Practices TVM
1. John Keene recently invested $2,566.70 in a project that is promising to return 12
percent per year. The cash flows are expected to be as follows:
End of
Cash
Year
Flow
1
$325
2
400
3
550
4
?
5
750
6
800
What is the cash flow at the end o
This is time to unlock your true power
Hillary Clinton
Thefeaturesofbonds
Typesofbond.
Howtocalculateintrinsicvalueofbonds.
YieldtoMaturity,YieldtoCallandCurrent
Yield.
Therisksofbondinvestingandissuing.
CorporateFinanceaddressesthe
following3questions:
1
ASSUMPTION UNIVERSITY
MARTIN de TOURS SCHOOL OF MANAGEMENT AND ECONOMICS
DEPARTMENT OF FINANCE AND BANKING
COURSE SYLLABUS
SEMESTER 2/2013
(DAY PROGRAM ONLY)
COURSE TITLE
FIN3701
Pre-requisite(s)
: CORPORATE FINANCE
: FIN 2700
Money, Banking and Financial
Chapter 11 - Capital
Budgeting and Risk Analysis
Budgeting
Great minds have purposes. Others have wishes
W. Irving
In this chapter, you will learn
In
The measures of a Project standing alone risk,
The
Project contribution to firm risk and systematic
risk
CHAPTER 12
Determining the Cost of Capital
In this chapter, you will learn
Determinations and Calculations of Cost of
Capital Components
Debt
Preferred
Common Equity
WACC= Weighted Average Cost of Capital
Corporate Finance addresses the
following
3 q
Trading System
Secondary Markets for securities
and derivatives
Automatic Order Matching
(Price then Time Priority)
2
Order Arrangement
3
best
bid
3
best
offer
3
Ex. Stock A $100
Bid
1,000 /
100
1,000 /
99.5
3,500 / 99
Offer
101 /
1,500
102 /
1,000
103 /
Appendix: Time Value
of Money Tables
American Management Association. All rights reserved.
209
American Management Association. All rights reserved.
Present Value Table
1%
2%
1
0.990
0.980
2
0.980
0.961
3
0.971
0.942
4
0.961
0.924
5
0.951
0.906
6
0.942
CHAPTER 15
Lever = Increase
ANALYSIS &
IMPACT OF LEVERAGE
IN THIS CHAPTER, YOU WILL LEARN
The basics of break-even analysis and operating
leverage and how they relate to each other.
How to measure operating leverage and financial
leverage and distinguish
Solution practice TVM
1. Find the present value of each of the cash flows:
PV of CF1 = $325/1.12 = $290.18. PV of CF 2 = $400/(1.12)2 = $318.88.
PV of CF3 = $550/(1.12)3 = $391.48.
PV of CF 5 = $750/(1.12)5 =
$425.57. PV of CF6 = $800/(1.12)6 = $405.30. S
Solution practice bonds
1. The bond has a current yield of 9.17% = $110/$1200. Next
years projected price is $1,196.02 (N=19, I=8.83, PMT=110,
FV=1000), for a capital gains return of 0.33%. The total return
is 9.17% - 0.33% = 8.84% 8.83%, which is the yie
Solution: Statement of Cash Flows
In addition to the information presented in the following balance sheet for the
beginning and end of 20X1, Mr.S Corporation had a net income after taxes of $182 (diff in
retained earning 142 +div 40) million and paid out
Question 1) True or False, Explain
a) Two investors are evaluating McDonalds stock for possible
purchase. They agree on the expected value of Dividend next
year and also on the expected future dividend growth rate.
Further, they agree on the riskiness of
Practice Ch.7
Bonds
Semiannual Example
What is the value of a $1,000 par 10% coupon
bond with 8 years to maturity and semi-annual
coupon payments. The required return is 9%
Is it discount or premium?
Is it undervalue of overvalue?
Should we buy this b
1)True or False
a. The Net Present Value (NPV) of a project with cash flows that accrue relatively
slowly is more sensitive to changes in the discount rate than is the NPV of a project
with cash flows that come in more rapidly.
b. The NPV method is prefer
Chapter 9 - Capital Budgeting
Decision Criteria
Decision
Live as if you die tomorrow. Learn as if you were to live forever
Gandhi
In this chapter, you will learn
In
The types and special features of capital
The
budgeting decisions.
budgeting
How to calc
1)True or False
a. The Net Present Value (NPV) of a project with cash flows that accrue relatively
slowly is more sensitive to changes in the discount rate than is the NPV of a project
with cash flows that come in more rapidly.
b. The NPV method is prefer
Chapter 10 - Cash Flows and
Other Topics in Capital
Budgeting
Budgeting
Our greatest weakness lies in giving up
T. Edison
In this chapter, you will learn
In
How to evaluate cash flows.
How to do the capital rationing.
Corporate Finance addresses the fol
Chapter 18 Solution
18-13A.
(a)
Effective Rate
Interest
=
$20,000 x .10 x 180/360
= $1,000
APR
=
1
$1,000
x
(180 / 360)
$20,000
= .10 or 10%
(b)
Cost of Loan
The net proceeds from the loan are now $20,000 - (.15 x $20,000) or
$17,000. Thus, the effective
Chapter 15 Extra Sheet
1. Emma Corporation has $1,500,000 debt with 12% interest and has $480,000
preferred equity with 15% annual dividend. The company was able to sell
50,000 units of its product at $80 per unit in the current year. Contribution
margin