The material set forth in this chapter will comprise approximately 8% of the questions on your upcoming CFA Level 1 examination. Keep in mind that CFA Institute's exam questions are comprehensive. Be sure to know not only what these topics are, but how they relate to each other.

Within this section, we will discuss the agency problems associated with the agent-principal relationship, the calculations and uses of the cost of capital in capital budgeting, the calculations and applications of Net Present Value (NPV), the types of risks and risk analysis techniques, the effect of leverage on a company or project's return, and the various dividend theories and related calculations.

Agent-Principle Relationship

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