H2
, (met C_{0} vaak negatief)
Two equivalent decision rules for capital investment:

Net present value rule: accept investments that have positive net present values

Rateofreturnrule: Accept investments that offer rates of return in excess of their opportunity costs of capital.
H3
Present value of growing perpetuity(met g de verwachte groei en r het discontopercentage.)
(met DF de discount factor voor aantal periodes t)
Annuity factor =
PV=C*Annuity factor
DCF (Discounted cash flow) formula:
Bij betaling C aan eind ieder jaar:
Bij betaling C aan begin ieder jaar:
Bij continue betaling C per jaar: reken eerst r uit door:
1 dollar geïnvesteerd met een contiously compounded rate of r, zal groeien tot e^{r}. Aan het einde van t jaren zal het groeien tot e^{rt}. Nadat r gevonden is, gebruik maken van
Compounded annualy:
Compounded semiannually:
Compounded contiously: e^{rt}
Real cash flow nominal cash flow inflation rate
H4
The cash payoff to owners of common stocks comes in two forms:

cash dividends and

capital gains or losses
Stock prices:
of ook
Expected return = r =
(of ) met g de verwachte groei en r het discontopercentage.
Plowback ratio=1payout ratio = (EPS is earnings per share)
Return on Equity = ROE =
Dividend growth rate=g=Plowback ratio*ROE=
(met PVGO the present value of growth opportunities)
Earningsprice ratio, therefore equals:
Free Cash Flow (FCF) is the amount of cash that a firm can pay out to investors after paying for all investments necessary for growth.
H14
Par value =
Gemiddelde prijs waarvoor aandelen verkocht zijn:
Aantal aandelen wat is teruggekocht: “in issue” – “outstanding”
Prijs teruggekochte aandelen = Treasury shares / aantal wat is teruggekocht
Net common equity =
Common stock + Additional Paid in Capital + Retained Earnings + Treasury shares
H15
Why are the costs of debt issues less than those of equity issues?

Easier, cheaper issuing process. Less risk to investors. Less risk of initial mispricing, hence less risk for the underwriters.
H29
Net working capital = current assets – current liabilities
Dupont system:
=salestoassetsratioprofit margin
= leverage ratio x salestoassetsratio x profit margin x “debt burden”
H32
Altman’s discriminant analysis:

Z<1.2 predicted to go bankrupt

1.2 < Z < 2.9 hovering in gray area
Five steps in credit management:

Establish normal terms of sale

Decide the form of the contract with your customer

Assess each customer’s creditworthness

Establish sensible credit limits

Collect
Some of the most important ratios with regard to credit management to consider are:

Measures of leverage: debt ratio, timesinterestearned

Measures of liquidity: cash ratio, quick ratio

Measures of profitability: return on assets

Measures of efficiency: especially important is the average collection period.

Marketvalue ratios: such as the markettobook ratio
Identifying the least informative ratios depends on the circumstances. However, some points to note in this regard are:

Efficiency ratios are often difficult to interpret.

Liquidity ratios may be misleading in some circumstances, for example, if a company has an unused line of credit.

A high priceearning ratio might be the result of temporarily low earnings.
H33
Cash acquisition:
Cost = Cash Paid – PV_{B}
Stock acquisition:
Cost = NxP_{AB}  PV_{B}
Met P_{AB }de prijs per aandeel NADAT de merger aangekondigd is.
NPV = gain – cost
Two reasons why sellers earn higher returns:

Buying firms are typically larger than selling firms

The competition among potential bidders
H34
Motives for privatization:

Increased efficiency

Share ownership

Revenue for the government

In the U.S., the largest shareholders of corporations are financial institutions. However, since ownership is usually widely dispersed, effective control often rests with management. In many countries outside the U.S., families and governments often have large equity stakes.

Top managers in Germany are more likely to balance the interests of all stakeholders (rather than just those of shareholders), but poor performance can still result in management turnover.

Carveout or spinoff of a division improves incentives for the division’s managers. If the businesses are independent, it is easier to measure the performance of the division’s managers.

The limited life of a privateequity partnership reassures the limited partners that the cash flow will not be reinvested in a wasteful manner. It also tends to ensure that partnerships focus on opportunities to reorganize poorly performing businesses and to provide them with new management before selling them off.

The remuneration package for the general partners typically includes a 20% carried interest. This is equivalent to a call option on the partnership’s value and, as is the case for all options, this option is more valuable when the value of the assets is highly variable.
