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Flashcard 1428878658828

Tags

#blue-apron #citychef

Question

Blue Apron creates and captures value by solving a prescient problem facing many Americans today: [...] but [...]

Answer

they love to cook

feel they don’t have the time.

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Blue Apron creates and captures value by solving a prescient problem facing many Americans today: they love to cook but feel they don’t have the time.

Original toplevel document

Blue Apron: Fixing the Food Delivery Supply Chain – Technology and Operations Management
Written by SRT, Posted on December 9, 2015 Blue Apron leverages supply chain innovation to get fresh ingredients, great recipes delivered weekly to your home. [imagelink] Blue Apron creates and captures value by solving a prescient problem facing many Americans today: they love to cook but feel they don’t have the time. Blue Apron “delivers farm fresh ingredients and original recipes so [people] can create an incredible meal any night of the week 2 .” The company works with local farmers to create deli

Flashcard 1428946029836

Tags

#blue-apron #citychef

Question

Who is a customer of blue apron?

Answer

“Everybody who wants to cook is our customer,”

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when I asked cofounder and COO Wadiak whether men were their target customers, he quickly dispelled that notion. “Everybody who wants to cook is our customer,” he explained over the phone. “But we have actually found that we have a high percentage of customers who have never cooked before.”

Original toplevel document

Why Men Love Blue Apron - Vogue
t is about having a nice home-cooked meal,” he said. “We throw on some music and divide the tasks. I’m the meat-and-stove guy. She’s better at dicing.” Adding to my hunch, I noted that the hands pictured on their recipe cards were male. But when I asked cofounder and COO Wadiak whether men were their target customers, he quickly dispelled that notion. “Everybody who wants to cook is our customer,” he explained over the phone. “But we have actually found that we have a high percentage of customers who have never cooked before.” Wadiak worked for years as a chef, both in restaurants and in people’s homes. “If you ever teach a class to someone who has never cooked before, you really learn quickly what people can

Flashcard 1428955991308

Tags

#blue-apron #citychef

Question

Blue Apron is one of three fast-growing, venture-backed meal kit startups are based in New York City.

[...], which was founded by Salzberg's former business school classmates, scored a Shark Tank deal and has annual revenue estimated in the tens of millions.

[...] , which was founded in Berlin but operates a regional headquarters in New York, just raised $85 million at a valuation of $2.9 billion and has global revenue of about $40 million a month (HelloFresh declined comment).

Answer

Plated

HelloFresh

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Blue Apron is one of three fast-growing, venture-backed meal kit startups are based in New York City. Plated, which was founded by Salzberg's former business school classmates, scored a Shark Tank deal and has annual revenue estimated in the tens of millions. HelloFresh, which was f

Original toplevel document

Unknown title
d more than $190 million and has been valued at $2 billion, has not yet demonstrated profitability and faces well-funded competitors. It also faces the looming threat of a bursting tech bubble that could turn off the venture capital spigot. It is one of no fewer than three fast-growing, venture-backed meal kit startups based in New York City. Plated, which was founded by Salzberg's former business school classmates, scored a Shark Tank deal and has annual revenue estimated in the tens of millions. And HelloFresh, which was founded in Berlin but operates a regional headquarters in New York, just raised $85 million at a valuation of $2.9 billion and has global revenue of about $40 million a month (HelloFresh declined comment). Food? Delivery? Talk of a bubble? People could be forgiven for mistaking Blue Apron, Plated and HelloFresh for Kozmo and Webvan, two delivery companies that were among the notorious f

Flashcard 1428962544908

Tags

#blue-apron #citychef

Question

The menus, which change [...] based on seasonal needs and are created by the culinary team and renowned guest chefs.

Answer

weekly

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d>The service is convenient, offering free delivery in refrigerated boxes whenever best fits the customer’s schedule. The step-by-step recipes are appropriate for beginner and experienced cooks alike. The menus, which change weekly based on seasonal needs, are created by the culinary team and renowned guest chefs.<html>

Original toplevel document

Blue Apron: Fixing the Food Delivery Supply Chain – Technology and Operations Management
rybody who wants to cook is our customer 1 ”. The recipes are simple, with instructions written in a clear and direct way, complete with pictures. The business model focuses on removing the biggest obstacle to cooking – deciding what to cook. The service is convenient, offering free delivery in refrigerated boxes whenever best fits the customer’s schedule. The step-by-step recipes are appropriate for beginner and experienced cooks alike. The menus, which change weekly based on seasonal needs, are created by the culinary team and renowned guest chefs. For its suppliers, Blue Apron works with family-run farmers and artisans to source the highest quality ingredients. On the recipe cards, they provide an information sheet that highlight

Flashcard 1429142637836

Tags

#sister-miriam-joseph #trivium

Question

Geometry, the theory of space, and astronomy, an application of the theory of space, are the arts of [...].

Answer

continuous quantity or extension

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Geometry, the theory of space, and astronomy, an application of the theory of space, are the arts of continuous quantity or extension.

Original toplevel document (pdf)

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Flashcard 1430658878732

Tags

#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #study-session-4-microeconomics-analysis

Question

The candidate should be able to:

describe [...] and [...]
describe the use of indifference curves, opportunity sets, and budget constraints in decision making;
calculate and interpret a budget constraint;
determine a consumer’s equilibrium bundle of goods based on utility analysis;
compare substitution and income effects;
distinguish between normal goods and inferior goods and explain Giffen goods and Veblen goods in this context.

Answer

consumer choice theory and utility theory;

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LEARNING OUTCOMES
The candidate should be able to: describe consumer choice theory and utility theory; describe the use of indifference curves, opportunity sets, and budget constraints in decision making; calculate and interpret a budget constraint;

Flashcard 1431707454732

Tags

#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #section-3-utility-theory #study-session-4

Question

3. UTILITY THEORY: MODELING PREFERENCES AND TASTES

The section is divided in:

3.1. [...]

3.2. Representing the Preference of a Consumer: The Utility Function

3.3. Indifference Curves: The Graphical Portrayal of the Utility Function

3.4. Indifference Curve Maps

3.5. Gains from Voluntary Exchange: Creating Wealth through Trade

Answer

Axioms of the Theory of Consumer Choice

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Section 3. UTILITY THEORY: MODELING PREFERENCES AND TASTES
3. UTILITY THEORY: MODELING PREFERENCES AND TASTES The section is divided in: 3.1. Axioms of the Theory of Consumer Choice 3.2. Representing the Preference of a Consumer: The Utility Function 3.3. Indifference Curves: The Graphical Portrayal of the Utility Function 3.4. In

Flashcard 1432238558476

Tags

#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #section-3-utility-theory #study-session-4

Question

Bundle A might have the same amount of all but one of the goods and services as bundle B but a different amount of that one.

Bundles A and B would be considered two [...]

