1. Corporate Finance: Review for Final Exam
Professor Scott Hoover
Business Administration 221

2. Financial Statements (review) Financial Statement Analysis
Introduction
Time Value of Money
Basic Intuition: Indifference
Present Value vs. Future Value
Financial Statements (review)
Financial Statement Analysis
What questions are important in assessing the health of a firm?
The DuPont Relationship
Ratios
Difficulties with Financial Statement Analysis

3. Financial Forecasting
Importance
The Typical Methodology (Percent-of-Sales Forecasting)
The Cash Budget
What is a cash budget?
Basic methodology
Growth Management
What is the optimal growth rate for a company?
The Sustainable Growth Rate

4. Financing Financial Securities How much debt should a firm have?
Benefits of Debt
Drawbacks of Debt
A Second Look at ROE….
The relationship between interest rates on debt and ROIC
FRICTO Analysis
Difficulties in determining the optimal level of debt
Financial Securities
Bonds
Derivatives
Stock

5. Capital Budgeting How are projects created? Relevant Cash Flows
Capital Expenditures
Salvage Cash Flows
Operating Cash Flows
Changes in Net Working Capital
Opportunity Costs
Externalities

6. The Weighted Average Cost of Capital (WACC)
Cost of Equity
Cost of Debt
Cost of Preferred Stock
Project Evaluation Techniques
NPV
IRR
mutually exclusive projects

7. EXAM STRUCTURE
Topic
# of Problems
Points
General 4 40
Stocks 1 10
Capital Budgeting 3 50
Type
Problem Solving 60
Short Answer/Essay