: uses all cash flows
2. adjusts for the time value of money
Bottom line: NPV IS ALWAYS RIGHT!
NPV: CONS
answers: need appropriate discount rate
1. relatively more difficult to communicate
