Suppose the MRP = 6% and your estimate the firm’s Levered Beta to be 1.15. Your estimate of the Cost of Equity for the firm is 12.0%. What is the approximate yield on a 10-year US Treasury?

Suppose the MRP = 6% and your estimate the firm’s Levered Beta to be 1.15. Your estimate of the Cost of Equity for the firm is 12.0%. What is the approximate yield on a 10-year US Treasury?

F402/560 // MID-TERM EXAM OVERVIEW GENERAL INFORMATION 25 multiple choice questions; 4 points each; 100 possible points Students may prepare 2 letter-sized pages of notes (front & back) for use with the exam The notes will collected with the exam and destroyed after the exam is completed The exam is the property of the instructor and will be collected after feedback and comments QUESTION CONTENT OVERVIEW QUESTION TOPIC/COMMENT Impact of financing on NOPAT ROIC needed to achieve desired EVA What drives value? What doesn’t drive value? Calculate NOPAT given Capital & ROIC Calculate Horizon Value X, Y & Z … what’s the difference? Negative FCF … Positive EVA … meaning? Calculate ROIC given simple financial statement Calculate EVA given simple financial statement 10 What goes into Invested Capital? What doesn’t? 11 Calculate Invested Capital from a simple financial statement 12 Calculate NOPAT from a simple financial statement 13 Calculate Free Cash Flow from a simple financial statement 14 Applying Mid-Year Discounting 15 How do you compute NOPAT under the Financing Approach? 16 Analyze the disposition of Free Cash Flow in a simple example 17 Use M&M theory to calculate NOPBT 18 Use M&M theory to calculate the Unlevered Cost of Capital 19 Use M&M Theory and the Value Driver Model to estimate Value 20 Evaluate the Price per Share of a company 21 Estimate Market Value Added from simple financial projections 22 Estimate Value from simple financial projections 23 Given r, c* & b what should a company do? 24 Given r, c* & b what should a company do? 25 Given r, c* & b what should a company do?

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