Award-Winning Finance Tutors serving Reading

The student and I reviewed a presentation that included specific concepts, terminology, and also calculations that were related to capital structure, optimal capital structure, leverage effects and risks, theories (e.g., MM1), and corporate valuation based upon the use of debt vs. no debt.

Tonight we worked again on the final problem left on the exam. We have next week to check over everything and make sure it is correct. There are still a couple of questions that the student has to clarify with his professor regarding the current bond interest rate and which formula we need to use to calculate unlevered beta. I forwarded him two articles afterwards that used a slightly different formula for him to look over. We need the clarification from the professor as that will affect the final answer for WACC. I also sent him an article on the effect of debt on cost of capital. He has a discussion question on the exam, and it is a very straight forward explanation on the cause and effect. Tonight was a very good collaborative session.

We discussed financial statement analysis and equity valuation techniques. The student did his analysis on HD and LOW and we went through his thought process and some techniques on how to do theoretical valuation, and then compare/contrast with current prices. He continues to show improvement in all areas.

We focused predominantly on the basic time value of many calculations including present and future of value of lump sums and annuities. The student's primary concerns were with identifying the correct equations to use for various problems. I showed her how to identify those that were for lump sums and annuities, as well as how to tell the difference between present and future value.

We looked at GAAP balance sheet, income statement, and cashflow statements for a couple publicly-traded companies and began some simple exercises/analytics to understand how the information was presented, how the 3 statements tied together, and lastly, what relationships are significant to outside investors and statement readers. We contrasted a growth company with a long-established entertainment company as to what their financial statements looked like and what their market multiples were like.

We looked at residual variance and the student's investment problems. She was able to understand where the problem was to be headed using the lists of stocks. We built a strategy to study the material by fully understanding the formulas provided and realizing how the statistics formula applies.