Advanced Corporate Finance-MT

Book need to be used for this questions is FINANCIAL THEPRY AND CORPORATE POLICY 4TH EDITION, COPELAND-WESTON-SHASTRI

CHAPTER 1,2 & 6

Questions:

1. What is the role of interest rates when firms make investment and consumption decisions?

2. What is marginal rate of substitution (MRS)?

3. What is the Fisher Separation Theorem?

4. What is the importance of capital markets? What do they accomplish?

5. How do transaction costs affect financial markets?

6. What is the ‘Agency Problem’?

7. What is the ‘Unanimity Principle’?

8. Explain the economist’s definition of profit?

9. How does FIFO and LIFO (cost of goods pricing techniques) tie in to the difference between the definition of profit from an accountant and an economist?

10. What is the optimum value of a capital budgeting technique? What effect should the best (most effective) technique have? What are the most prevalent techniques used? Their strengths and weaknesses?

11. What is the ‘reinvestment rate’?

12. What is the Capital Pricing Model (CAPM)?

a. Who developed the model?

b. How is it used?

c. What are its applications?

d. What empirical tests have been done?

13. What is the Arbitrage Pricing Theory (APT)?

a. Who developed the model?

b. How is it used?

c. What are its applications?

d. What empirical tests have been done?

14. What is the Market Risk Premium?