Corporate Finance Complete Exam Study Set |100% Correct| Question and Answers

Corporate Finance Complete Exam Study Set |100% Correct| Question and Answers Financial break-even *Ans* Financial break even NPV solved=0, OCF* for NPV=0 Q=(FC+OCF*)/ (P-v) v=variable cost per unit General Break-Even *Ans* Q=(FC+OCF) /(P-v) Constant Growth Model (infinite) *Ans* a widely cited dividend valuation approach that assumes that dividends will grow at a constant rate, but a rate that is less than the required return Constant Growth Model (finite) *Ans* Should include terminal value (what you sell it for) @ end To do so you calculate the non-constant growth rate until horizon date T...then calculate the terminal value as you would in an infinite CGM w/ denominator raised to power T expected rate of return (constant growth model) *Ans* The rate of return expected to be realized from an investment; the weighted average of the probability distribution of possible results capital gains yield *Ans* the dividend growth rate, or the rate at which the value of an investment grows Dividend Yield *Ans* a stock's expected cash dividend divided by its current price terminal value (Horizon Value) *Ans* the sale price at the end of the expected holding period Perpetual Growth Method *Ans* dividing the last cash flow forecast by the difference between the discount rate and terminal growth rate. The terminal value calculation estimates the value of the company after the forecast period. (FCF * (1 + g)) / (d - g) Free Cash Flow Valuation Model *Ans* A model that determines the value of an entire company as the present value of its expected free cash flows discounted at the firm's weighted average cost of capital, which is its expected average future cost of funds over the long run.