Intermediate Financial Management exam with complete solutions.
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Grado
Financial management
Institución
Financial Management
Corporate finance provides the skills for managers need to:
1. identify and select corporate strategies and individual projects that add value to their firm
2. forecast the funding requirements of their company
Three business organization from start-up to a major corporation?
1. sole prop...
Intermediate Financial Management exam
with complete solutions
Corporate finance provides the skills for managers need to: - ANSWER-1. identify and
select corporate strategies and individual projects that add value to their firm
2. forecast the funding requirements of their company
Three business organization from start-up to a major corporation? - ANSWER-1. sole
proprietorship
2. partnerships
3. corporations
Advantages and disadvantages of sole proprietorship: - ANSWER-ad: tax ad, easy to
start, cheaper
dis: unlimited liability, limited capital
Advantages and disadvantages of a corporation: - ANSWER-ad: limited liability,
unlimited life, easier to raise capital, easier to transfer ownership.
dis: double tax, harder to start, costly paper work requirements
Becoming a public corporation in 2 two ways? - ANSWER-1. IPO -raises capital, allows
found to "cash out"
2. SEO - or issue debt
What is the agency problem? - ANSWER-managers do not always act in the best
interest of the owners
What is corporate governance? - ANSWER-is a set of rules that controls a company;s
behavior towards its directors, mangers, employees, shareholders, creditors,
customers, competitors and community.
What is the primary goal of any firm? - ANSWER-maximize shareholders wealth
, Is maximizing stock price good for society, employees, and customers? - ANSWER-
higher employment growth: 1. that makes managers owners (LBO's), 2. privatized gov't
firm
What three aspects of the CF's affect an investment's value? - ANSWER-1. times of
CF's (sooner)
2. amount of CF's (more)
3. risk of CF's (less)
Free Cash Flows = - ANSWER-sales rev - operating costs - operating taxes - required
investments in operating capital
WACC (weighted average cost of capital) - ANSWER-is the average required by
investors
WACC is affected by ? (4) - ANSWER-1. interest rate
2. capital structure
3. risk of firm
4. investors attitude towards risk
Intrinsic value? - ANSWER-is the sum of all the future expected free cashflows when
converted into todays dollars: FCF 1/ (1+WACC)^1 + FCF 2 (1+WACC)^2
Types of security: money market and capital market securities ? - ANSWER-money
market- maturity is less than a year
capital market - maturity is more than one year
Financial markets do what ? - ANSWER-connect providers of capital (savers ) with
users of capital (borrowers )
Who are the providers (savers) and users (borrowers) of capital?
1. Households
2. Non-financial corporations:
3. Governments:
4. Financial corporations: - ANSWER-1. net savers
2. not borrowers
3. net borrowers (may be wrong)
4. almost break even
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