Midterm Study Flashcards
What should be included when determining the cash flows of a personal project, e.g., getting a degree?
- The pleasure derived from the project
- Initial cash outflow
- Cash inflows
- Subsequent cash outflows
- The psychological pain induced by the project
How can we calculate the value of an entire firm?
-As the sum of outstanding stocks and liabilities
-As all current and future net earnings
-As all current and future cash inflows minus outflows
NOT AS current and future revenue
The goal of financial management is to _____.
maximize the market value of equity (shareholder wealth)
The goal of financial management is to maximize the market value of the existing owners’ equity. For public companies, this is the same as maximizing the stock price, or shareholder wealth maximization.
The capital gains yield is the _____.
percentage change in the stock price
What is the value of a dollar received now compared to a dollar received in the future?
The current dollar is worth more, because it can be invested now.
The interest earned on previously accumulated interest is called _____ interest.
compound
Which of the following statements is correct?
The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as every quarter or every year.
What is the name for an infinite stream of constant payments occurring at regular time intervals?
Perpetuity
_____ makes markets efficient
Competition between investors
In an efficient market, _____.
all securities are fairly priced
A market where prices reflect all available public information is _____.
semistrong-form efficient
A market where prices reflect all information is _____.
strong-form efficient
A market where prices reflect all past trading data is _____.
weak-form efficient
If markets are semistrong-form efficient, _____.
trying to identify mispriced securities is futile
