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UCF | FIN 3414
Intermediate Corporate Finance
Professors
- Frye,
- Melissa Frye,
- Joshua Harris,
- Borde
59 sample documents related to FIN 3414
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UCF FIN 3414
Overview of Financial Management n Major areas in finance n Forms of business organization n Goals of the corporation n Agency relationships n Factors that affect stock price Overview 1 Major Areas in Finance n Money and capital markets n Investments n Fi -
UCF FIN 3414
Financial Environment: Markets, Institutions, Interest Rates, and Taxes n Financial markets n Capital formation -institutions n Determinants of interest rates n Yield curves Financial Environment 1 n Taxable vs. tax-exempt bonds Define the following terms -
UCF FIN 3414
Discounted Cash Flow Analysis Time Value of Money - TVM n Future value n Present value n Annuities n Rates of return n Perpetuities n Amortization Time Value of Money 1 Time lines show timing of cash flows. 0 1 2 3 i% CF0 CF1 CF2 CF3 Tick marks at ends of -
UCF FIN 3414
Analysis of Financial Statements n Ratio analysis n Limitations of ratio analysis n Qualitative factors StatementAnalysis 1 Income Statement 2010 Sales 5,834,400 COGS 4,980,000 Other expenses 720,000 Deprec. 116,960 Tot. op. costs 5,816,960 EBIT 17,440 In -
UCF FIN 3414
Risk and Return n Stand-alone risk n Portfolio risk n Pricing risk risk aversion n Historical risk and returns n Constructionand Return Risk of efficient portfolios 1 What is investment risk? n Investment risk p -
UCF FIN 3414
Bond Valuation n Terminology and key features n Valuation model n Risk and cash flows n Yield to maturity (YTM) n Yield to call (YTC) n Duration Bond Valuation 1 Bond Terminology n n n n n Indenture: legal agreement Issue date: when issued Maturity date: -
UCF FIN 3414
Stock Valuation n Preferred stock valuation n Common stock valuation n Security market equilibrium n Supernormal growth stocks n Market efficiency levels Stock Valuation 1 What is the cash flow stream of a Preferred Stock with an annual dividend of $10? 1 -
UCF FIN 3414
The Cost of Capital n Cost of capital components lDebt lPreferred lCommon equity n WACC n MCC n IOS Cost of Capital 1 What sources of capital should be included in a firms WACC? n Long-term debt n Preferred stock n Common equity (including): lRetained ear -
UCF FIN 3414
Capital Budgeting n Payback period n Net present value (NPV) n Internal rate of return (IRR) n Profitability index (PI) n Modified IRR (MIRR) Capital Budgeting 1 What Is capital budgeting? n Analysis of potential additions to fixed assets. n Long-term dec -
UCF FIN 3414
Project Cash Flow Estimation n Relevant cash flows n Working capital treatment n Unequal project lives n Abandonment value n Inflation Cash Flow Estimation 1 Proposed Project n Cost: $200,000 + $10,000 shipping + $30,000 installation. n Depreciable cost $ -
UCF FIN 3414
Capital Structure n Business risk n Operating leverage and risk n Financial leverage and risk n Capital structure theory n Finding the optimal capital structure Capital Structure 1 What is business risk? n Uncertainty about future operating income (EBIT), -
UCF FIN 3414
Distributions to Shareholders n Investors payout preferences n Dividend policy theory n Signaling and clientele effects n Residual dividend model n Stock repurchases n Stock dividends and stock splits Distributions 1 What is dividend policy? It is the dec -
UCF FIN 3414
Working Capital Management n Alternative working capital policies n Cash, inventory, and A/R management n Accounts payable management n Short-term financing policies n Bank debt and commercial paper WorkingCapital 1 Basic Definitions n Gross working capit -
UCF FIN 3414
Future value interest factor of $1 per period at i% for n periods, FVIF(i,n). Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 1 1.0100 1.0200 1.0300 1.0400 1.0500 1.0600 1.0700 1.0800 1.0900 1.1000 1.1100 1.1200 1.1300 1.1400 -
