Chapter 14 - Debt & Equity Financing Flashcards
1
Q
Required return
A
minimum return to get NPV > 0
aka cost of capital / discount rate
2
Q
cost of equity
A
return required by equity investors
3
Q
cons of gordon growth model
A
- only applicable for dividend payers
- k-e is influenced by g
- no consideration of risk
4
Q
firm value
A
A+L=E
5
Q
cost of debt
A
observable, return required by creditors for borrowing
6
Q
tax cuts and jobs act 2017
A
limits amount of interest deduction to 30% of EBITDA
7
Q
WACC
A
required return on assets to maintain stock-price
most popular form of economic value added
8
Q
total equity
A
shares outstanding * book value per share
9
Q
WACC * capital < CF
A
firm is destroying value
