RISK-ADJUSTED DISCOUNT RATE



GSBA 548 - Corporation Finance MBA.PM Spring 2007 Semester - J. K. Dietrich

Important Vocabulary from GSBA 548 Classes

CHIEF EXECUTIVE OFFICER (CEO)

CHAIRMAN OF THE BOARD

CHIEF FINANCIAL OFFICER (CFO), TREASURER, CONTROLLER

BOARD OF DIRECTORS, MANAGEMENT, FIDUCIARY DUTY

SARBANES-OXLEY BILL

BUY SIDE, SELL SIDE ANALYSTS

FINANCIAL MARKETS, MARKET FOR MANAGERS, MARKET FOR CONTROL

BOOK VALUE, MARKET VALUE

MARKET CAPITALIZATION, MARKET CAP

MARKET RETURN

VALUE ADDED

MARKET VALUE ADDED, ECONOMIC VALUE ADDED

NET PRESENT VALUE

PRESENT VALUE OF A CASH FLOW, PRESENT VALUE OF A SEQUENCE OF CASH FLOWS

CASH FLOW, DISCOUNT RATE, PAYMENT DATE OR MATURITY

PERPETUITY, GROWING PERPETUITY, ANNUITY, GROWING ANNUITY

SOURCES OF PRESENT VALUES, NON-LINEARITY OF PRESENT VALUE CALCULATIONS

VALUATION, PRESENT VALUE, INTRINSIC VALUE

NET PRESENT VALUE AND WEALTH, INCREASES IN WEALTH

CASH FLOW, DISCOUNT RATE, PAYMENT DATE OR MATURITY

PERPETUITY, GROWING PERPETUITY, ANNUITY, GROWING ANNUITY

VALUATION, PRESENT VALUE, INTRINSIC VALUE

DISCOUNTED BONDS AND BILLS

ZERO COUPON BONDS, CONSOLS

COUPON BONDS, COUPON RATE, BALLOON PAYMENT

MORTGAGES, SELF-AMORTIZING LOANS

CONSTANT PRINCIPAL PAYMENT LOANS

CALLABLE, CONVERTIBLE, SINKING FUND, SERIAL BONDS

TAX-ADVANTAGED BONDS, MUNICIPAL BONDS

RISK-ADJUSTED DISCOUNT RATE

STOCK PRICE INDICES

INVESTMENT STRATEGIES

PRICE-EARNINGS MULTIPLE

CASH FLOW PER SHARE

PRESENT AND FUTURE EARNINGS MULTIPLIERS

GROWTH AND VALUE FIRMS

CONSTANT GROWTH RATE OF DIVIDENDS MODEL

DIFFERENTIAL DIVIDEND GROWTH MODEL

PROFITABILITY INDEX, INTERNAL RATE OF RETURN

INCOME VS. CASH FLOWS, INCREMENTAL CASH FLOWS

SOURCES OF PRESENT VALUE IN PROJECTS

DEPRECIATION TAX SHIELD

INVESTMENT TAX CREDIT

ENTITY APPROACH TO FIRM VALUATION

FREE CASH FLOWS

PRO FORMAS

DUPONT ANALYSIS

RETURN ON EQUITY, RETURN ON ASSETS (GROSS AND NET)

PULLTHROUGH, AVERAGE CORPORATE TAX RATE

MARGIN, TURNOVER

INVENTORY TURNOVER, DAYS ACCOUNTS RECEIVABLE

NET PLANT TURNOVER

AVERAGE AGE OF NET PLANT

LEVERAGE

CONTINUING VALUE

COMPETITIVE ADVANTAGE

SEQUENCING OF INVESTMENT DECISIONS

REAL OPTIONS: GROWTH, TIMING, SWITCHING, EXPANSION/CONTRACTION, ABANDONMENT OPTIONS

EXPECTED CASH FLOWS

SCENARIO ANALYSIS, SENSITIVITY ANALYSIS

BREAK-EVEN ANALYSIS

HOLDING PERIOD RETURN, AVERAGE RATE OF RETURN, EXPECTED RETURN

STANDARD DEVIATION AND VARIANCE OF RETURNS

CORRELATION AND COVARIANCE OF RETURNS

PORTFOLIO, PORTFOLIO WEIGHTS, EFFICIENT PORTFOLIO

DIVERSIFICATION EFFECT

RISK-FREE INTEREST RATE, RISK PREMIUM, PRICE OF RISK

BETA (COEFFICIENT)

CAPITAL ASSET PRICING MODEL (CAPM)

SYSTEMATIC RISK, UNSYSTEMATIC RISK

CAPM EQUILIBRIUM RISK ADJUSTMENT

COST OF CAPITAL, COST OF EQUITY, COST OF DEBT

ASSET BETA

PROJECT BETA

PURE PLAY BETA, INDUSTRY BETA, DIVISIONAL BETA

EQUITY AND ASSET BETAS

WEIGHTED-AVERAGE COST OF CAPITAL

DIVISIONAL COST OF CAPITAL

WEAK, SEMI-STRONG AND STRONG EFFICIENCY

TESTS OF MARKET EFFICIENCY

MODIGLIANI-MILLER CAPITAL STRUCTURE IRRELEVANCE THEOREMS

TAX SUBSIDY WITH DEBT FINANCING, BANKRUPTCY COSTS, AGENCY COSTS OF DEBT, DEBT AND TAXES

MODIGLIANI-MILLER DIVIDEND IRRELEVANCE THEOREM

INFORMATION CONTENT IN DIVIDENDS, CLIENTELE EFFECT

MILLER-SCHOLES TAX STRATEGIES AND DIVIDEND IRRELEVANCE ARGUMENT

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