Chapter 1
How many owners are there in a Sole Proprietorship?
1
The main disadvantage of a C-Corp?
Double Taxation
Formula to find the PV of a FV?
PV=FV/(1+r)^n
Formula for PV of a perpetuity?
PV=C/R
What is the Equivalent n Period Discount rate?
(1+r)^n-1
What are the 3 main tasks of the finaicial manager?
Investment, Financing, Manage working capital
What is the formula for Enterprise Value?
EV=MVE+Debt-Cash
Formula to find FV of a PV?
PV*(1+r)^n
Formula for PV of a growing perpetuity?
PV=C/r-g
If given a 35% 3-year effective rate, what is the equivalent discount rate over 1 year?
10.521%
The overall goal of the financial Manager
Create value for shareholders.
What is the Market Value of Equity of a firm with share price of $100 and 1 million shares outstanding?
$100,000,000
What is the definition of cost benefit analysis?
If the benefits outweigh the costs then that is a good decision
Iwould like to retire and spend $350,000/year for the rest of my life. If i can achieve 5% on my investments, how much would i need to deposit today?
$7,000,000
Formula for real rate of interest?
((1+Nom)/(1+Inf))-1
List the 4 types of firms
LLC, Sole Proprietorship, Corporation, Partnership
What are the 4 financial statements?
Balance Sheet, Income Statement, Statement of Cashflows, Statement of shareholders Equity
If Disney share price is $100 and Tesla is $120, would you trade 20 shares of Tesla for 25 shares of Disney?
Yes. 25 shares of disney are worth more than 20 shares of Tesla.
Formula for PV of a growing annuity?
PV=C*(1/r-g)*(1-(1+g/1+r)^n)
Formula to get and EAR from an APR?
(1+APR/m)^m - 1
A C-Corp earns $5.00 before tax. the Corp tax rate is 40% and tax on dividend income is 15%. How much earnings are left for shareholders after all taxes are paid?
$2.55
What are the ratios that make up the Dupont Formula?
Net Profit margin, Asset Turnover, and Equity Multiplier
What is the FV of $150 deposited for 10 years earning 10%?
$389.06
$4,796.40
Formula to find PV of a risk free annuity?
PV=CF/(1+r)^n