Answer

distinct bundles.

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Bundle A might have the same amount of all but one of the goods and services as bundle B but a different amount of that one. Bundles A and B would be considered two distinct bundles.

Original toplevel document

3. UTILITY THEORY: MODELING PREFERENCES AND TASTES
ave zero of one or more of those goods. A distinctly different consumption bundle would contain all of the same goods but in different quantities, again allowing for the possibility of a zero quantity of one or more of the goods. For example, bundle Amight have the same amount of all but one of the goods and services as bundle B but a different amount of that one. Bundles A and B would be considered two distinct bundles. Given this understanding of consumption bundles, the first assumption we make about a given consumer’s preferences is simply that she is able to make a comparison between a

Flashcard 1432292297996

Tags

#blue-apron #business-model #citychef #operational-model

Question

At each fulfilment center, workers on assembly lines pack boxes to be delivered anywhere from [...] later.

Answer

1-7 days

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n>Bulk purchasing, portioned delivery . Blue Apron built its model on the idea of reducing food waste. At each fulfilment center, workers on assembly lines pack boxes with poultry, meat, vegetables and condiments to be delivered anywhere from 1-7 days later. Purchasing in bulk allows the company to negotiate prices with farmers, who are happy to receive a slightly lower price for a guaranteed volume. By only offering 6 recipes per we

Original toplevel document

Blue Apron: Fixing the Food Delivery Supply Chain – Technology and Operations Management
lity ingredients. On the recipe cards, they provide an information sheet that highlights the farms which provided the produce alongside information about how to cut and cook. Click here to view a video featuring Blue Apron’s Ghee Supplier. Blue Apron aligns its operating model with its business model through: Control of the supply chain . Blue Apron’s model centers on delivering fresh ingredients. To maintain control of quality, the company manages its own distribution channel. The company sources farms differently for each of their three regional fulfilment centers, so the food is local and fresh and the delivery costs are low. The boxes are delivered in refrigerated boxes to maintain freshness, however, so delivery is outsourced to the cheapest partner for a given shipment. Bulk purchasing, portioned delivery . Blue Apron built its model on the idea of reducing food waste. At each fulfilment center, workers on assembly lines pack boxes with poultry, meat, vegetables and condiments to be delivered anywhere from 1-7 days later. Purchasing in bulk allows the company to negotiate prices with farmers, who are happy to receive a slightly lower price for a guaranteed volume. By only offering 6 recipes per week, Blue Apron can allocate the ingredients in a way that reduces food waste. Everything subscribers receive is pre-measured to the precise proportions the recipe requires, meaning less spending on unnecessary produce and less food waste. Data analytics . As a subscription business, Blue Apron collects data on its customers that allows for predictive modeling of demand. They built an internal suite of tools that manage the workflow of purchasing, fulfilment operations, ecommerce and order processing, shipping software, customer service software 6 . The software can estimate how many customers will cancel an order in any given week, for example, which allows the company to plan meals based on the expected availability and price of certain crops. Using this data helps create processes that improve operational efficiency and lower costs, supporting the $10 per meal price. Supporting Suppliers. There is a team at Blue Apron responsible for negotiating with farms to source ingredients, but they also work closely with farmers on crop rotation and management. This allows the company to work with farmers to plan production in a way that is more seasonal, more efficient and utilizes their resources better, all of which results in higher quality crops at lower prices for consumers. Additionally, by helping farmers to plan to rotate “heavy feeder” plants with less hungry plants like legumes, the farms use less pesticide and fertilize, resulting in healthier farms. Blue Apron focuses on bringing their customers an easy way to cook through a high quality food delivery service that has never bene available at scale before. Key operational decision

Flashcard 1432297016588

Tags

#blue-apron #business-model #citychef #operational-model

Question

By only offering [...] recipes per week, Blue Apron can allocate the ingredients in a way that reduces food waste.

Answer

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y, meat, vegetables and condiments to be delivered anywhere from 1-7 days later. Purchasing in bulk allows the company to negotiate prices with farmers, who are happy to receive a slightly lower price for a guaranteed volume. By only offering 6 recipes per week, Blue Apron can allocate the ingredients in a way that reduces food waste. Everything subscribers receive is pre-measured to the precise proportions the recipe requires

Original toplevel document

Flashcard 1432535043340

Tags

#blue-apron #citychef

Question

According to Blue Apron, the majority of its members are [...].

Answer

couples

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According to Blue Apron, the majority of its members are couples. But even men who aren’t in a relationship are taking advantage of it. “It’s good for a date night, if you want to impress someone,” said Ricky, 29, who tried it out for two weeks.</spa

Original toplevel document

Why Men Love Blue Apron - Vogue
ioned my husband’s newfound love for cooking at the office and a coworker told me she was having a similar experience at her house. We both wondered if Blue Apron was somehow secretly targeting men—after all, three guys founded the company. According to Blue Apron, the majority of its members are couples. But even men who aren’t in a relationship are taking advantage of it. “It’s good for a date night, if you want to impress someone,” said Ricky, 29, who tried it out for two weeks. “I wouldn’t sign up for it regularly, but I’ll definitely do it again for a special occasion.” Andee and her boyfriend, Tom, decided to try out Blue Apron after seeing an offer to join

Flashcard 1432539499788

Tags

#blue-apron #citychef

Question

Integrating that locally-grown food into your diet requires paying careful attention to [...] — as well as the [...] of nearby farmers.

Answer

hyper-local seasonality

growing schedules

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Integrating that locally-grown food into your diet requires paying careful attention to hyper-local seasonality — as well as the growing schedules of nearby farmers.

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Open it
em "a safety net and a recipe," he says. "If you can cook with it and interact with it on an emotional level, it changes your perception. It's the secret sauce to educating people about food and biodiversity." Integrating that locally-grown food into your diet requires paying careful attention to hyper-local seasonality — as well as the growing schedules of nearby farmers. "The idea of planning ahead is a challenge," says Jennifer Goggin, the co-founder of FarmersWeb, an online marketplace designed to connect farmers with services like Blue Apro

Flashcard 1432557587724

Tags

#blue-apron #citychef #operational-model #supply-chain

Question

Blue Apron’s model sources farms differently for [...], so the food is local and fresh and the delivery costs are low.

Answer

each of their three regional fulfilment centers

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Blue Apron’s model centers on delivering fresh ingredients. To maintain control of quality, the company manages its own distribution channel. The company sources farms differently for each of their three regional fulfilment centers, so the food is local and fresh and the delivery costs are low. The boxes are delivered in refrigerated boxes to maintain freshness, however, so delivery is outsourced to the cheapest p

Original toplevel document

Flashcard 1432559947020

Tags

#blue-apron #citychef #operational-model #supply-chain

Question

The boxes are delivered in refrigerated boxes to maintain freshness, however, [...] is outsourced to the [...]

