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Review Topics for Exam 1

1. Two major features of corporation, and its other characteristics

2. Agency problems: types, examples, methods to deal with them

3. PV of a series of cash flows (single cash flow, annuity, perpetuity, uneven cash flows)

4. Bond valuation: annual or semi-annual compounding

5. Stock valuation using dividend growth model: constant growth, super-normal growth

6. Compare terminologies: rate of return, and cost of capital

7. Cost of debt and cost of preferred stock

8. Beta vs. Sigma, market risk vs. firm-specific risk

9. Cost of common equity (using CAPM and DCF methods)

10. WACC

11. Percent of sales method

12. Net new financing, and how to adjust financial variables to eliminate it?

13. In a planned expansion, how to forecast production volume, sales, PPE, debt and interest expenses?

14. FCF

15. Enterprise value

16. How to use discounted free cash flow method to predict stock value?

17. How to value stock based on comparable firms?

18. All the quizzes and homework assignments, and sample test.