Full Course Summary of advanced Finance course in a later stage of the Bachelor. Mostly material on equity valuation, debt vs. equity financing and asset pricing such as CAPM as well as derivatives and real options.
Forward P/E Ratio based on expected Earnings in the next 12 months
Most useful comparable = EV/Sales
Efficient market Hypothesis
= relevant information is quickly (almost instantly) and correctly incorporated into the prices of
securities
Securities are priced based on their future cash flows
Securities with equivalent risk have the same expected return
Implications for Corporate Managers:
1) Focus on NPV and Free Cash Flow
2) Focus on free cash flows and not accounting earnings
With efficient markets, accounting decisions don’t always affect value of the firm
3) Use financial transactions to fund investment (liquidity provided by financial markets)
,Chapter 12: Estimating the cost of Capital
Equity cost of capital rule of thumb → 𝑟𝐸 = 𝐷𝑖𝑣. 𝑌𝑖𝑒𝑙𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller mathiasm1. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.35. You're not tied to anything after your purchase.