Answer

delivery

cheapest partner for a given shipment.

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hannel. The company sources farms differently for each of their three regional fulfilment centers, so the food is local and fresh and the delivery costs are low. The boxes are delivered in refrigerated boxes to maintain freshness, however, so delivery is outsourced to the cheapest partner for a given shipment.<body><html>

Original toplevel document

Flashcard 1432565976332

Tags

#blue-apron #citychef

Question

On the recipe cards, they provide an information sheet that [...] alongside information about how to cut and cook.

Answer

highlights the farms which provided the produce

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On the recipe cards, they provide an information sheet that highlights the farms which provided the produce alongside information about how to cut and cook.

Original toplevel document

Blue Apron: Fixing the Food Delivery Supply Chain – Technology and Operations Management
ooks alike. The menus, which change weekly based on seasonal needs, are created by the culinary team and renowned guest chefs. For its suppliers, Blue Apron works with family-run farmers and artisans to source the highest quality ingredients. On the recipe cards, they provide an information sheet that highlights the farms which provided the produce alongside information about how to cut and cook. Click here to view a video featuring Blue Apron’s Ghee Supplier. Blue Apron aligns its operating model with its business model through: Control of the supply chain . Blue Apron’s m

Flashcard 1432568335628

Tags

#blue-apron #business-model #citychef #data-analytics #operational-model

Question

As a [...], Blue Apron collects data on its customers that allows for predictive modeling of demand.

Answer

subscription business

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As a subscription business, Blue Apron collects data on its customers that allows for predictive modeling of demand. They built an internal suite of tools that manage the workflow of purchasing, fulfilment operat

Original toplevel document

Flashcard 1432692067596

Tags

#italian #italian-grammar #structure

Question

Gender is a purely [...] term.

Answer

grammatical

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Gender is a purely grammatical term.

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Flashcard 1435700169996

Tags

#citychef #munchery

Question

Munchery’s [...] pose one of the main drags on its business.

Answer

high fixed costs

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Munchery’s high fixed costs pose one of the main drags on its business.

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How an immigrant motherfucker made munchery
a few hours a day around din-nertime. The CEOs were “advocating for a way to make this fair for workers but to allow our businesses to operate,” he says. “Every presi-dential candidate is going to have to deal with this subject.” Munchery’s high fixed costs pose one of the main drags on its business. Services such as GrubHub, which connect diners and restaurants online, don’t have significant fixed costs, because the restaurants make the food and in most cases deliver it to customers. Tran and his executives, naturally, pitch Munchery’s expensive infra structure as its biggest advantage. It enables the company to control all of its operating costs, so it

Flashcard 1435701742860

Tags

#citychef #munchery

Question

The closest direct competitor Munchery has is [...]

Answer

Sprig

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The closest direct competitor Munchery has is Sprig

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How an immigrant motherfucker made munchery
hing to build, but when we’ve built it, it’s going to be incredibly difficult to compete with,” says Kris Fredrickson, Munchery’s vice president for operations, who joined the company after six years as a banker at Goldman Sachs. The closest direct competitor Munchery has is Sprig, another San Francisco startup with a haul of venture capital—more than $50 million—a centralized kitchen (in a former Chevys Fresh Mex restaurant), and a gospel of high-quality, low-co

Flashcard 1436154989836

Tags

#costs #finance #investopedia

Question

Explicit costs have a paper trail and provide [...].

Answer

audit documentation

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cit Costs vs. Implicit Costs Explicit costs arise based on what has actually been purchased as opposed to implicit costs that arise based on what has actually been given up other than money. Explicit costs have a paper trail and provide audit documentation. Implicit costs are not traceable in a financial system. While management will utilize explicit costs when viewing business operations, implicit costs are only utilized in decision-maki

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Explicit Cost Definition | Investopedia
hased are examples of explicit costs. Although the depreciation of an asset is not an activity that can be tangibly traced, depreciation expense is an explicit cost because it relates to the cost of the underlying asset that the company owns. Explicit Costs vs. Implicit Costs Explicit costs arise based on what has actually been purchased as opposed to implicit costs that arise based on what has actually been given up other than money. Explicit costs have a paper trail and provide audit documentation. Implicit costs are not traceable in a financial system. While management will utilize explicit costs when viewing business operations, implicit costs are only utilized in decision-making or choosing between multiple alternatives. Opportunity Costs Explicit costs are used in the computation of opportunity costs. An opportunity cost is the total value of an item forgone. It is calculated by adding the explicit and

Flashcard 1439273192716

Tags

#eximbank #key-features-of-loan-guarantees #octopus #usa

Question

Guaranteed loans cover 100 percent of [...] and [...] for 85 percent of the U.S. contract price.

Answer

the principal and interest

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Guaranteed loans cover 100 percent of the principal and interest for 85 percent of the U.S. contract price.

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Government-Assisted Foreign Buyer Financing (Eximbank USA)
g may not be available in certain countries and certain terms for U.S. government policy reasons (for more information, see the Country Limitation Schedule posted on the Bank’s Web site, www.exim.gov, under the “Apply” section). Key Features of Ex-Im Bank Loan Guarantees Loans are made by commercial banks and repayment of these loans is guaranteed by Ex-Im Bank. Guaranteed loans cover 100 percent of the principal and interest for 85 percent of the U.S. contract price. Interest rates are negotiable, and are usually floating and lower than fixed rates. Guaranteed loans are fully transferable, can be securitized and are available in certain foreign currencies. Guaranteed loans have a faster documentation process with the assistance of commercial banks. There are no U.S. vessel shipping requirements for amounts less than $20 million. Key Features of Ex-Im Bank Direct Loans Fixed-rate loans are provided directly to creditworthy foreign buyers. Direct loans supp

Flashcard 1439746362636

Tags

#cfa-level-1 #microeconomics #reading-16-the-firm-and-market-structures #study-session-4

Question

Section 7 reviews techniques for [...] the various forms of market structure.

Answer

identifying

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Section 7 reviews techniques for identifying the various forms of market structure. For example, there are accepted measures of market concentration that are used by regulators of financial institutions to judge whether or not a p

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1. INTRODUCTION
tes. Sections 3, 4, 5, and 6 analyze demand, supply, optimal price and output, and factors affecting long-run equilibrium for perfect competition, monopolistic competition, oligopoly, and pure monopoly, respectively. Section 7 reviews techniques for identifying the various forms of market structure. For example, there are accepted measures of market concentration that are used by regulators of financial institutions to judge whether or not a planned merger or acquisition will harm the competitive nature of regional banking markets. Financial analysts should be able to identify the type of market structure a firm is operating within. Each different structure implies a different long-run sustainability of profits. A summary and practice problems conclude the reading. <body><html>

Flashcard 1442128203020

Tags

#cfa-level-1 #factors-that-determine-market-structures #microeconomics #reading-16-the-firm-and-market-structures #section-2-analysis-of-mkt-structures #study-session-4

Question

Because oligopoly industries have so few firms, each firm feels dependent on [...].

