Spring 2017
MFE 6390
Homework Assignment #1
Due at the beginning of class on Tuesday, January 24th
Student Names:
Question 1
Suppose the Gap Store is considering opening a store on South Court Street and they hire you to conduct
some required research. Yo

8/24/2016
Bond as Investment
Fall 2016, BF 4211, Dr. Zhi Li
1
Master of the Universe
Bond market is march larger than stock market
US bond market is more than 2x the size of the US stock market
Who issues bonds in U.S?
Bond traders Masters of the Univers

Systematic Risk and Equity
Risk Premium
Chapter 12
Fundamental Premise of Portfolio Theory
Rational investors prefer highest expected return at the
lowest possible risk
What is one way we have discussed lowering risk
without sacrificing return?
Combining

Mergers & Acquisitions
Chapter 22
Mergers & Acquisitions Defined
Merger
Two firms are combined on a relatively co-equal basis, one firm
usually emerges as the dominant management, the selling firm
ceases to exist as a separate entity
Both sets of shareh

ZhiLiFine4211
10/7/2016
Capital Budgeting and Risk
Chapter 13
1
Valuing a Project
In order to value a project we need to know both the
expected cash flows, and the appropriate discount
rate.
Up till this point the discount rate has been given,
NOW we are

Dr. Zhi Li
Fall 2016, BF 4211: Corporate Finance
Phone: 614-688-7525
Email: [email protected]
Office Hours: 2:30-3:30 p.m. MW; and by appointment, Rm. 838 FH
Course Description:
The course introduces students to key concepts in financial management, includi

Making Investment Decisions
with the NPV Rule
Chapter 9
The Basic Principles
Use cash flows rather than earnings. You cannot spend earnings.
Cash flow = Dollars receive Dollars paid
Accounting Earnings are NOT cash flow
Accounting earnings start with c

Capital Budgeting
- Why NPV Leads to Better Investment Decisions
Capital Budgeting Definition
Definition:
A set of comprehensive principles and rules used to
value real investments
Questions we will address:
Should we take this project?
Which project sh

Introduction to Risk, Return
and the Opportunity Cost of
Capital
Chapter 7
Percentage Return
Historical Rates of Return
Year
Source: histretSP Damodaran
BF 4211 Dr. Zhi Li
2
1
Risk and Return:
Value of $100 Invested from1928 to 2014
BF 4211 Dr. Zhi Li
3
S

Review
Cost of Capital
The Weighted Average Cost of Capital WACC
If there is no tax
WACC = ra = D/V * rd + E/V*re
With corporate tax (tax shield benefit)
WACC= D/V * rd*(1-T) + E/V * re
If a project has the same risk as firm, can use the firms WACC as
dis

Journal of Business & Technology Law
Volume 3 | Issue 1
Article 4
The Google IPO
Matthias Hild
Follow this and additional works at: http:/digitalcommons.law.umaryland.edu/jbtl
Part of the Corporation and Enterprise Law Commons
Recommended Citation
Matthia

Payout Policy
Chapter 17
Cash Distributions to Shareholders
Why would firm distribute free cash flow to investors?
Whether or not the firm can employ free cash flow better than
investors.
In other words, can the firm invest the free cash flow to generat

HW 1
Xiaoan Huang
P15 Question 3
Ice cream is a close substitute for frozen yogurt, therefore when the
price of the frozen yogurt falls, we would expect the demand curve
for icecream to shift leftward, lowering both the price and quantity
for ice cream. T

P45, Question 9
Full time job
1 part time job
25
actively seeking jobs
20
retired
a
labor force
70
Labor force participation rate
77.8%
b
number of unemployed
10
unemployment rate
14.3%
c
household total employment
70
Established Survey total employment
6

CLASS 1 OVERVIEW
1.
Syllabus presentation and clarification
2.
Quiz
3.
Chapter 5: Basic concepts of risk and
return and various measures of calculation
4.
Chapter 18: Fundamentals of valuation
(mainly stocks)
THE RISK-RETURN TRADE
OFF
REMEMBER YOUR NORMAL

It seems that real-option-based management will work much better if
managers use the right valuation model. But many critics point out that
the main problem is that options approach often overvalue the growth
opportunities of companies. However, we hold t

journal ofErrmomzr' lmspernvmLbiume I 5, Number 2 Spring ZUUIPages 81-102
Capital Structure
Stewart C. Myers
he study of capital structure attempts to explain the mix of securities and
financing sources used by corporations to finance real investment. Mos

BF 4211 Fall 2016, Dr Zhi Li
The Value of Common Stock
Types of Stock - Preferred stock
Does not grant voting rights
Holders receive cash in the form of fixed
dividend payment, or by selling (illiquid)
More like bonds than stocks
Usually callable after 5

10/27/2016
Debt Financing
Chapter 15
1
Debt
Common features:
Borrower promises a certain stream of interest and
principal payments.
Lender is not an owner of the corporation and has no
voting rights.
If the corporation defaults on debt obligations and

Chapter 14
Equity Financing
Corporate Financing
We have been focusing on investment
decision, now we are turning to
financing decisions
Investment decisions: How do we spend
our money?
Financing decisions: How do we raise
money?
Equity & Debt
BF 4211 Fal

CAPITAL
STRUCTURE
Will Chun, Connor Kitko, Troy Plewa, Greg Incollingo,
Yunrong Ouyang
Introduction- Capital
Structure(Myers)
Written
by Stewart Myers in 2001
Attempts
Provides
to explain theories of capital structure decisions
historical overview of M

Year 0
1. Sales Revenue
2.
Cost of Goods Sold (COGS)
3. Gross Profit
4. Selling, General and Administrative Expenses (SG&A)
5. Research & Development (R&D)
6. Depreciation
(20,000)
20,000
16,000
4,000
2,600
7. Operating Profit (EBIT)=3-4-5-6
8. Net Operat

1. Sales Revenue
2.
Cost of Goods Sold (COGS)
3. Gross Profit
4. Selling, General and Administrative Expenses (SG&A)
5. Research & Development (R&D)
6. Depreciation
7. Operating Profit (EBIT)
8. Net Operating Profit After Taxes (NOPAT)
Adjustments
9. Add

1.00
10.00
6.00
Unit Sold
Price
Cost
year0
year1
1. Sales Revenue
2. Cost of Goods Sold (COGS)
3. Gross Profit
4. Selling, General and Administrative Expenses (SG&A)
5. Research & Development (R&D)
6. Depreciation
1.2
7. Operating Profit (EBIT)
-1.2
8. Ne

SUMMARY OUTPUT
Regression
Multiple R
R Square
Adjusted R
Standard Er
Observatio
Statistics
0.910977
0.829879
0.829536
2.276095
498
ANOVA
df
Regression
Residual
Total
Intercept
r_M r_f
SS
MS
F
Significance F
1 12534.87 12534.87 2419.575 6.64E-193
496 2569.

SUMMARY OUTPUT
Regression Statistics
Multiple R 0.707986
R Square 0.501244
Adjusted R 0.500239
Standard Er5.123116
Observatio
498
ANOVA
df
Regression
Residual
Total
SS
MS
F
Significance F
1 13083.12 13083.12 498.4745 6.02E-077
496 13018.18 26.24632
497 26