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1) Chapter 12: Questions and Exercises 12.1, 12.2 (p. 935):

12.1 Free Cash Flows. Explain ‘‘free’’ cash flows.

  • Describe which types of cash flows are free and which are not.
  • How do free cash flows available for debt and equity stakeholders differ from free cash flows available for common equity shareholders?

12.2 Free-Cash-Flows-Based Valuation Approaches.

  • Explain the theory behind the free cash flows valuation approaches.
  • Why are free cash flows value-relevant to common equity shareholders when they are not cash flows to those shareholders but rather are cash flows into the firm?

2) Chapter 13: Questions and Exercises 13.2, 13.3 (p. 995):

13.2 Required Income:

  • Explain required income. What does required income represent? How is required income conceptually analogous to interest expense?

13.3 Residual Income:

  • Explain residual income. What does residual income represent? What does residual income measure?

3) Chapter 14: Questions and Exercises 14.1, 14.2 (p. 1048):

14.1 Value Determinants.

  • What are the fundamental determinants of share value, and how do they affect market-based valuation multiples, such as market-to-book and price- earnings ratios?

14.2 Residual ROCE. Explain residual ROCE (return on common shareholders’ equity).

  • What does residual ROCE represent? What does residual ROCE measure?

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