ECON 373 - Study Guide III

Economics 373

MANAGERIAL ECONOMICS

Spring 2015

Study Guide for Test #3

1. Categories of investment projects

2. Projecting cash flows

3. Net present value

4. Internal rate of return criterion for taking on a project

5. Profitability index - calculation and use

6. Cost of debt

7. Risk-free rate plus premium approach to calculating the cost of equity capital

8. Dividend valuation model approach to calculating the cost of equity capital

9. Capital asset pricing model approach to calculating the cost of equity capital

10. Weighted cost of capital

11. Expected value

12. Variance and standard deviation

13. Coefficient of variation

14. Utility and risk preference - graph and calculation

15. Risk-adjusted discount rate approach to adjusting the valuation model for risk

16. Certainty-equivalent approach to adjusting the valuation model for risk

17. Decision trees

18. Maximin criterion for making decisions under uncertainty

19. Minimax regret criterion for making decisions under uncertainty

20. Adverse selection

21. Moral hazard

22. Principal-agent problem

23. Types of auctions and how they work

24. Products with interrelated demands

25. Plant capacity utilization - graph

26. Required conditions for price discrimination

27. First degree price discrimination - graph and explanation

28. Second degree price discrimination - graph and explanation

29. Third degree price discrimination - graph and explanation

30. Transfer pricing with no external market for intermediate product - graph

31. Transfer pricing with perfectly competitive market for intermediate product - graph

32. Transfer pricing with imperfectly competitive market for intermediate product - graph

33. Cost-plus pricing

34. Advantages and problems with cost-plus pricing

35. Relationship of cost-plus pricing to demand

36. Peak-load pricing - graph

37. Two-part tariff

38. Tying

39. Bundling

40. Other pricing practices