PASSED FINAL CUTIE GF

Question 1

required return necessary to make capital budgeting project

Answer 1

COST OF CAPITAL

Question 2

business is financed through equity

Answer 2

COST OF EQUITY

Question 3

used by companies internally judge whether capital project is worth the expenditure of resources

Answer 3

COST OF CAPITAL METRIC

Question 4

depends on the mode of financing used

Answer 4

COST OF CAPITAL

Question 5

financed solely through debt

Answer 5

COST OF DEBT

Question 6

represents hurdle rate that company must overcome before can generate value

Answer 6

COST OF CAPITAL

Question 6

many companies used this combination of debt and equity to finance the business

Answer 6

WEIGHTED AVERAGE COST OF CAPITAL (WACC)

Question 7

overall (blank) is derived from weighted average cost of all capital resources

Answer 7

OVERALL COST OF CAPITAL

Question 8

From the perspective of an investor the cost of capital is?

Answer 8

is the return expected by whoever is providing the capital for a business

Question 9

WHY IS COST OF CAPITAL IMPORTANT?

Answer 9

helps investor assess their options.

assists capital budgeting since businesses must decide if project worthwhile before starting.

essential for businesses to design the ideal capital structure of their firm.

used to evaluate the performance of certain project compared to cost of capital.

Question 10

companies’ interest rates they pay on any debt such as mortgages or bonds

Answer 10

COST OF DEBT

Question 11

return a company requires to determine if the capital return requirements are met investment

Answer 11

COST OF EQUITY

Question 12

business’ cost of capital is based on weighted average of the cost of debt & cost of equity

Answer 12

WEIGHTED AVERAGE COST OF CAPITAL

Question 13

process business undertakes to evaluate major projects or investment

Answer 13

CAPITAL BUDGETING

Question 14

company might assess a prospective project’s lifetime cash inflows and outflows to determine whether the potential return would generated meet sufficient target benchmark

Answer 14

CAPITAL BUDGETING

Question 15

looks at the initial cash outflow needed to fund a project, mix of cash inflows in the form of revenue, and other future outflows in the form of maintenance and other costs.

Answer 15

DISCOUNTED CASH FLOW ANALYSIS

Question 15

cashflow except for the initial outflow are discounted back to the present date

Answer 15

PRESENT VALUE

Question 15

resulting number from the DCF analysis

Answer 15

NET PRESENT VAUE

Question 15

discounted since present value states than an amount of money today is worth more than same amount in the future

Answer 15

CASH FLOW

Question 16

use combination of debt-such bonds or bank credit, it or the cost of capital

Answer 16

PUBLICY-TRADED COMPANIES

Question 17

calculate the hurdle rate or the minimum amount that the project needs to earn from its cash inflows to cover the costs

Answer 17

GOAL OF COST OF CAPITAL

Question 18

simplest form of capital budgeting analysis

Answer 18

PAYBACK ANALYSIS

Question 19

widely used because it’s quick and can give managers “back of the envelope” understanding the real value of proposed project

Answer 19

PAYBACK ANALYSIS

Question 20

most complicated form of capital budgeting analysis, also the most accurate in helping managers decide which project to pursue

Answer 20

THROUGHOUT ANALYSIS

Question 21

calculates how long it take to recap the costs of investment

Answer 21

PAYBACK ANALYSIS

Question 22

used when companies have only a limited amount of funds to invest in a project

Answer 22

PAYBACK ANALYSIS