Wacc theory Study guides, Class notes & Summaries

What is meant by capitalization? What is meant by a firm’s capital structure? For financial planning purposes, explain why either book or market value should be used to determine the firm’s capital structure. What is capital structure theory? Capitalization is the process of evaluation and maximizing a company’s capital structure i.e. debts and equities. Capital Structure is a firm’s combination of deb and equity. Capital structure is used to determine the thresholds for debt and e...

Corporate Finance Final Practice Questions A decrease in a firm's level of debt tends to imply: - correct answersa decrease in the firm's stock price. A key difference between the APV, WACC, and FTE approaches to valuation is: - correct answershow debt effects are considered; i.e. the target debt to value ratio and the level of debt. According to MM Proposition II with no taxes, the: - correct answersrequired return on equity is a linear function of the firm's debt-equity ratio. ...

This summary is an extended version of ACFM lectures.

CORPORATE FINANCE TEST BANK STUFF 11th Canadian Edition Ross The interests of community groups affected by a company's operations are most likely to be considered in corporate governance under: - CORRECT ANSWER- Stake Holder Theory Dividend Discount Model Approach - CORRECT ANSWER- Need to reorganize to be finding K ; Required Return kce = (D1/P0) + g Which yield measure is the most appropriate for comparing a company's investments in short-term securities? - CORRECT ANSWER- When evaluatin...

The notes are structured in a way to answer exam questions. Includes: Fundamentals of business finance; Time value money; Cash Flows; Investment appraisal – risk and considerations; Portfolio theory; Capital Markets; Finance Sources; Cost of Capital & WACC; Capital Structure; and Dividend Policy.

EXAM 2022 VERIFIED SOLUTION Which of the following is true of the idea screening phase of the new product developmentprocess? New product ideas are not eliminated merely because they are outside the fields of a firm's interest in this stage. Lack of technology and resources is often not a useful reason to discount new product ideas in this stage. A firm needs to consider three categories of risk and its associated risk tolerance in this stage prior to reaching a decision. Unlike the id...

Qual Exam Questions With Complete Solutions . Suppose that at the end of year 4, when the bonds above become callable, the yield to maturity is 8%. Which ONE of the following statements is TRUE? a. The company is likely to call the bonds because interest rates have remained constant. b. The company will wait until the bonds mature to call them to maximize their time value. c. The company definitely will not call the bonds because the call price is above the bond price. d. The company defi...

Qual Exam Questions With Complete Solutions . Suppose that at the end of year 4, when the bonds above become callable, the yield to maturity is 8%. Which ONE of the following statements is TRUE? a. The company is likely to call the bonds because interest rates have remained constant. b. The company will wait until the bonds mature to call them to maximize their time value. c. The company definitely will not call the bonds because the call price is above the bond price. d. The company defi...

What is the MM Irrelevance Proposition? - correct answer Capital Structure is irrelevant and the WACC remains constant What is the MM corrected proposition with taxes? - correct answer Firms should be financed with 100% debt How does bankruptcy affect the MM Propositions? - correct answer MM irrelevance theory continues to hold with risky debt and costless bankruptcy? What are the direct costs of bankruptcy? - correct answer Incurred to facilitate an orderly bankrupt...

A decrease in a firm's level of debt tends to imply: - correct answersa decrease in the firm's stock price. A key difference between the APV, WACC, and FTE approaches to valuation is: - correct answershow debt effects are considered; i.e. the target debt to value ratio and the level of debt. According to MM Proposition II with no taxes, the: - correct answersrequired return on equity is a linear function of the firm's debt-equity ratio. According to the pecking-order theory, a firm...