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UCF FIN 3414
1. NAFTA seeks to A. substitute cheap labor in Mexico for expensive labor in the United States B. curb illegal immigration from Mexico to the United States C. phase out all trade and tariff barriers between North America D. phase out all of the trade and -
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UCF FIN 3414
Business Honors Finance Boot Camp Breakout Session TVM Practice Problems Solutions 1. At 8 percent interest, how long does it take to double your money? PV = -1, FV = 2, I = 8, SOLVE N= 9.006 2. Imprudential Inc. has an unfunded pension liability of $800 -
UCF FIN 3414
Corporate Finance Chapter 16 Dividends I. Different types of dividends a. Cash distribution of earnings b. Reduces retained earnings c. Stock dividend: increases the number of shares outstanding, reducing the value of each share d. Stock split: increases -
UCF FIN 3414
Corporate Finance Chapter 18 Short-term Finance and Planning I. Cash and Net Working Capital a. Net Work Capital = current assets current liabili ties b. Cash = long-term debt + equity + current liabilities current assets other than cash fixed assets c. A -
UCF FIN 3414
Determining the Cost of Capital Chapter 10 1 Overview s rd rps rs Capital components s common stock, preferred stock, debt investors expect return s different risks s Cost of capital s Why not AP & accruals? required rate of return (com -
UCF FIN 3414
Capital Budgeting: Decision Criteria Chapter 12 1 What is Capital Budgeting? s Analysis of potential additions to fixed assets Long-term decisions Large expenditures Very important to firms future strategic direction 2 Overview of the Proces -
UCF FIN 3414
Capital Budgeting: Estimating Cash Flows and Analyzing Risk Chapter 13 1 Estimating Cash Flows l Most important and most difficult step in capital budgeting l Consider relevant CFs q q Use CF not accounting income Only incremental CFs are relevant -
UCF FIN 3414
Accounting for Financial Management Chapter 7 1 Overview Value of any business asset (real or financial) Depends on usable expected after-tax CFs Maximize firm value Increase firms expected after-tax CFs How do we predict? Financial stateme -
UCF FIN 3414
Current Asset Management Chapter 21 1 Working Capital Terms Working capital (gross working capital) Current assets used in operations Net working capital Current _ minus current _ Net operating working capital (NOWC) Operating CA minus oper -
UCF FIN 3414
Capital Structure Decisions Chapter 15/16 1 Overview a Capital structure Mix of debt and equity Remember: Firm value depends on FCF and WACC, which are affected by mix a Effect of debt Debtholders have a prior claim on cash flows relative to -
UCF FIN 3414
Financial Planning and Forecasting Financial Statements Chapter 9 In preparing for battle I have always found that plans are useless, but planning is indispensable. - Dwight D. Eisenhower 1 The Financial Plan Steps Project statements and use to a -
UCF FIN 3414
1 Chapter 1: An Overview of Financial Management Valuation From economics, the value of any financial asset is the PV of expected future cash flows CFt Value = t t =1 (1 + r ) n Can a corporation be considered a financial asset? 2 Goals and -
UCF FIN 3414
Mergers, Divestitures, and Holding Companies Chapter 26 1 Mergers s Definition x Any combination that forms one economic unit. Synergy 3 s Reasons for mergers x A B taken separately. Operati -
UCF FIN 3414
