Chapter 11 Project Analysis and Evaluation conceptual

How do you calculate accounting break-even quantity, cash break-even quantity, and financial break-even

quantity? What are their interpretations?

How do we calculate degree of operating leverage? How is it interpreted? How does it change as quantity

changes?

How do you perform situation analysis? How do you find worst and best case NPV?

How do you perform sensitivity analysis?

Chapter 12 Some Lessons from Capital Market History

What is the relationship between risk (variability) and return?

~ Based on the risk return tradeoff, we would expect the return of an asset to be proportional to its risk

How do you calculate the arithmetic and geometric average returns? How is Blumes formula used?

How is risk measured?

What is the Coefficient of Variation?

What are the sources of risk? Which can be eliminated and how?

What are the differences between systematic and unsystematic risk?

How is the risk premium determined?

What is the disposition effect? The investor overconfidence hypothesis?

What is the Efficient Markets Hypothesis? What do we observe?

Chapter 13 Return, Risk, and the Security Market Line

How do you calculate portfolio weights? What are the weights and how do they change?

How does diversification affect volatility, systematic, and unsystematic risk?

How does the volatility of a portfolio compare to the weighted average volatility of the portfolio?

What is correlation and how is it interpreted?

What is the beta of the market portfolio? What is the interpretation of a stocks beta?

What are the components of the CAPM?