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