Answer

the pricing strategies of the others.

Therefore, non-price competition becomes a dominant strategy.

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e few firms in the market feel dependent on each other. Each firm fears retaliatory price changes that would reduce total revenue for all of the firms in the market. Because oligopoly industries have so few firms, each firm feels dependent on the pricing strategies of the others. Therefore, non-price competition becomes a dominant strategy.<body><html>

Original toplevel document

2. ANALYSIS OF MARKET STRUCTURES
d monopoly is the local electrical power provider. In most cases, the monopoly power provider is allowed to earn a normal return on its investment and prices are set by the regulatory authority to allow that return. 2.2. Factors That Determine Market Structure Five factors determine market structure: The number and relative size of firms supplying the product; The degree of product differentiation; The power of the seller over pricing decisions; The relative strength of the barriers to market entry and exit; and The degree of non-price competition. The number and relative size of firms in a market influence market structure. If there are many firms, the degree of competition increases. With fewer firms supplying a good or service, consumers are limited in their market choices. One extreme case is the monopoly market structure, with only one firm supplying a unique good or service. Another extreme is perfect competition, with many firms supplying a similar product. Finally, an example of relative size is the automobile industry, in which a small number of large international producers (e.g., Ford and Toyota) are the leaders in the global market, and a number of small companies either have market power because they are niche players (e.g., Ferrari) or have little market power because of their narrow range of models or limited geographical presence (e.g., Škoda). In the case of monopolistic competition, there are many firms providing products to the market, as with perfect competition. However, one firm’s product is differentiated in some way that makes it appear better than similar products from other firms. If a firm is successful in differentiating its product, the differentiation will provide pricing leverage. The more dissimilar the product appears, the more the market will resemble the monopoly market structure. A firm can differentiate its product through aggressive advertising campaigns; frequent styling changes; the linking of its product with other, complementary products; or a host of other methods. When the market dictates the price based on aggregate supply and demand conditions, the individual firm has no control over pricing. The typical hog farmer in Nebraska and the milk producer in Bavaria are price takers . That is, they must accept whatever price the market dictates. This is the case under the market structure of perfect competition. In the case of monopolistic competition, the success of product differentiation determines the degree with which the firm can influence price. In the case of oligopoly, there are so few firms in the market that price control becomes possible. However, the small number of firms in an oligopoly market invites complex pricing strategies. Collusion, price leadership by dominant firms, and other pricing strategies can result. The degree to which one market structure can evolve into another and the difference between potential short-run outcomes and long-run equilibrium conditions depend on the strength of the barriers to entry and the possibility that firms fail to recoup their original costs or lose money for an extended period of time and are therefore forced to exit the market. Barriers to entry can result from very large capital investment requirements, as in the case of petroleum refining. Barriers may also result from patents, as in the case of some electronic products and drug formulas. Another entry consideration is the possibility of high exit costs. For example, plants that are specific to a special line of products, such as aluminum smelting plants, are non-redeployable, and exit costs would be high without a liquid market for the firm’s assets. High exit costs deter entry and are therefore also considered barriers to entry. In the case of farming, the barriers to entry are low. Production of corn, soybeans, wheat, tomatoes, and other produce is an easy process to replicate; therefore, those are highly competitive markets. Non-price competition dominates those market structures where product differentiation is critical. Therefore, monopolistic competition relies on competitive strategies that may not include pricing changes. An example of non-price competition is product differentiation through marketing. In other circumstances, non-price competition may occur because the few firms in the market feel dependent on each other. Each firm fears retaliatory price changes that would reduce total revenue for all of the firms in the market. Because oligopoly industries have so few firms, each firm feels dependent on the pricing strategies of the others. Therefore, non-price competition becomes a dominant strategy. Exhibit 1. Characteristics of Market Structure Market Structure Number of Sellers Degree of Product Differentiation Barriers to Entry Pricing Power of Firm Non-price Competition Perfect competition Many Homogeneous/ Standardized Very Low None None Monopolistic competition Many Differentiated Low Some Advertising and Product Differentiation Oligopoly Few Homogeneous/ Standardized High Some or Considerable Advertising and Product Differentiation Monopoly One Unique Product Very High Considerable Advertising From the perspective of the owners of the firm, the most desirable market structure is that with the most control over price, because this control can lead to large profits. Monopoly and oligopoly markets offer the greatest potential control over price; monopolistic competition offers less control. Firms operating under perfectly competitive market conditions have no control over price. From the consumers’ perspective, the most desirable market structure is that with the greatest degree of competition, because prices are generally lower. Thus, consumers would prefer as many goods and services as possible to be offered in competitive markets. As often happens in economics, there is a trade-off. While perfect competition gives the largest quantity of a good at the lowest price, other market forms may spur more innovation. Specifically, there may be high costs in researching a new product, and firms will incur such costs only if they expect to earn an attractive return on their research investment. This is the case often made for medical innovations, for example—the cost of clinical trials and experiments to create new medicines would bankrupt perfectly competitive firms but may be acceptable in an oligopoly market structure. Therefore, consumers can benefit from less-than-perfectly-competitive markets. PORTER’S FIVE FORCES AND MARKET STRUCTURE A financial analyst aiming to establish market conditions and consequent profitability of incumbent firms should start with the questions framed by Exhibit 1: How many sellers are there? Is the product differentiated? and so on. Moreover, in the case of monopolies and quasi monopolies, the analyst should evaluate the legislative and regulatory framework: Can the company set prices freely, or are there governmental controls? Finally, the analyst should consider the threat of competition from potential entrants. This analysis is often summarized by students of corporate strategy as “Porter’s five forces,” named after Harvard Business School professor Michael E. Porter. His book, Competitive Strategy, presented a systematic analysis of the practice of market strategy. Porter (2008) identified the five forces as: Threat of entry; Power of suppliers; Power of buyers (customers); Threat of substitutes; and Rivalry among existing competitors. It is easy to note the parallels between four of these five forces and the columns in Exhibit 1. The only “orphan” is the power of suppliers, which is not at the core of the theoretical economic analysis of competition, but which has substantial weight in the practical analysis of competition and profitability. Some stock analysts (e.g., Dorsey 2004) use the term “economic moat” to suggest that there are factors protecting the profitability of a firm that are similar to the moats (ditches full of water) that used to protect some medieval castles. A deep moat means that there is little or no threat of entry by invaders, i.e. competitors. It also means that customers are locked in because of high switching costs. <body><html>

Flashcard 1448324238604

Tags

#cfa-level-1 #fra-introduction #reading-22-financial-statement-analysis-intro #study-session-7

Question

Reading 22 is organized as follows:

Section 2 discusses the scope of financial statement analysis.

