Flotation cost can be substantial and often amount to between 2 % and 7 % of the total amount of equity capital raised, depending on the type of offering incorrect treatment of flotation cost increasing the. This means that all candidates who take the exam in december 2020, or any exam dates offered in 2021, will be tested using the current 2020 cfa program curriculum. Where fcff 1 is the free cash flow to firm expected next year, wacc is the weightedaverage cost of capital and g is the growth rate of fcff we can determine the companys equity. Sep 01, 2017 the study session on corporate finance is 7% of the level 1 cfa exam.
The result may be an upward sloping marginal cost of capital. If the npv is greater than zero, the project is profitable. Given that it is the cost that a company incurs to raise additional capital, the wacc may also be referred to as the marginal cost of capital mcc. Ift packages are designed for selfstudy and practice at. One can expect between 1618 questions from this material on exam day split between the am and pm session. The ba ask price is the reciprocal of the ab bid price. Earlier we published chartered financial analyst cfa course details eligibility, fee, duration, salary. The study session on corporate finance is 7% of the level 1 cfa exam. The weighted average cost of capital wacc is defined as the weighted average cost of the component costs of debt, preferred stock, and common stock or equity. Corporate finance, cfa program 20 curriculum, volume 4 cfa institute, 2012. Cost of capital is the required return necessary to make a capital budgeting project, such as building a new factory, worthwhile.
Cfa level 1 ebook free download cfa is becoming a benchmark qualification in the field of investments. You will learn how to calculate the cost of debt, cost preferred stock, and cost of equity for a firm. This rate, also called the discount rate, is used in evaluating. Sign up for the free package click here to see for yourself.
This cfa exam prep video cost of capital weighted average cost of capital wacc for the complete set of level i videos sign up for the ift level. Hector mercadier cfa preparation level 1 2guidance for standards ivii 2. Cfa level 1 course details, study material and training wsm. Capital budgeting decisions are based on incremental aftertax cash flows discounted at the opportunity cost of funds. Exam dates, cost, and registration fees cfa institute. Cfa program curriculum 2020 level ii, volumes 1 6 provides the complete level ii curriculum for the 2020 exam, with practical instruction on the candidate body of knowledge cbok and how it is applied, including expert guidance on incorporating concepts into practice.
Chartered financial analyst cfa level 1 preparation course training in london uk, dubai united arab emirates, kuala lumpur malaysia, istanbul turkey, france paris. Because cfa level 2 is much harder than cfa level 1. Cfa program curriculum 2020 level ii volumes 16 box set wiley. As a company raises more and more funds, the cost of the different sources of capital may change, leading to a change in the weighted average cost of capital. Capital budgeting describes the process by which all companies make decisions on their capital projects. As the name indicates, this course covers part of syllabus of corporate finance paper of level 1 of cfa exams. Lvl 1 cannot be seen as a ticket to any corporate role as you have a dime a dozen of them. We also discuss economics in a global context, notably international trade, capital flows and currency exchange rates. Determining the net present value npv of a project. Quizlet flashcards, activities and games help you improve your. The marginal cost of capital schedule is a graph plotting the new funds raised by a company on the xaxis and the cost of capital on the yaxis. Marginal cost of capital is the weighted average cost of the last dollar of new capital raised by a company. Cfa program chartered financial analyst program level 1 the cfa program curriculum is focused on ten key topics which increase in complexity at each of the three levels.
If you want to continue with ift, then choose a package which fits your needs and budget. Weighted average cost of capital wacc cfa level 1 1. Cost of capital weighted average cost of capital taxes and cost of capital weights of the weighted average optimal capital. This cfa exam prep video cost of capital weighted average cost of capital wacc for the complete set of level i videos sign up for the ift level i free. Basics of financial statement analysis a guide for private company directors and shareholders by travis w. Get a competitive edge in your studies with the global leader in cfa exam prep. However, if you compare cfa level 1 with level 2, you will make a mistake. Those candidates, who want to do work in the financial sector, may apply for cfa level 1. Level 1 the chartered financial analyst cfa kaplan uk.
