Corporate Finance / Corporate Valuation Flashcards
1
Q
Net Working Capital
A
Current Assets (Cash + Inventory+ Accounts Receivable) - Current Liabilities (Accounts Payable)
2
Q
Free Cash Flows
A
NOPAT [(Revenues - costs - depreciation)*(1-t)] + Depreciation - CapEx
3
Q
What Tax rate do we use for calculating FCF
A
Should use the tax rate on each additional dollar (marginal)
4
Q
Discount Rate
A
the cost of capital - Must account for 1) Time value of money, 2)riskiness of cash flows; Rate must also account for opportunity cost to investors (return on investment of similar risk)
5
Q
ROI
A
(Total Benefits - Total Cost)/Total Cost
Return on investment does not account for time (projects can have the same ROI but different return rates)
