Chapter 2: Capital Structure, Cost of capital and Value of the firm Flashcards
1
Q
Capital Strucutre (def.)
A
a mix of equity and debt used to finance the activities
2
Q
Unlevered firm (def.)
A
a firm that does not use debt financing
3
Q
Levered firm (def.)
A
a firm that uses debt financing
4
Q
Firm Value (formula)
A
Operational CF / RR
5
Q
RR on equity (formula)
A
CF to shareholders / Equity fund
6
Q
Value of equity (formula)
A
firm value - total debt
7
Q
Value per share (formula)
A
value of equity / number of shares
8
Q
CF to shareholders (formula)
A
CF - interest
9
Q
Vf
A
Value of the firm
10
Q
Vs
A
Value of equity
11
Q
Vb
A
Value of debt
12
Q
Rs
A
RR on equity
13
Q
Rb
A
RR on debt
14
Q
WACC
A
(Vs / Vf) * Rs + (Vb / Vf) * Rb
15
Q
CFf
A
CF before interest
