Within corporate finance, the agency problem is considered as the conflict of interest between the company’s managers and its stockholders.

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The Arbitrage Pricing Theory is a method used to estimate the returns on assets and portfolios. It is a model based on the linear relationship between an asset’s expected risk and return.

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The Modigliani-Miller Theorem suggests that a company’s capital structure and the average cost of capital does not have an impact on its overall value.

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The Gordon growth model, or GGM, is used to calculate the intrinsic value of a stock from future dividends. The model only works for companies that pay out dividends, which have a constant growth rate.

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Modern Portfolio Theory is a theory presented in 1952 by Harry Markowitz on how risk-averse investors can create portfolios to maximize the return on investments based on the optimal levels of risk.

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Stock valuation is the process of determining the current (or projected) worth of a stock at a given time period. There are 2 main ways to value stocks: absolute and relative valuation.

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Capital budgeting is a process that helps determine whether a firm should invest in something or not. When businesses want to buy new long term assets such as new machinery or start a new project, it is imperative to consider if it would be worth it or not.

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The optimal capital structure of a firm is the right combination of equity and debt financing. It allows the firm to have a minimum cost of capital while having the maximum market value.

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Compound interest is the interest on the initial principal as well as the interest from the prior periods. It is also referred to as interest on interest.

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