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Fundamentals of Finance 1 > Chapter 8 > Flashcards

Chapter 8 Flashcards

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1
Q

WACC

A

weighted average cost of capital

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2
Q

WACC=

A

WACC = Wequity * Requity + Wdebt * Rdebt * (1-tax rate)

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3
Q

Weight of equity =

A

MCAP / value of the firm

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4
Q

Weight of debt =

A

Market value of debt/ value of the firm

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5
Q

value of the firm=

A

MCAP + market value of debt

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6
Q

interest tax shield:

A

lowers tax payments because interest expense is reported above the line that reports pre-tax profits.

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7
Q

WACC with preferreds =

A

same formula + Wpreferreds * Rpreferreds

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8
Q

Wpreferreds =

A

market value of preferreds / value of the firm

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9
Q

Rpreferreds =

A

dividend per share / price(preferred)

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10
Q
A
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Fundamentals of Finance 1 (9 decks)

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