HFT 4464 Exam 3 Review. This Exam Covers the Following Topics Chapter 8:Cost of Capital Chapter 9:Capital Budgeting Chapter 10:Capital Budgeting Methods.

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Presentation transcript:

HFT 4464 Exam 3 Review

This Exam Covers the Following Topics Chapter 8:Cost of Capital Chapter 9:Capital Budgeting Chapter 10:Capital Budgeting Methods 50 Multiple Choice Questions Total 16 are vocabulary oriented

Chapter 8 Solve problems for Cost of Capital –Cost of Debt –After Tax Cost of Debt –Cost of Preferred Stock –Cost of Internal Equity –Cost of External Equity –Weighted Average Cost of Capital –See Worksheet Problem & quiz from Ch. 8

Chapter 9 Calculate Net Investment for a Project Calculate Net Cash Flows for a Project Similar to Chapter 9 homework –Know difference in opportunity & sunk costs

Chapter 10 Capital Budgeting Problems for the Following Methods –Payback period –Discounted payback period –Net present value –Profitability index –Internal rate of return –Modified internal rate of return Refer to handout sample problem

Vocabulary Independent versus mutually exclusive decision Definition of opportunity cost What are net cash flows? Definition of payback period Net present value & scale differences Issuance costs Purposes for considering a capital project Marginal cost of capital What is terminal value in the MIRR formula?

Other Notes: You must provide your own Scantron –Brown form 2052 You must provide your own calculator Formula sheet will be provided Tables will be provided Scratch paper will be provided Questions?