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Finance Review

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CH2 Assets=Liabilities +Stockholder’s Equity
Cash Flow From Firm’s Assets=Cash Flow to Creditors + Equity Investor →CF(A)=CF(B)+CF(S)
一、 CF(A)=Operating Cash flow (OCF)-CAPEX-△NWC
1) OCF(看income statement)=EBIT + Depreciation -Tax paid
EBIT=Revenue-Cost-Depreciation Tax=(EBIT-interest)*tax rate
Earnings per share=Net income/total share outdating’s
Dividends per share=Dividend/ total share outdating’s
2) CAPEX定义:Acquisitions-Sales of fixed assets 是out flow 需被finance
CAPEX=△Total fixed assets+△accumulated depreciation=△PPE+△intangibles
3) △NWC=NWCend-NWCbeg financed by firm,是cash outflow长期
NWC=current assets-current liabilities
二、 CF(B)=Interest paid +debt retired-debt issued= Interest paid-New borrowing
CF(B)= Interest paid-(ending long-term debt-beginning long-term debt)
三、 CF(S)=Dividends +share buybacks-stock issued
Share buyback=treasury stock(end-beg)
Stock issued=△common stock+△capital surplus

CH7 Capital budgeting:accept or reject project.
一、 NPV:difference between sum of PV of future cash flow(只用cash flow,no earnings会计学上的;全部的CF of the project,discount rate)and initial cost.
NPV rule:大于0接受,小于0reject.Positive NPV benefit stockholders
Firm value=各种NPV加总(源自于cash flow)cash flow can only be estimated, 有risk
Discount rate:return expected to earn on a financial asset of risk→opportunity cost
二、 Payback period: time that CF-initial cost>0,选择一个particular cutoff date对比之
NO timing of cash flow;ignore payment after (short-term偏好,long-term好项目被拒); cut-off date 随便选择的
三、 IRR: independent on interest rate in capital market, only on cash flow of the project
IRR: rate making NPV=0.csot为负,investing,IRR>discount rate,接受;cost为正,Financing,IRRDrate,接受
五、 Profitability Index=PV of future CF(不含最初的投资)/Initial investment>1接受
Capital rationing:资金有限问题
CH8 Makeing capital investment decisions

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