Section 3 describes the [...] used in financial statement analysis, including the primary financial statements.

Section 4 provides a framework for guiding the financial statement analysis process.

Answer

sources of information

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Reading 22 is organized as follows: Section 2 discusses the scope of financial statement analysis. Section 3 describes the sources of information used in financial statement analysis, including the primary financial statements. Section 4 provides a framework for guiding the financial statement analysis process. </sp

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1. INTRODUCTION
dited) commentary by management. Basic financial statement analysis—as presented in this reading—provides a foundation that enables the analyst to better understand information gathered from research beyond the financial reports. This reading is organized as follows: Section 2 discusses the scope of financial statement analysis. Section 3 describes the sources of information used in financial statement analysis, including the primary financial statements (balance sheet, statement of comprehensive income, statement of changes in equity, and cash flow statement). Section 4 provides a framework for guiding the financial statement analysis process. A summary of the key points and practice problems in the CFA Institute multiple-choice format conclude the reading. <body><html>

Flashcard 1456125381900

Tags

#calculus #mathematics #tensors #vectors

Question

So in 3-dimensional space, a second-rank tensor is represented by 3² = 9 numbers. In N-dimensional space, [how many numbers for scalar, vector and tensor?]

Answer

scalars still require only one number, vectors require N numbers, and tensors require N^R numbers

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So in 3-dimensional space, a second-rank tensor is represented by 3 2 = 9 numbers. In N-dimensional space, scalars still require only one number, vectors require N numbers, and tensors require N R numbers

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Flashcard 1457088236812

Tags

#bayes #programming #r #statistics

Question

How is a dataframe different from a matrix? (2 ways)

Answer

But each column can be of a different type, and, in particular, columns can be factors.

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A data frame is much like a matrix, insofar as it has several columns of equal length. But each column can be of a different type, and, in particular, columns can be factors. A data frameisreallyatypeof list in which each component is thought of as a named column of a matrix, with different columns possibly of different types. The elements of a data frame ca

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Flashcard 1457160588556

Tags

#matlab #programming

Question

A complex number may be represented in polar coordinates: z =re^iθ angle(z) returns θ between −π and π ; that is, atan2(imag(z), real(z)). abs(z) returns the [...]

Answer

magnitude r

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A complex number may be represented in polar coordinates: z =re iθ angle(z) returns θ between −π and π ; that is, atan2(imag(z), real(z)). abs(z) returns the magnitude r

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Annotation 1465021500684

PART I: USE DECOYED OBJECTS OF DESIRE AND RED HERRINGS TO THROW PEOPLE OFF THE SCENT

#48-laws-of-power #law-3-conceal-your-intentions

If at any point in the deception you practice people have the slightest suspicion as to your intentions, all is lost. Do not give them the chance to sense what you are up to: Throw them off the scent by dragging red herrings across the path. Use false sincerity, send ambiguous signals, set up misleading objects of desire. Unable to distinguish the genuine from the false, they cannot pick out your real goal.

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Flashcard 1465038802188

Tags

#48-laws-of-power #law-3-conceal-your-intentions

Question

PART I: USE [...] AND [...] TO THROW PEOPLE OFF THE SCENT

Answer

DECOYED OBJECTS OF DESIRE

RED HERRINGS

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PART I: USE DECOYED OBJECTS OF DESIRE AND RED HERRINGS TO THROW PEOPLE OFF THE SCENT If at any point in the deception you practice people have the slightest suspicion as to your intentions, all is lost. Do not give them the

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Flashcard 1465054268684

Tags

#48-laws-of-power #law-3-conceal-your-intentions

Question

If at any point in the deception practice [...], all is lost.

Answer

people suspect your intentions

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If at any point in the deception you practice people have the slightest suspicion as to your intentions, all is lost. Do not give them the chance to sense what you are up to: Throw them off the scent by dragging red herrings across the path. Use false sincerity, send ambiguous signals, se

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Annotation 1465056627980

#48-laws-of-power #law-3-conceal-your-intentions

Do not give them the chance to sense what you are up to: Throw them off the scent by dragging red herrings across the path.

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Annotation 1465058200844

#48-laws-of-power #law-3-conceal-your-intentions

Use false sincerity, send ambiguous signals, set up misleading objects of desire. Unable to distinguish the genuine from the false, they cannot pick out your real goal.

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>If at any point in the deception you practice people have the slightest suspicion as to your intentions, all is lost. Do not give them the chance to sense what you are up to: Throw them off the scent by dragging red herrings across the path. Use false sincerity, send ambiguous signals, set up misleading objects of desire. Unable to distinguish the genuine from the false, they cannot pick out your real goal.<body><html>

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Annotation 1465059773708

TRANSGRESSION OF THE LAW

#48-laws-of-power #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

Ninon de Lenclos, a badass ma'am helped the Marquis de Sevigné to hit on a bitch. Ninon was sixty-two at the time,bitch was twenty-two and hot. First, told him this was war, and that the bitch was a citadel to which he had to lay siege. Every step had to be planned and executed with the utmost attention to detail.

Told him to start over and approach her indifferently, treat her like a friend. This was to throw her off the scent. The bitch was no longer to take his interest in her for granted.

Ninon planned ahead. Once she was confused, it would be time to make her jealous. At the next party, the marquis would show up with a bunch of hot bitches. She would get jelous and he would look desired by others. A woman who is interested in a man wants to see that other women are interested in him, too. It makes it all the more satisfying to snatch him from them.

Once the countess was jealous but intrigued, it would be time to manipulate her. The marquis would fail to show up at parties where the bitch expected to see him and appear at places where she dont expext him. She would be unable to predict his moves. All of this would push her into the state of emotional confusion that is a prerequisite for successful seduction.

These took several weeks. Bitch started laughing a little harder at his jokes, listen more closely to his stories. Bitch was asking questions about him and look for him. It was a matter of weeks now, maybe a month or two..

Dumbfuck marquis some days later was at the bitch's home. He took her hand and told her he was in love with her. Bitch got confused, a reaction he did not expect. She became polite, then excused herself. Bro, fucked it up, the spell was broken.

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Annotation 1465064230156

#48-laws-of-power #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

A woman who is interested in a man wants to see that other women are interested in him, too.

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her for granted. Ninon planned ahead. Once she was confused, it would be time to make her jealous. At the next party, the marquis would show up with a bunch of hot bitches. She would get jelous and he would look desired by others. A woman who is interested in a man wants to see that other women are interested in him, too. It makes it all the more satisfying to snatch him from them. Once the countess was jealous but intrigued, it would be time to manipulate her. The marquis would fail to show

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Flashcard 1465065278732

Tags

#48-laws-of-power #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

Question

A woman who is interested in a man wants to [...], too.

