Finc 630 Midterm Review Exam Questions (74 Terms) With Verified Definitions Updated 2024

Finding cost of capital for projects with different risks from entire firm {Ans: similar procedure as for divisions. Find public comparables and use their equity betas for inference.}What capital structure do you use to unlever equity to asset beta, and lever asset beta to equity beta? {Ans: When unlevering, use the capital structure of the company during the estimation period. When relevering, use target capital structure the company will apply going forward.}Different methods to find cost of debt: {Ans: - Expected YTM method is best and most accurate, but requires most info. - Yield on treasuries + credit spread uses less info, but need info on credit rating. - Synthetic credit rating method is based on financial ratios to determine estimated credit spread. - CAPM and debt beta: if given cost of debt, can find debt beta - ask investment banker but not used often.}active monitoring {Ans: done by board and large shareholders}how to evaluate the board of directors: {Ans: size, composition/are there enough independent directors, are directors qualified, how busy are they, is it easy to remove captured directors/are elections staggered, how are they compensated, is there a split between CEO and chairman of