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Flashcards in Final Deck (29)
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1

Discount rate that captures the riskiness of the firm

WACC

2

Wacc

Discount rate that captures the riskiness of the firm

3

Cost of debt =

YTM

4

rE formula (equity and debt)

(EBIT-Interest)/E

5

rE formula (no debt)

EBIT/E

6

Price per share of a firm formula

Market value of equity/#shares outstanding

7

Cost of equity

rE

8

Cost of capital

r0

9

Cost of debt

rD

10

Return on (levered) equity

rE

11

Return on (unlevered) equity

r0

12

The return that investors require when they invest in bonds (interest rate)

rD

13

rE

Cost of equity
Return on (levered) equity
Return on common stock

14

Return on common stock

rE

15

r0

Cost of capital
Return on (unlevered) equity

16

rD

Cost of debt
Interest rate
YTM

17

Leverage formula

Book value of debt/market value of a firm

18

Formula for number of new shares

Amount raised for company = number of shares sold x subscription price

19

How many rights will it take to purchase one new share formula

Number of rights (#shares outstanding) / #new shares

20

ex rights share price formula

Total paid / shares now owned

21

Value of one right formula

Current stock price - 'ex rights' share price

22

Ex rights share price

Value of a share, post rights offering

23

Amount raised for company/subscription price =

Number of new shares sold

24

Number of rights/number of new shares

How many rights it will take to purchase one new share

25

Number of shares outstanding / number of new shares

How many rights it will take to purchase one new share

26

Number of rights is equal to

Shares outstanding

27

Scenario 1 Prop 2

Leverage increases the risk and return to stockholders

28

Scenario 2 Prop 1

Firm value increases with debt

29

Formula for number of shares repurchased

Debt/price per share