CF chapter 14 Flashcards
1
Q
Capital structure
A
The relative proportions of equity and debt and other securities that the firm has outstanding
2
Q
Cost of Capital
A
The return required by investors who provide capital for the firm
3
Q
Leverage ratio (formula)
A
D/(D+E)
4
Q
Debt to equity ratio (formula)
A
D/E
5
Q
Expected return formula
A
(Cash flow + resale price / Purchase price) -1
6
Q
Equity of a firm formula
A
E = Possible outcomes / 1+rE
7
Q
Cost of equity formula
A
Ru + D/E (Ru - Rd)
8
Q
rU = rA = Formula (pretax waac)
A
rE * E/D *E + rD * D/D+E
