Note that page numbers correspond to the pages of the slides for each session.

Session 1: Time Value of Money

1) What is Time Value of Money (TVM)? What is Future Value (FV)? What is Present Value
(PV)?
(Pages 4 - 8)
2) What does it mean by “Compounding”? What does it mean by “Discounting”?
(Pages 10 - 18)
3) What is Perpetuity? What is Annuity?
(Pages 27 - 30)

Session 2: Investment Decision Rules

1) What is Net Present Value (NPV)? What is the NPV decision rule? Why NPV is the
dominant method in capital budgeting decision?
(Pages 5 - 6)
2) What is Internal Rate of Return (IRR)? What is the IRR decision rule?
(Pages 9-11)
3) What is the relation between NPV rule and IRR rule? In which situation(s) do they agree,
or potentially disagree, with each other? If they disagree, which rule should we follow?
(Pages 14 -17)
4) What is Payback Period? What is the payback period decision rule?
(Pages 19 -20)
5) What is Profitability Index (PI)? What is the PI decision rule?
(Pages 23 -24)

Session 3: Calculating Free Cash Flow

1) What is the definition of incremental cash flows? Which types of cash flows are
relevant/irrelevant for capital budgeting decision?
(Pages 5 - 8)
2) What are the six steps to calculate Free Cash Flows (FCF)?
(Pages 12, 31)
3) What are the elements in a pro forma income statement?
(Page 16)
4) What is Operating Cash Flow (OCF)? How to calculate it?
(Page 18)
5) What is Net Working Capital (NWC)? What is the change in NWC (ΔNWC)? What is its
impact on FCF?
(Pages 21-24)
6) What is after-tax salvage value? How to calculate it?
(Pages 28-30)

Session 4: Cost of Equity

1) What is equity and what is debt? How are they different?
 (Page 4)
2) What are the costs of (using) equity and debt for the firm which raises capital?
(Pages 5-6)
3) What is dividend? What is the Dividend Growth Model (DGM)? How to use the DGM to
find cost of equity?
(Pages 9-17)
4) What is Capital Asset Pricing Model (CAPM)? What is the expected return of market
portfolio (expected return on market)? What is market risk premium? What is beta? How to
use CAPM to find cost of equity?
(Pages 19-22)

Session 5: Cost of Debt

1) What is a bond? What are coupon, coupon rate, face value, and maturity?
(Pages 5-7)
2) What is yield to maturity (YTM)?
(Pages 10-12)
3) What are the differences between an annual bond and a semi-annual bond?
(Pages 13-14)
4) What is the YIELD function in Excel?
(Page 15)
5) What is credit rating? What are the two risk components considered in credit rating? How
can we use credit rating to estimate cost of debt?
(Pages 17-21)

Session 6: Cost of Capital

1) What is weighted average cost of capital (WACC)?
(Pages 5, 10)
2) What are before-tax cost of debt and after-tax cost of debt?
(Pages 5-7)
3) What are the weight of equity and the weight of debt?
(Pages 8-9)

Session 7: Scenario & Sensitivity Analysis and Trade-off Theory

1) What are scenario analysis and sensitivity analysis? How do they differ? What is the
purpose of conducting these analyses in capital budgeting decision?
(Pages 3, 6-9, 11-14)
2) What is the benefit of debt financing? What is interest tax shield?
(Page 19)
3) What is the cost of debt financing? What are direct and indirect bankruptcy costs?
(Pages 20-21)
4) What is trade-off theory of capital structure? (Pages 22-24)