Extra Flashcards
Capital structure
mix of long and short term debt to finance a project
what happens to bond prices as IR increases?
decreases
bonds with specific maturity’s and ytm with highest risk
long t, low ytm
bond price risk is also called
interest rate risk
a coupon is a what payment?
int
bonds or shares riskier
shares
speculative or investment bonds have a lower default risk rate
investment
common shares and preference shares
preference shares paid 1st, fixed, no voting rights, infinite
common shares paid 2nd, not fixed, voting rights if company doing well
bond or shares fixed time period
bonds
if intrinsic value is < market value
overvalued, sell
tax savings using cd, atcd
cd-atcd
tax savings comes from the ability to __- which
minus dep which decreases EBIT (taxable income)
D to E ratio
D/E
leverage affects tax rate?
no
leverage magnifies
variability in net income for shareholders
CR<YTM
discount
investment bonds rating
AAA-BBB/Baa
primary and secondary market
primary- debt, secondary- shares
what is the number one factor when deciding cost of capital
risk
ex-dividend day is when
one day before record date
you won’t receive the dividend if you buy __
on or after ex-div day
