Chapter 13 Cue Cards

Question	Answer
Define Capital Structure	Firms mix of long financing (debt and equity)
Define Cost of Capital	Return the firms investors could expect to earn if they invested in securities
What is the WACC	Average of returns on debt and equity with weights depending on relative market values
Why use market values not book values	Book values are issued, market values are real
Is debt interest tax deductible T/F	True Ya it is
How to calculate Market Value	Market value of a company's bonds is the PV of all coupons and par value discounted at current int rate
Financial Managers use Yield to Maturity on the bond as expected return T/F	True
Formula for Expected Return on Preferred Stock	rpreferred = Dividend / Price preferred
What are flotation costs	Implementing financing decisions when evaluating projects
Define Horizon Value	Value at a specified time
Do floatation costs affect WACC	No. They are treated as a negative cash flow in the NPV Calculation

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	Created by dylan_earl about 9 years ago