cfa-l-2 2024 Study Materials - Aswini Bajaj Classes

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a. Contrast types of employee compensation
b. Explain how share-based compensation affects the financial statements
c. Explain how to forecast share-based compensation expense and shares outstanding in a financial statement model and their use in valuation
d. Explain how post-employment benefits affect the financial statements
e. Explain financial modeling and valuation considerations for post-employment benefits

b. describe uses of private business valuation and explain key areas of focus for financial analysts
e. compare models used to estimate the required rate of return to private company equity (for example, the CAPM, the expanded CAPM, and the build-up approach)

c. explain the assumptions underlying the simple linear regression model, and describe how residuals and residual plots indicate if these assumptions may have been violated
d. calculate and interpret the coefficient of determination and the F-statistic in a simple linear regression
e. describe the use of analysis of variance (ANOVA) in regression analysis, interpret ANOVA results, and calculate and interpret the standard error of estimate in a simple linear regression
f. formulate a null and an alternative hypothesis about a population value of a regression coefficient, and determine whether the null hypothesis is rejected at a given level of significance
g. calculate and interpret the predicted value for the dependent variable, and a prediction interval for it, given an estimated linear regression model and a value for the independent variable

a. formulate a multiple regression equation to describe the relation between a dependent variable and several independent variables, and determine the statistical significance of each independent variable
b. interpret estimated regression coefficients and their p-values
c. formulate a null and an alternative hypothesis about the population value of a regression coefficient, calculate the value of the test statistic, and determine whether to reject the null hypothesis at a given level of significance
d. interpret the results of hypothesis tests of regression coefficients
f. explain the assumptions of a multiple regression model
g. calculate and interpret the F-statistic, and describe how it is used in regression analysis
h. contrast and interpret the R2 and adjusted R2 in multiple regression
o. evaluate and interpret a multiple regression model and its results

a. explain the Modigliani–Miller propositions regarding capital structure
b. explain the effects on costs of capital and capital structure decisions of taxes, financial distress, agency costs, and asymmetric information
c. explain factors an analyst should consider in evaluating the effect of capital structure policy on valuation
d. describe international differences in the use of financial leverage, factors that explain these differences, and implications of these differences for investment analysis

a. classify merger and acquisition (M&A) activities based on forms of integration and relatedness of business activities
b. explain common motivations behind M&A activity
c. explain bootstrapping of EPS and calculate a company’s post-merger EPS
d. explain, based on industry life cycles, the relation between merger motivations and types of mergers
e. contrast merger transaction characteristics by form of acquisition, method of payment, and attitude of target management
f. distinguish among pre-offer and post-offer takeover defense mechanisms
g. compare the discounted cash flow, comparable company, and comparable transaction analyses for valuing a target company, including the advantages and disadvantages of each
h. evaluate a takeover bid and its effects on the target shareholders versus the acquirer shareholders
i. explain how price and payment method affect the distribution of risks and benefits in M&A transactions
j. describe characteristics of M&A transactions that create value
k. distinguish among equity carve-outs, spin-offs, split-offs, and liquidation
l. explain common reasons for restructuring

a. calculate the yearly cash flows of expansion and replacement capital projects and evaluate how the choice of depreciation method affects those cash flows
b. explain how inflation affects capital budgeting analysis
c. evaluate capital projects and determine the optimal capital project in situations of 1) mutually exclusive projects with unequal lives, using either the least common multiple of lives approach or the equivalent annual annuity approach, and 2) capital rationing
d. explain how sensitivity analysis, scenario analysis, and Monte Carlo simulation can be used to assess the stand-alone risk of a capital project
e. describe types of real options relevant to a capital project
f. describe common capital budgeting pitfalls

a. contrast realized holding period return, expected holding period return, required return, return from convergence of price to intrinsic value, discount rate, and internal rate of return
b. calculate and interpret an equity risk premium using historical and forward-looking estimation approaches
c. determine the required return on an equity investment using the capital asset pricing model, the Fama–French model, the Pastor–Stambaugh model, macroeconomic multifactor models, and the build-up method (e.g., bond yield plus risk premium)
d. explain beta estimation for public companies, thinly traded public companies, and non-public companies
e. describe strengths and weaknesses of methods used to estimate the required return on an equity investment
f. explain international considerations in required return estimation
g. explain and calculate the weighted average cost of capital for a company
h. evaluate the appropriateness of using a particular rate of return as a discount rate, given a description of the cash flow to be discounted and other relevant facts

d. demonstrate methods to forecast the following costs: cost of goods sold, selling general and administrative costs, financing costs, and income taxes
f. describe the relationship between return on invested capital and competitive advantage

l. evaluate whether a stock is overvalued, fairly valued, or undervalued based on a residual income model