Day 18

Question 1

Equation: WACC

Answer 1

= (Debt Weight × Cost of Debt) + (Equity Weight × Cost of Equity)

Question 2

The three elements needed to estimate the cost of equity capital of a firm using the weighted average cost of capital are:

Answer 2

1. Current Dividends per share (D)
2. Expected growth rate in dividends (g)
3. Current market price per share of Common Stock (P)

MCQ-03920

Question 3

Equation: Annual OCF

Answer 3

= Pretax Cash Flow × (1 - Tax rate) + (Depreciation × Tax rate)

MCQ-08558

Question 4

The Net Present Value =

Answer 4

Discounted after tax cash flow minus the initial investment

MCQ-04983

Question 5

Equation: Cost of Retained Earnings

Answer 5

= (CY Dividend × 1 + Growth Rate) ÷ Share Price + Growth Rate

MCQ-08993

Question 6

Five Components of Enterprise Risk Management: GO PRO

Answer 6

• Governance and Culture DOVES
• Strategy & Objective Setting SOAR
• Performance VAPIR
• Review & Revision SIR
• Ongoing Information & Communication and Reporting TIP

MCQ-00641

Question 7

Equation: Economic Value Added

Answer 7

Net Operating Profit After Tax (NOPAT) less required return (after tax cost of capital on the investment)

NOPAT = EBIT × (1 - Taxes)

MCQ-08548

Question 8

Components of ERM: Governance and Culture DOVES

Answer 8

• Desired culture
• Oversight Executive board
• Values
• Employees are attracted to the company
• Structure of company is established

MCQ-00641

Question 9

Components of ERM: Objective & Strategy setting SOAR

Answer 9

• Evaluates alternative Strategies
• Formulates business Objectives
• Analyze
• Define Risk appetite

MCQ-00641