Term
wk 8
Projected Retained Earnings |
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Definition
| RE + [(NI-dividends)*proj %] |
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Term
wk 8
Additional Debt Required |
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Definition
| Proj CA + proj FA - proj AP - LTD - stock - proj RE |
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Term
wk 8
External Finance Needed
*proj RE |
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Definition
proj TA - proj AP - LTD - stock - proj RE
*proj RE = RE + [addt'l RE (1+proj %)] |
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Term
wk 8
Projected Increase in RE |
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Definition
| sales * profit margin * (1+proj %) |
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Term
wk 8
Equity Funding Needed
*Current TE |
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Definition
proj A - proj L - current TE - proj increase in RE
*current TE = CA + net FA - CL |
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Term
wk 8
Sustainable Growth Rate
*ROE |
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Definition
(ROE * retention rate) / [1-(ROE*RR)]
*ROE = profit margin * TA turnover * (1+DA ratio) |
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Term
wk 9
Expected Return on Stock
*Beta |
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Definition
Risk-Free Rate + (exp. Return on Market - Risk-Free Rate)(Beta)
*Beta: exp return = risk-free rate + (market risk premium * beta) |
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Term
wk 9
Expected Return on Market |
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Definition
| exp return = risk-free rate + (exp return on market - risk-free rate)(beta) |
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Term
wk 9
Cost of Preferred Stock |
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Definition
| dividends / selling price |
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Term
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Definition
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Term
wk 9
Aftertax Cost of Debt |
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Definition
| embedded cost (1-tax rate) |
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Term
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Definition
| cost of E [1 / (1+DE ratio)] + cost of D [DE ratio / (1+DE ratio)](1-tax rate) |
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Term
wk 9
Total risk is measured by....
Systematic risk is measured by... |
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Definition
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Term
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Definition
| (CA15 - CL15) - (CA14 - CL14) |
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Term
wk 10
Change in Gross FA (net cap spending) |
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Definition
| net FA 2015 - net FA 2014 + depreciation |
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Term
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Definition
| ebit - taxes + depreciation - change in gross FA - change in NWC |
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Term
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Definition
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Term
wk 10
Stock Price (FCFF)
*Eo |
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Definition
Eo / shares outstanding
*Eo = value of firm - LTD** + CL
**LTD trade % |
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Term
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Definition
| FCFF - interest + (LTD15 - LTD14) |
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Term
wk 10
Stock Price (FCFE)
*Eo |
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Definition
Eo / shares outstanding
*Eo = FCFE / (cost of equity - g) |
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Term
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Definition
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Term
|
Definition
| EBIT / sharesP1 = [EBIT - debt interest %(debt)] / sharesP2 |
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Term
wk 11
MM Prop 1 w/ No Taxes, Share Price |
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Definition
| debt / (sharesP1 - sharesP2) |
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Term
wk 11
value of firm All Equity |
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Definition
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Term
wk 11
value of firm Levered |
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Definition
| $ per share (shares) + debt |
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Term
wk 11
value of firm Unlevered
*if borrows |
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Definition
EBIT (1-tax rate) / cost of equity
*if borrows, value firm unlevered + (tax rate * borrow amount) |
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Term
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Definition
[(VE / VL) * RE] + [(debt / VL) * coupon %) * (1-tax rate)]
*RE = cost of cap + [(cost of cap - coupon %) * (debt / VE) * (1-tax rate)] |
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Term
wk 11
How should a company select capital structure? |
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Definition
| The structure that maximizes the value of the firm |
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Term
wk 11
What does MM Prop 1 w/ Taxes imply? (2) |
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Definition
WACC decreases as DE ratio increases
Value increases as debt increases because of the interest tax shield |
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Term
wk 11
Pecking Order Theory uses what first? |
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Definition
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Term
wk 11
What type of firm is Unlevered Cost of Capital |
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Definition
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