MBA 530 Test 3
Home > Flashcards > Print Preview
The flashcards below were created by user
Calbrenar
on
FreezingBlue Flashcards. What would you like to do?

WACC
 = WdRd(1T) + WpRp + WsRs
 Weighted Avg Cost of Capital


embedded rate
avg rate on previously issued debt. also historical rate

project financing
large project w/ special financing that get's a claim on project specific cash flows.

F
% flotation cost (% of proceeds paid)





RHATs
= Rs = D1/P0 + Expected g

Re
 = RHATe = D1/(P0(1F)+g)
 Cost of common equity

Uncontrollable Financing Factors
 Stock & Bond Market
 Market Risk Premium
 Tax Rates

Controllable Financing Factors
 Capital Structure Policy
 Divident Policy
 Investment Policy

Independent  NPV > 0
Exclusive
 Accept both Projects
 Accept Highest NPV if > 0

Independent  IRR > WACC
Exclusive
 Accept Both
 Accept highest IRR if > WACC

MIRR
Same as IRR but cash flows invested at WACC instead of IRR

NVP Profile
What is IRR
Where NPV = 0

Profitability Index (PI)
= PV of Future Cash Flows / Initial Cost

Payback (PB)
# of years prior to full recovery of cost + unrecovered cost / cash flow during full recovery year

Discounted PB
cash flows discounted at WACC