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Finance Class Comparisons

8 side-by-side comparisons of finance methods, standards, and concepts with detailed analysis.

Two core methods used in capital budgeting. NPV gives dollar value; IRR gives percentage return.

WACC is a blended firm-wide discount rate. CAPM estimates the cost of equity, which is one input to WACC.

Stocks represent ownership with unlimited upside and higher risk. Bonds are loans with fixed payments and priority in bankruptcy.

Systematic Risk vs Unsystematic Risk

Systematic risk affects all securities and cannot be diversified away. Unsystematic risk is firm-specific and eliminated through diversification.

Debt Financing vs Equity Financing

Debt means borrowing with fixed repayment obligations. Equity means selling ownership with no guaranteed payments.

Simple Interest vs Compound Interest

Simple interest is calculated on the original principal only. Compound interest earns interest on accumulated interest.

An annuity has a fixed number of equal payments. A perpetuity pays equal amounts forever.

Nominal Rate vs Real Rate

The nominal rate includes inflation. The real rate strips it out to show true purchasing power growth.

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