Chapter 1 (An overview of financial management and the financial environment) Flashcards
1
Q
How to do you calculate FCF?
A
EBIT *(1-t) =NOPAT \+ Dep =OCF \+ Change NOWK \+ Change CAP Ex =FCF
2
Q
the average rate of return required by all the company’s investors
A
WACC (weighted average cost of capital)
3
Q
the sum of all the future expected free cash flows when converted into today’s dollar
A
intrinsic value
4
Q
What do we call the price, or cost, of debt capital?
A
interest rate
5
Q
What do we call the price, or cost, of equity capital?
A
Cost of equity = required return = dividend yield + capital gain
6
Q
fee paid to broker for making the transaction
A
commission
7
Q
cost of trading with dealer
A
spread
8
Q
price dealer will buy from you
A
bid
9
Q
price dealer will sell to you
A
ask
10
Q
ask - bid
A
spread
