Dear CFA Level I Candidate, so far, we have seen the Commandments and Sins of Fixed Income and Economics. I am sure they have helped you while solving your mock exams.
- In this session, we will take a look at the Commandments and Sins of Corporate Finance.
- If we are asked to choose 1 project among 2 where the decision based on NPV and IRR conflicts, chose the project that has the higher NPV.
- The decision to take a project based on Profitability Index is that PI>1.
- While calculating the cost of capital, remember to always consider the after tax cost of debt.
- Treatment of Flotation Costs – Adjust them to the initial project cost.
- Country Risk Premium = Sovereign Yield Spread * (std dev Equity Index of Developing Country/std dev Sovereign Bond in terms of the developed market currency)
The revised CAPM formula:
Cost of Equity = Rf + B(E(Rm)-Rf + CRP)
We hope that the above points were useful for your preparation. We will send you such useful information before the exam. If you want to know about a particular topic please write to us at email@example.com.
You can get some useful downloads for your CFA exams. You can also buy some recordings for the topic of your choice on our course page.
If you want to see what questions others are asking then please visit our forum.
Please feel free to write to us for any help regarding your CFA exams.
Related links you will like:
6 tips to Score 70%+ in Alternative Investments
6 tips to Score 70%+ in Derivatives