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About this document
- Pages
- 7 pages
- Price
- $7 one-time, yours to keep
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- Format
- Subject
- Accounting, Corporate Finance, Finance
- Module
- FIN571 · Week 5
This document contains multiple choice questions on corporate finance, with solutions. It covers topics such as capital rationing, cost of capital, and bond pricing. It is for Week 5 of the FIN571 module.
What's inside
- Capital rationing and profitability index
- Cost of capital and WACC
- Bond pricing and YTM
- After-tax cost of debt
- Cost of equity and beta
Who it is for: Students taking the FIN571 Corporate Finance module in Week 5. (Postgraduate)
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Summary
Corporate finance is about how firms make decisions about investments and raising money. Students can practise multiple choice questions on topics like capital rationing, cost of capital, and project evaluation.
Capital Rationing
Capital rationing is about choosing the best projects when there is not enough money for all of them. Students can practise questions on how to calculate the profitability index of a project.
Cost of Capital
Cost of capital is the return that a firm must earn on its investments to satisfy its investors. Students can practise questions on how to calculate the cost of equity and the cost of debt.
Project Evaluation
Project evaluation is about deciding whether to invest in a project. Students can practise questions on how to calculate the internal rate of return and the net present value of a project.
Key terms
- Capital Rationing
- The process of choosing the best projects when there is not enough money for all of them.
- Cost of Capital
- The return that a firm must earn on its investments to satisfy its investors.
- Profitability Index
- The ratio between the present value of the cash inflows and the initial investment of a project.
- Weighted Average Cost of Capital
- The average cost of a firm's different sources of capital, weighted by their proportions.
- Yield to Maturity
- The total return that an investor earns if they buy a bond and hold it until it matures.
- Beta
- A measure of a firm's stock price volatility compared to the overall market.
Questions this document helps with
- How do firms decide which projects to invest in?
- What is the cost of capital and why is it important?
- How do firms estimate the return they need to earn on their investments?
Summary written with AI from the document's text.
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