When i registered for my cfa level 1 and got the books designed by the cfa institute i was overwhelmed with the course content. December 2020 cfa level 1 exam preparation with analystnotes. Describe how taxes affect the cost of capital from different capital sources determine the proper rate at which to discount the cash flow associated with a capital budgeting project weighted average cost of capital wacc or marginal cost of capital mcc. The study session is further broken down into six specific readings detailed below with an expectation that each reading will test a couple key loss. The providers of capital require a return on their money. Those candidates, who want to do work in the financial sector, may apply for cfa level 1 program course. Cfa level 2 course details, study material and training. Ethical and professional standards 1code of ethics and. Saurabh, passed level 1 cfa exam in june 2018 required disclaimer.
In addition to the basic capital budgeting principles outlined above, there are several concepts that capital managers should be aware of in the capital budgeting process. We want to do whatever we can to help the community in these extraordinary times. But before going into the nittygritty, lets talk a bit about why these three letter word is worth pursuing. The cost of capital used in capital budgeting should be calculated as a weighted average, or composite, of the various types of funds a firm generally uses. Npv equals the sum of present values of all cash flows inflows. Cfa level 1 is easy, but the trick is to have a proper understanding of all the concepts, if you are one of those who likes to mug things up then let me tell you the course is so voluminous that you will never be able to store so many things at on. Section 1 will cover reading 36 capital budgeting section 2 will cover reading 37 cost of capital. Npv equals the sum of present values of all cash flows inflows and outflows in a project.
Capital is a necessary factor of production, and has a cost. Capital budgeting decisions are based on incremental aftertax cash flows discounted at the opportunity cost. Cfa level 1 is easy, but the trick is to have a proper understanding of all the concepts, if you are one of those who likes to mug things up then let me tell you the course is so voluminous that you will never. Harms, cfa, cpaabv executive summary football coaching legend bill parcells famously said, you are what your record says you are. Due to the postponement of the june 2020 exam, cfa institute has made the decision to freeze the 2020 cfa program curriculum for two exam cycles. Ift has helped thousands of candidates successfully prepare for all three levels of the cfa program exam since 2011. Futures markets and contracts page 36 stu d y session 17 reading assignments. Corporate finance, cfa program 20 curriculum, volume 4 cfa institute, 2012 36. It is different from the average cost of capital which is based on the cost of equity and debt already issued. This cfa exam prep video marginal cost of capital schedule flotation costs summary of cost of capital for the complete set of level i videos sign up for. Mundellfleming model with low capital mobility trade. Sep 12, 2019 the marginal cost of capital, which corresponds to the average risk of a company while appropriately adjusting for the riskiness of a given project, plays a key role in capital budget decision making based on the net present value npv of the project.
Prepare for you exam with the most popular cfa program exam prep videos on the internet. It is designed to introduce the candidate to the various concepts of the finance and investment world. Answer b cost of capital yves courtois cfa gene c lai and. Additional considerations of taxes, agency costs, and. Weve provided best recommended authors and text books of cfa level 1. The marginal cost of capital mcc plays a very important role in capital. As you have already cleared cfa level 1, you know about cfa exam already. Take advantage of free cfa level i exam study materials from kaplan schweser. And to give you a glimpse, most cfa students get stuck in cfa level 2.
The concept of cost of capital is important to both the investment decisions made by a companys management and the valuation of the. Cost of capital study guide by ldself includes 11 questions covering vocabulary, terms and more. Chartered financial analyst cfa level 1 preparation. Wacc weighted average cost of capital cfa level 1 in the previous two posts, we got introduced to the concept of capital budgeting and how capital projects are evaluated and selected. Marginal cost of capital is the cost of the additional capital raised by a firm. You will learn to calculate the weighted average cost of capital of a firm. Calculate and interpret the cost of equity capital using the capital asset pricing model camp approach, the dividend discount model approach, and the bondyieldplus riskpremium approach the capital asset pricing model camp approach step 1. Cfa level 1 syllabus for dec 2019 june 2020 ca chit chat. R elaine henry, cfa and michael a broihahn, cfa 2 010 modular level 1, vol 3, pp 342344 financial statement analysis, pamela p peterson, cfa. Weighted average cost of capital the weighted average cost of capital wacc is a common topic in the financial management examination. Major differences between capital leases and operating leases in cfa level 1 financial concepts capital leases and operating leases often come up as complicated concepts to master for cfa level 1. By taking this course, you will be able to practice case studies in cost of capital.