Answer

see that other women are interested in him.

It makes it all the more satisfying to snatch him from them.

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A woman who is interested in a man wants to see that other women are interested in him, too.

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Annotation 1465067638028

#48-laws-of-power #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

A state of emotional confusion that is a prerequisite for successful seduction.

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d, it would be time to manipulate her. The marquis would fail to show up at parties where the bitch expected to see him and appear at places where she dont expext him. She would be unable to predict his moves. All of this would push her into the state of emotional confusion that is a prerequisite for successful seduction. These took several weeks. Bitch started laughing a little harder at his jokes, listen more closely to his stories. Bitch was asking questions about him and look for him. It

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Flashcard 1465069473036

Tags

#48-laws-of-power #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

Question

A [...] is a prerequisite for successful seduction.

Answer

state of emotional confusion

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A state of emotional confusion that is a prerequisite for successful seduction.

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Annotation 1465072356620

Interpretation of the first law Part I transgression

#48-laws-of-power #interpretation #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

Ninon de Lenclos knew everything about the art of love. The greatest writers, thinkers, and politicians of the time had been her lovers—men like La Rochefoucauld, Molière, and Richelieu. Seduction was a game to her, to be practiced with skill. As she got older, and her reputation grew, the most important families in France would send their sons to her to be instructed in matters of love.

Ninon knew that men and women are very different, but when it comes to seduction they feel the same: Deep down inside, they often sense when they are being seduced, but they give in because they enjoy the feeling of being led along. It is a pleasure to let go, and to allow the other person to detour you into a strange country. Everything in seduction, however, depends on suggestion. You cannot announce your intentions or reveal them directly in words. Instead you must throw your targets off the scent. To surrender to your guidance they must be appropriately confused. You have to scramble your signals—appear interested in another man or woman (the decoy), then hint at being interested in the target, then feign indifference, on and on. Such patterns not only confuse, they excite.

Imagine this story from the countess’s perspective: After a few of the marquis’s moves, she sensed the marquis was playing some sort of game, but the game delighted her. She did not know where he was leading her, but so much the better. His moves intrigued her, each of them keeping her waiting for the next one—she even enjoyed her jealousy and confusion, for sometimes any emotion is better than the boredom of security. Perhaps the marquis had ulterior motives; most men do. But she was willing to wait and see, and probably if she had been made to wait long enough, what he was up to would not have mattered.

The moment the marquis uttered that fatal word “love,” however, all was changed. This was no longer a game with moves, it was an artless show of passion. His intention was revealed: He was seducing her. This put everything he had done in a new light. All that before had been charming now seemed ugly and conniving; the countess felt embarrassed and used. A door closed that would never open again.

Do not be held a cheat, even though it is impossible to live today without being one. Let your greatest cunning lie in covering up what looks like cunning.

Baltasar Gracián, 1601-1658

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Annotation 1465074191628

#48-laws-of-power #interpretation #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

Ninon knew that men and women are very different, but when it comes to seduction they feel the same: Deep down inside, they often sense when they are being seduced, but they give in because they enjoy the feeling of being led along.

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ld, Molière, and Richelieu. Seduction was a game to her, to be practiced with skill. As she got older, and her reputation grew, the most important families in France would send their sons to her to be instructed in matters of love. Ninon knew that men and women are very different, but when it comes to seduction they feel the same: Deep down inside, they often sense when they are being seduced, but they give in because they enjoy the feeling of being led along. It is a pleasure to let go, and to allow the other person to detour you into a strange country. Everything in seduction, however, depends on suggestion. You cannot announce your intenti

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Annotation 1465075764492

#48-laws-of-power #interpretation #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

Everything in seduction, however, depends on suggestion. You cannot announce your intentions or reveal them directly in words. Instead you must throw your targets off the scent.

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feel the same: Deep down inside, they often sense when they are being seduced, but they give in because they enjoy the feeling of being led along. It is a pleasure to let go, and to allow the other person to detour you into a strange country. Everything in seduction, however, depends on suggestion. You cannot announce your intentions or reveal them directly in words. Instead you must throw your targets off the scent. To surrender to your guidance they must be appropriately confused. You have to scramble your signals—appear interested in another man or woman (the decoy), then hint at being interested

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Annotation 1465077337356

#48-laws-of-power #interpretation #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

In seduction you have to scramble your signals—appear interested in another man or woman (the decoy), then hint at being interested in the target, then feign indifference, on and on. Such patterns not only confuse, they excite.

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erything in seduction, however, depends on suggestion. You cannot announce your intentions or reveal them directly in words. Instead you must throw your targets off the scent. To surrender to your guidance they must be appropriately confused. You have to scramble your signals—appear interested in another man or woman (the decoy), then hint at being interested in the target, then feign indifference, on and on. Such patterns not only confuse, they excite. Imagine this story from the countess’s perspective: After a few of the marquis’s moves, she sensed the marquis was playing some sort of game, but the game delighted her. She

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Annotation 1465078910220

#48-laws-of-power #interpretation #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

His moves intrigued her, each of them keeping her waiting for the next one—she even enjoyed her jealousy and confusion, for sometimes any emotion is better than the boredom of security.

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Imagine this story from the countess’s perspective: After a few of the marquis’s moves, she sensed the marquis was playing some sort of game, but the game delighted her. She did not know where he was leading her, but so much the better. His moves intrigued her, each of them keeping her waiting for the next one—she even enjoyed her jealousy and confusion, for sometimes any emotion is better than the boredom of security. Perhaps the marquis had ulterior motives; most men do. But she was willing to wait and see, and probably if she had been made to wait long enough, what he was up to would not have matte

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Annotation 1465080483084

#48-laws-of-power #interpretation #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

The moment the marquis uttered that fatal word “love,” his true intention was revealed: He was seducing her. All that before had been charming now seemed ugly.

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n is better than the boredom of security. Perhaps the marquis had ulterior motives; most men do. But she was willing to wait and see, and probably if she had been made to wait long enough, what he was up to would not have mattered. The moment the marquis uttered that fatal word “love,” however, all was changed. This was no longer a game with moves, it was an artless show of passion. His intention was revealed: He was seducing her. This put everything he had done in a new light. All that before had been charming now seemed ugly and conniving; the countess felt embarrassed and used. A door closed that would never open again. Do not be held a cheat, even though it is impossible to live today without being one. Let your greatest cunning lie in covering up what looks like cunning. Baltas

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Annotation 1465082055948

#48-laws-of-power #interpretation #law-3-conceal-your-intentions #part-i-use-objects-of-desire-and-red-herrings #transgression-of-the-law

Do not be held a cheat, even though it is impossible to live today without being one. Let your greatest cunning lie in covering up what looks like cunning.

