MGT 8803 Final UPDATED ACTUAL
Questions and CORRECT Answers
Cash Flow - CORRECT ANSWER✔✔- EBIT * (1 - T) + Depreciation - Capital Expenditures
- Increase in Net Working Capital
Terminal Value - CORRECT ANSWER✔✔- (Cash Flow * (1 + g)) / (r - g) or
(EBIT * (1 - t)) * (1 + g) / (r - g) or
Net Income * Earnings Multiple
Cost of Capital (r) - CORRECT ANSWER✔✔- (D/V) * Cost of Debt * (1 - T) + (E/V) * Cost
of Equity
Cost of Equity - CORRECT ANSWER✔✔- Risk Free Rate + Beta * Market Risk Premium
Discounted Terminal Value - CORRECT ANSWER✔✔- Terminal Value / (1 + Target Rate) ^
years
Required Final % Ownership - CORRECT ANSWER✔✔- Investment / Discounted Terminal
Value
Retention Ratio - CORRECT ANSWER✔✔- 1/ (1 + Additional Selling %)
Required Current % Ownership - CORRECT ANSWER✔✔- Required Final % Ownership /
Retention Ratio
# of New Shares - CORRECT ANSWER✔✔- (Starting # of Shares /(1- Required Final %
Ownership)) - Starting # of Shares
Price Per New Share - CORRECT ANSWER✔✔- Investment / # of New Shares
, Valuation - CORRECT ANSWER✔✔- # of Shares * Price Per Share
Limited Partners - CORRECT ANSWER✔✔- Provide most of the capital
General Partners - CORRECT ANSWER✔✔- Responsible for managing the fund, including
investment selection, working with entrepreneurs, and harvesting the investments.
Strategic Plan - CORRECT ANSWER✔✔- Establishes organization's overall mission, goals,
and objectives.
Functional Plans - CORRECT ANSWER✔✔- Planning related to specific business functions,
driven by goals developed in strategic planning.
Operational/Tactical Plans - CORRECT ANSWER✔✔- Apply to specific activities of the
organization.
Contingency Plans - CORRECT ANSWER✔✔- Address incorrect planning assumptions or
the realization of known risks.
Competitive Advantage - CORRECT ANSWER✔✔- Superior performance relative to other
competitors in same industry.
Competitive Parity - CORRECT ANSWER✔✔- Two or more firms in the same industry
perform at the same level.
Competitive Disadvantage - CORRECT ANSWER✔✔- Firm underperformance relative to
competitors in the same industry.
Business Model - CORRECT ANSWER✔✔- How various components of the business fit
together to produce a profit.
Cost-Leadership Strategy - CORRECT ANSWER✔✔- Becoming the lowest-cost producer in
an industry.
Questions and CORRECT Answers
Cash Flow - CORRECT ANSWER✔✔- EBIT * (1 - T) + Depreciation - Capital Expenditures
- Increase in Net Working Capital
Terminal Value - CORRECT ANSWER✔✔- (Cash Flow * (1 + g)) / (r - g) or
(EBIT * (1 - t)) * (1 + g) / (r - g) or
Net Income * Earnings Multiple
Cost of Capital (r) - CORRECT ANSWER✔✔- (D/V) * Cost of Debt * (1 - T) + (E/V) * Cost
of Equity
Cost of Equity - CORRECT ANSWER✔✔- Risk Free Rate + Beta * Market Risk Premium
Discounted Terminal Value - CORRECT ANSWER✔✔- Terminal Value / (1 + Target Rate) ^
years
Required Final % Ownership - CORRECT ANSWER✔✔- Investment / Discounted Terminal
Value
Retention Ratio - CORRECT ANSWER✔✔- 1/ (1 + Additional Selling %)
Required Current % Ownership - CORRECT ANSWER✔✔- Required Final % Ownership /
Retention Ratio
# of New Shares - CORRECT ANSWER✔✔- (Starting # of Shares /(1- Required Final %
Ownership)) - Starting # of Shares
Price Per New Share - CORRECT ANSWER✔✔- Investment / # of New Shares
, Valuation - CORRECT ANSWER✔✔- # of Shares * Price Per Share
Limited Partners - CORRECT ANSWER✔✔- Provide most of the capital
General Partners - CORRECT ANSWER✔✔- Responsible for managing the fund, including
investment selection, working with entrepreneurs, and harvesting the investments.
Strategic Plan - CORRECT ANSWER✔✔- Establishes organization's overall mission, goals,
and objectives.
Functional Plans - CORRECT ANSWER✔✔- Planning related to specific business functions,
driven by goals developed in strategic planning.
Operational/Tactical Plans - CORRECT ANSWER✔✔- Apply to specific activities of the
organization.
Contingency Plans - CORRECT ANSWER✔✔- Address incorrect planning assumptions or
the realization of known risks.
Competitive Advantage - CORRECT ANSWER✔✔- Superior performance relative to other
competitors in same industry.
Competitive Parity - CORRECT ANSWER✔✔- Two or more firms in the same industry
perform at the same level.
Competitive Disadvantage - CORRECT ANSWER✔✔- Firm underperformance relative to
competitors in the same industry.
Business Model - CORRECT ANSWER✔✔- How various components of the business fit
together to produce a profit.
Cost-Leadership Strategy - CORRECT ANSWER✔✔- Becoming the lowest-cost producer in
an industry.