What to expect on the cfa level i exam investopedia. Net present value npv the net present value npv is the fundamental measure of profitability of investment projects. Cfa institute does not endorse, promote or warrant the accuracy or quality of soleadea. Cost of capital includes the cost of debt and the cost of equity.
See updates to the 2019 level i cfa program curriculum. A project will have a negative npv if its irr is less than the firms cost of capital. The marginal cost of capital cfa level 1 analystprep. Basics of financial statement analysis mercer capital. Chartered financial analyst cfa level 1 preparation course. For a short, limited time, were offering committed cfa candidates the option of preparing all the way through obtaining their charter, at no cost. Da4399 cfa level ii quick dd wiley efficient learning. Students love the way arif irfanullah explains concepts. Cfa is a course pursued by individuals from diverse academic backgrounds, be it finance or a nonfinance one. The cost of capital is level to the point at which one of the costs of capital changes, such as when the company bumps up against a debt covenant, requiring it to use another form of capital. May 06, 2015 as i have always mentioned that cfa lvl 1 demonstrates your interest level in the field of finance and adds significantly to your knowledge base. Cfa level 1 exam free study materials kaplan schweser.
This study session covers the capital budgeting process with emphasis on its prin. Sep 12, 2019 the capital budgeting cash flows are not the same as accounting net income. Apr 17, 2019 marginal cost of capital is the weighted average cost of the last dollar of new capital raised by a company. Differences between capital leases and operating leases in. The weighted average cost of capital is a weighted average of the aftertax marginal costs of each source of capital. Financial reporting and analysis biggest cfa level 1 topic financial reporting and analysis is the heavy weight in level 1 representing 20% of the exam. Basic principles of capital budgeting cfa level 1 analystprep. Cfa level 1 syllabus 201920 cfa level 1 decemberjune.
Section 5 presents the weighted average cost of capital, a discount rate used when finding the present value of cash flows to all. This is referred to as the weighted average cost of capital wacc. You may have heard about cfa level 1, but may never get the time to dive in. When it comes to finding job opportunities, the job opportunities present in the. It provides behavioural justification for constant overall cost of capital and therefore total value of the firm. It is the composite rate of return required by shareholders and debtholders for financing new investments of the company. Welcome to this cfa level 1 corporate finance cost of capital course this course is structured in a way to enable you to prepare for cfa level 1 corporate finance exam. Sep 20, 2011 this cfa level i video covers concepts related to.
Welcome to corporate finance cfa level 1 part 1 course. Downloadable powerpoint slides in pdf format 96 corporate finance practice questions with detailed answers pdf files in this video series, professor james forjan summarizes the cfa level 1 corporate finance chapter. The topic areas covered in the cfa level 1 syllabus and their weightage is as follows. The capital budgeting cash flows are not the same as accounting net income. It is different from the average cost of capital which is based on the cost. Types of projects appropriate for the capital budgeting process can be categorized as. Cfa level 1 is the first step toward making your investmentcareer a reality. Jun 05, 2019 cost of capital is the required return necessary to make a capital budgeting project, such as building a new factory, worthwhile.
Ift provides a complete learning experience and preparation strategy. This course also includes 96 corporate finance practice questions in pdf format from analystpreps mock exams. The cfa level i syllabus focuses on the basic knowledge of the ten topic areas and simple analysis using investment tools. Adapting that thought to the corporate world, one could say, your company is what its financial. Cfa study material 2020 exam levels i, ii and iii free pdf. Cost of capital vs irr cfa level 1 in one of the concept checker questions for schweser level 1 notes it states that. Ift packages are designed for selfstudy and practice at your own pace. Cfa institute, cfa, and chartered financial analyst are trademarks. Cfa level 1 kaplan cost of capital flashcards quizlet.
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