Baltasar Gracián, 1601-1658

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Article 1469122219276

2. COST OF CAPITAL
#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

The cost of capital is the rate of return that the suppliers of capital—bondholders and owners—require as compensation for their contribution of capital. Another way of looking at the cost of capital is that it is the opportunity cost of funds for the suppliers of capital: A potential supplier of capital will not voluntarily invest in a company unless its return meets or exceeds what the supplier could earn elsewhere in an investment of comparable risk. A company typically has several alternatives for raising capital, including issuing equity, debt, and instruments that share characteristics of debt and equity. Each source selected becomes a component of the company’s funding and has a cost (required rate of return) that may be called a component cost of capital . Because we are using the cost of capital in the evaluation of investment opportunities, we are dealing with a marginal cost—what it would cost to raise additional funds for the potential investment project. Therefore, the cost of capi

Annotation 1469123529996

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

The cost of capital is the rate of return that the suppliers of capital—bondholders and owners—require as compensation for their contribution of capital.

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2. COST OF CAPITAL
The cost of capital is the rate of return that the suppliers of capital—bondholders and owners—require as compensation for their contribution of capital. Another way of looking at the cost of capital is that it is the opportunity cost of funds for the suppliers of capital: A potential supplier of capital will not voluntarily invest in a

Flashcard 1469124578572

Tags

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

Question

The [...] is the rate of return that the suppliers of capital require as compensation for their contribution.

Answer

cost of capital

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The cost of capital is the rate of return that the suppliers of capital—bondholders and owners—require as compensation for their contribution of capital.

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Annotation 1469126151436

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

A potential supplier of capital will not voluntarily invest in a company unless its return meets or exceeds what the supplier could earn elsewhere in an investment of comparable risk.

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2. COST OF CAPITAL
of return that the suppliers of capital—bondholders and owners—require as compensation for their contribution of capital. Another way of looking at the cost of capital is that it is the opportunity cost of funds for the suppliers of capital: A potential supplier of capital will not voluntarily invest in a company unless its return meets or exceeds what the supplier could earn elsewhere in an investment of comparable risk. A company typically has several alternatives for raising capital, including issuing equity, debt, and instruments that share characteristics of debt and equity. Each source

Annotation 1469127724300

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

A company typically has several alternatives for raising capital, including issuing equity, debt, and instruments that share characteristics of debt and equity. Each source selected becomes a component of the company’s funding and has a cost (required rate of return) that may be called a component cost of capital .

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2. COST OF CAPITAL
y cost of funds for the suppliers of capital: A potential supplier of capital will not voluntarily invest in a company unless its return meets or exceeds what the supplier could earn elsewhere in an investment of comparable risk. A company typically has several alternatives for raising capital, including issuing equity, debt, and instruments that share characteristics of debt and equity. Each source selected becomes a component of the company’s funding and has a cost (required rate of return) that may be called a component cost of capital . Because we are using the cos

Annotation 1469130083596

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

The cost of capital that the investment analyst is concerned with is a marginal cost.

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2. COST OF CAPITAL
ponent cost of capital . Because we are using the cost of capital in the evaluation of investment opportunities, we are dealing with a marginal cost—what it would cost to raise additional funds for the potential investment project. Therefore, the cost of capital that the investment analyst is concerned with is a marginal cost. Let us focus on the cost of capital for the entire company (later we will address how to adjust that for specific projects). The cost of capital of a company is the require

Annotation 1469132442892

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

The cost of capital of a company is the required rate of return that investors demand for the average-risk investment of a company.

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2. COST OF CAPITAL
roject. Therefore, the cost of capital that the investment analyst is concerned with is a marginal cost. Let us focus on the cost of capital for the entire company (later we will address how to adjust that for specific projects). The cost of capital of a company is the required rate of return that investors demand for the average-risk investment of a company. The most common way to estimate this required rate of return is to calculate the marginal cost of each of the various sources of capital and then calculate a weighted average of these c

Flashcard 1469134015756

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#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

Question

The cost of capital of a company is the required rate of return that investors demand for [...] investment in the company.

Answer

the average-risk

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The cost of capital of a company is the required rate of return that investors demand for the average-risk investment of a company.

Original toplevel document

Annotation 1469135588620

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

The most common way to estimate the average risk required rate of return is to calculate the marginal cost of each of the various sources of capital and then calculate a weighted average of these costs. This weighted average is referred to as the weighted average cost of capital (WACC).

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2. COST OF CAPITAL
n the cost of capital for the entire company (later we will address how to adjust that for specific projects). The cost of capital of a company is the required rate of return that investors demand for the average-risk investment of a company. The most common way to estimate this required rate of return is to calculate the marginal cost of each of the various sources of capital and then calculate a weighted average of these costs. This weighted average is referred to as the weighted average cost of capital (WACC). The WACC is also referred to as the marginal cost of capital (MCC) because it is the cost that a company incurs for additional capital. The weights in this weighted average are the prop

Flashcard 1469137423628

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#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

Question

The most common way to estimate the average risk required rate of return is to [...] of these costs.

Answer

calculate the marginal cost of each of the various sources of capital and then calculate a weighted average.

This weighted average is referred to as the weighted average cost of capital (WACC).

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The most common way to estimate the average risk required rate of return is to calculate the marginal cost of each of the various sources of capital and then calculate a weighted average of these costs. This weighted average is referred to as the weighted average cost of capital (WACC).

Original toplevel document

Annotation 1469139782924

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

The WACC is also referred to as the marginal cost of capital (MCC) because it is the cost that a company incurs for additional capital.

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2. COST OF CAPITAL
s required rate of return is to calculate the marginal cost of each of the various sources of capital and then calculate a weighted average of these costs. This weighted average is referred to as the weighted average cost of capital (WACC). The WACC is also referred to as the marginal cost of capital (MCC) because it is the cost that a company incurs for additional capital. The weights in this weighted average are the proportions of the various sources of capital that the company uses to support its investment program. Therefore, the WACC, in its most gene

Flashcard 1469140831500

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#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

Question

The WACC is also referred to as the [...] because it is the cost that a company incurs for additional capital.

Answer

marginal cost of capital (MCC)

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The WACC is also referred to as the marginal cost of capital (MCC) because it is the cost that a company incurs for additional capital.

Original toplevel document

Annotation 1469142404364

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

The weights in this weighted average are the proportions of the various sources of capital that the company uses to support its investment program.

