1. Cost of Capital Dr Bryan Mills

2. Risk and Return % return % risk

10. Portfolio theory Investment A Investment B Time Rate of Return Rate of Return Time Combined effect (Portfolio Return)

11. Systematic risk 15-20 Portfolio Risk Number of securities Systematic (Market) Risk Unsystematic (unique) Risk

12. CAPM R f R m Return 1 Systematic Risk  Security Market Line (SML)

14. R y Market Return R m Slope =  <1 R y Market Return R m Slope =  >1

21. @22% (3.92) NPV 49.65 0.45 110.00 4 5.51 0.55 10.00 3 6.72 0.67 10.00 2 8.20 0.82 10.00 1 (74.00) 1.00 (74.00) PV Discount Factor Cashflow Year @15% 11.73 NPV 62.89 0.57 110.00 4 6.58 0.66 10.00 3 7.56 0.76 10.00 2 8.70 0.87 10.00 1 (74.00) 1.00 (74.00) PV Discount Factor Cashflow Year

22. 20% Return pa 0.0524 Times by Difference 0.7493 Higher Divided by Range 15.649 Range between high and low 11.73 Higher return 0.07 Difference in % 0.15 Lowest % IRR = original % +

26. WACC 0 Cost of Cap % X Gearing Cost of equity WACC Cost of debt

27. Market Value of firm 0 £ X Gearing Market value of equity