i .1 Which of the following events is likely to encourage a company to raise its target debt ratio? a. b. c. d. e. An increase in the corporate tax rate. An increase in the personal tax rate. An increase in the company\'s operating leverage. Stateme -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 3-1 a. A plot of the approximate regression line is shown in the following figure: 30 25 20 15 10 5 0 -30 -20 -10 -5 -10 -15 -20 0 10 20 30 40 rX (%) rY 50 Using Excel, the regression equation estimates are: -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 4-1 With your financial calculator, enter the following: N = 10; I = YTM = 9%; PMT = 0.08 1,000 = 80; FV = 1000; PV = VB = ? PV = $935.82. Alternatively, VB = $80(PVIFA9%,10) + $1,000(PVIF9%,10) = $80(1- 1/1.0910 -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 9-1 AFN = (A*/S0)S - (L*/S0)S - MS1(1 - d) $3,000,000 $500,000 $1,000,000 - $1,000,000 - 0.05($6,000,000)(1 - 0.7) = $5,000,000 $5,000,000 = (0.6)($1,000,000) - (0.1)($1,000,000) - ($300,000)(0.3) = $ -
UCF FIN 3414
Chapter 11 Corporate Value and Value-Based Management SOLUTIONS TO END-OF-CHAPTER PROBLEMS 11-1 NOPAT = EBIT(1 - T) = 100(1 - 0.4) = $60. = ($27 + $80 + $106) - ($52 + $28) = $213 - $80 = $133. Net operating WC06 Operating capital06 = $133 + $26 -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 12-1 a. $52,125/$12,000 = 4.3438, so the payback is about 4 years. b. Project K\'s discounted payback period is calculated as follows: Period 0 1 2 3 4 5 6 7 8 Annual Cash Flows ($52,125) 12,000 12,000 12,000 12, -
UCF FIN 3414
Chapter 26 Mergers, LBOs, Divestitures, and Holding Companies SOLUTIONS TO END-OF-CHAPTER PROBLEMS 26-1 FCF1 = 2.00(1.05) = $2.1 million; g = 5%; b = 1.4; rRF = 5%; RPM = 6%; wd = 30%; T = 40%; rd = 8% Vops = ? P0 = ? rs = rRF + RPM(b) = 5% + 6%(1. -
UCF FIN 3414
Corporate Value and Value-Based Management Chapter 11 1 Mini Case You have been hired as a consultant to Kulpa Fishing Supplies (KFS), a company that is seeking to increase its value. KFS has asked you to estimate the value of two privately held -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 2-1 r = (0.1)(-50%) + (0.2)(-5%) + (0.4)(16%) + (0.2)(25%) + (0.1)(60%) = 11.40%. 2 = (-50% - 11.40%)2(0.1) + (-5% - 11.40%)2(0.2) + (16% - 11.40%)2(0.4) + (25% - 11.40%)2(0.2) + (60% - 11.40%)2(0.1) 2 = 712. -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 5-1 D0 = $1.50; g1-3 = 5%; gn = 10%; D1 through D5 = ? D1 = D0(1 + g1) = $1.50(1.05) = $1.5750. D2 = D0(1 + g1)(1 + g2) = $1.50(1.05)2 = $1.6538. D3 = D0(1 + g1)(1 + g2)(1 + g3) = $1.50(1.05)3 = $1.7364. D4 = D0 -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 7-1 Corporate yield = 9%; T = 35.5% AT yield = 9%(1 - T) = 9%(0.645) = 5.76%. Corporate bond yields 8%. Municipal bond yields 6%. Equivalent pretax yield Yield on muni = on taxable bond (1 - T ) 6% 8% = (1 - T) 0. -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 8-1 CA = $3,000,000; CL = ?; I = ? CA CA - I = 1.5; = 1.0; CL CL CA = 1.5 CL $3,000,000 = 1.5 CL 1.5 CL = $3,000,000 CL = $2,000,000. CA - I = 1.0 CL $3,000,000 - I = 1.0 $2,000,000 $3,000,000 - I = $2,000,000 -
UCF FIN 3414
Chapter 10 Determining the Cost of Capital SOLUTIONS TO END-OF-CHAPTER PROBLEMS 10-1 40% Debt; 60% Equity; rd = 9%; T = 40%; WACC = 9.96%; rs = ? WACC = (wd)(rd)(1 - T) + (wce)(rs) 9.96% = (0.4)(9%)(1 - 0.4) + (0.6)rs 9.96% = 2.16% + 0.6rs 7.8% = 0 -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 13-1 Equipment NWC Investment Initial investment outlay Operating Cash Flows: t = 1 Sales revenues Operating costs Depreciation Operating income before taxes Taxes (40%) Operating income after taxes Add back dep -
UCF FIN 3414
SOLUTIONS TO END-OF-CHAPTER PROBLEMS 21-1 Sales = $10,000,000; S/I = 2 . Inventory = S/2 $10,000,000 = = $5,000,000. 2 If S/I = 5 , how much cash is freed up? Inventory = S/5 $10,000,000 = = $2,000,000. 5 Cash Freed = $5,000,000 - $2,000,000 = $3,000 -
UCF FIN 3414
Sample Q\'s for the first test Agency i Answer: d Which of the following statements is most correct? a. One of the ways in which firms can mitigate or reduce agency problems between bondholders and stockholders is by increasing the amount of debt in
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