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2. COST OF CAPITAL
age of these costs. This weighted average is referred to as the weighted average cost of capital (WACC). The WACC is also referred to as the marginal cost of capital (MCC) because it is the cost that a company incurs for additional capital. The weights in this weighted average are the proportions of the various sources of capital that the company uses to support its investment program. Therefore, the WACC, in its most general terms, is Equation (1) WACC = w d r d (1 – t) + w p r p + w e r e where w d = the prop

Annotation 1469144239372

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital

WACC = w_dr_d(1 – t) + w_pr_p + w_er_e

where

w_d = the proportion of debt that the company uses when it raises new funds

r_d = the before-tax marginal cost of debt

t = the company’s marginal tax rate

w_p = the proportion of preferred stock the company uses when it raises new funds

r_p = the marginal cost of preferred stock

w_e = the proportion of equity that the company uses when it raises new funds

r_e = the marginal cost of equity

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2. COST OF CAPITAL
al. The weights in this weighted average are the proportions of the various sources of capital that the company uses to support its investment program. Therefore, the WACC, in its most general terms, is Equation (1) WACC = w d r d (1 – t) + w p r p + w e r e where w d = the proportion of debt that the company uses when it raises new funds r d = the before-tax marginal cost of debt t = the company’s marginal tax rate w p = the proportion of preferred stock the company uses when it raises new funds r p = the marginal cost of preferred stock w e = the proportion of equity that the company uses when it raises new funds r e = the marginal cost of equity <body><html>

Flashcard 1469145812236

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Question

WACC = w_dr_d(1 – t) + w_pr_p + w_er_e

where

w_d = [...] when [...]

r_d = the before-tax marginal cost of debt

t = the company’s marginal tax rate

w_p = the proportion of preferred stock the company uses when it raises new funds

r_p = the marginal cost of preferred stock

w_e = the proportion of equity that the company uses when it raises new funds

r_e = the marginal cost of equity

Answer

the proportion of debt that the company uses

it raises new funds

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WACC = w d r d (1 – t) + w p r p + w e r e where w d = the proportion of debt that the company uses when it raises new funds r d = the before-tax marginal cost of debt t = the company’s marginal tax rate w p = the proportion of preferred stock

Original toplevel document

Annotation 1469184609548

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital #taxes-and-cc

In the United States and many other tax jurisdictions, the interest on debt financing is a deduction to arrive at taxable income.

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2.1. Taxes and the Cost of Capital
Notice that in Equation 1 we adjust the expected before-tax cost on new debt financing, r d , by a factor of (1 − t). In the United States and many other tax jurisdictions, the interest on debt financing is a deduction to arrive at taxable income. Taking the tax-deductibility of interest as the base case, we adjust the pre-tax cost of debt for this tax shield. Multiplying r d by (1 − t) results in an estimate of the after-tax co

Flashcard 1469187230988

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#cfa-level-1 #corporate-finance #reading-36-cost-of-capital #taxes-and-cc

Question

Estimating the cost of [...] capital is more challenging than estimating the cost of [...] capital.

Answer

common equity

debt

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Estimating the cost of common equity capital is more challenging than estimating the cost of debt capital.

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2.1. Taxes and the Cost of Capital
1 − 0.4) = €0.6 million because the interest reduces the company’s tax bill by €0.4 million. In this case, the before-tax cost of debt is 10 percent, whereas the after-tax cost of debt is (€0.6 million)/(€10 million) = 6 percent. Estimating the cost of common equity capital is more challenging than estimating the cost of debt capital. Debt capital involves a stated legal obligation on the part of the company to pay interest and repay the principal on the borrowing. Equity entails no such obligation. Estimating the co

Annotation 1469189590284

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital #taxes-and-cc

Debt capital involves a stated legal obligation on the part of the company to pay interest and repay the principal on the borrowing. Equity entails no such obligation.

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2.1. Taxes and the Cost of Capital
the before-tax cost of debt is 10 percent, whereas the after-tax cost of debt is (€0.6 million)/(€10 million) = 6 percent. Estimating the cost of common equity capital is more challenging than estimating the cost of debt capital. Debt capital involves a stated legal obligation on the part of the company to pay interest and repay the principal on the borrowing. Equity entails no such obligation. Estimating the cost of conventional preferred equity is rather straightforward because the dividend is generally stated and fixed, but estimating the cost of common equity is challengin

Annotation 1469191163148

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital #taxes-and-cc

Estimating the cost of conventional preferred equity is rather straightforward because the dividend is generally stated and fixed, but estimating the cost of common equity is challenging.

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2.1. Taxes and the Cost of Capital
uity capital is more challenging than estimating the cost of debt capital. Debt capital involves a stated legal obligation on the part of the company to pay interest and repay the principal on the borrowing. Equity entails no such obligation. Estimating the cost of conventional preferred equity is rather straightforward because the dividend is generally stated and fixed, but estimating the cost of common equity is challenging. There are several methods available for estimating the cost of common equity, and we discuss two in this reading. The first method uses the capital asset pricing model, and the second m

Flashcard 1469196143884

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Question

For estimating the cost of common equity, we discuss two. The first method uses the [...], and the second method uses the [...]

Answer

capital asset pricing model

dividend discount model (based on discounted cash flows)

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There are several methods available for estimating the cost of common equity, and we discuss two in this reading. The first method uses the capital asset pricing model, and the second method uses the dividend discount model, which is based on discounted cash flows. No matter the method, there is no need to make any adjustment in the cost of equity for

Original toplevel document

2.1. Taxes and the Cost of Capital
l on the borrowing. Equity entails no such obligation. Estimating the cost of conventional preferred equity is rather straightforward because the dividend is generally stated and fixed, but estimating the cost of common equity is challenging. There are several methods available for estimating the cost of common equity, and we discuss two in this reading. The first method uses the capital asset pricing model, and the second method uses the dividend discount model, which is based on discounted cash flows. No matter the method, there is no need to make any adjustment in the cost of equity for taxes because the payments to owners, whether in the form of dividends or the return on capital, are not tax-deductible for the company. <body><html>

Flashcard 1469199551756

Tags

#cfa-level-1 #corporate-finance #reading-36-cost-of-capital #taxes-and-cc

Question

Are dividends tax deductible?

Answer

The payments to owners, whether in the form of dividends or the return on capital, are not tax-deductible for the company.

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No matter the method, there is no need to make any adjustment in the cost of equity for taxes because the payments to owners, whether in the form of dividends or the return on capital, are not tax-deductible for the company.

Edited, memorised or added to reading queue

on 02-Feb-2017 (Thu)

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3. UTILITY THEORY: MODELING PREFERENCES AND TASTES

3.1. [...] 3.2. Representing the Preference of a Consumer: The Utility Function

3.3. Indifference Curves: The Graphical Portrayal of the Utility Function 3.4. Indifference Curve Maps 3.5. Gains from Voluntary Exchange: Creating Wealth through Trade

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3.1. [...]

3.2. Representing the Preference of a Consumer: The Utility Function

3.3. Indifference Curves: The Graphical Portrayal of the Utility Function

3.4. Indifference Curve Maps

3.5. Gains from Voluntary Exchange: Creating Wealth through Trade