IMBA Corporate Finance
Solutions to Practice 1 Questions
Question 1
A. False. The reverse is generally true.
B. True. The value of an asset is an increasing function of its cash flows.
C. True. The value of an asset is an increasing function of its life.

Investment
Spring 2014
Ya Tang(
Guanghua School of Management, Peking University
Theory Development and Industry Booming
Modern Finance : Corporate finance & Asset Pricing
Modern Finance Revolution
Wall Street Revolution 1
Markowitz, 1952,1959
[Portfolio

Investment
Spring 2015
Ya Tang(
Guanghua School of Management, Peking University
Course Information
Instructor: TANG, Ya (
o yatang@gsm.pku.edu.cn Tel: 62757900; Office: Rm 348, Guanghua Building 2
TA - Chen Tan (
o ch376364150@126.com
Teaching email addr

Lecture 2 Time Value of Money
and Net Present Value
()
In 2003 Toyota announced plans to build a new $800 million
automobile plant in San Antonio, Texas, Meanwhile, in
Missouri, Procter & Gamble had started installation of a new
machine to produce annuall

Lecture 6 Valuing Bonds
We will apply Ch.4 results to the valuation of stocks and
bonds.
1 Terminology
Some Features :
Certificate showing that a borrower-a firm-owes a
specified amount.
Has a specified payment per period, no risk, also has a
specified

Lecture 3
Alternative Investment Rules
In Chapter 4 we looked at how to use NPV to
evaluate any investment opportunity.
The basic investment rule:
Accept a project if the NPV is greater than zero
Reject a project if NPV is less than zero.
Advantages of

Lecture 5 Net Present Value and
Capital Budgeting (2)
1 Decision Tree ()
There is usually a sequence of decisions in NPV project
analysis.
The decision tree is simply a graphical representation of the
decisions facing the project and the information obt

Lecture 1
Introduction of Corporate Finance
In a beauty contest for companies in 2014, the
winner is
Apple
The other top ten finalists are
Amazon,
Google,
Berkshire Hathaway,
Starbucks,
Coca-Cola,
Walt Disney
FedEx,
Southwest Airlines, and
General Electr

Solutions of HW1
1
Deposit your money in the bank that offers the highest effective annual interest rate.
0.041 4
SAIR m
) 1 = (1 +
) 1 = 4.16%
EAIR( Bank America) = (1 +
4
m
0.0405 12
SAIR m
) 1 = (1 +
) 1 = 4.13%
EAIR( Bank USA) = (1 +
12
m
You should d

Lecture 4 NPV and Capital
Budgeting
In previous chapter, we saw the basics of capital
budgeting (using NPV, etc.)
In this chapter, we will see some real-world
applications.
1 Identification of Cash Flows
Cash Flows-Not Accounting Income
Example in Lectur

Lecture 1
Introduction of Corporate Finance
In a beauty contest for companies in 2014, the
winner is
Apple
The other top ten finalists are
Amazon,
Google,
Berkshire Hathaway,
Starbucks,
Coca-Cola,
Walt Disney
FedEx,
Southwest Airlines, and
General Electr

Lecture 2 Time Value of Money
and Net Present Value
()
In 2003 Toyota announced plans to build a new $800 million
automobile plant in San Antonio, Texas, Meanwhile, in
Missouri, Procter & Gamble had started installation of a new
machine to produce annuall

Lecture 3
Alternative Investment Rules
In Chapter 4 we looked at how to use NPV to
evaluate any investment opportunity.
The basic investment rule:
Accept a project if the NPV is greater than zero
Reject a project if NPV is less than zero.
Advantages of

Corporate Finance
HW 1
Due on Oct 13th, 2016
1 Bank America offers a stated annul interest rate of 4.1 percent, compounded
quarterly, while bank USA offers a stated annual interest rate of 4.05 percent,
compounded monthly. In which bank should you deposit

1. Why are secondary market transactions of importance to corporations?
2. Describe the process for calculating a yield to maturity for a bond, and tell what could
cause the yield to maturity to change.
3.Compare the price sensitivity to changes in inter

Lecture 06
Investment Decision II
- under Uncertainty
Topics
p Covered
Decision under Uncertainty
Sensitivity Analysis
Scenario Analysis
Simulation Analysis
Break Even Analysis
Real Options and the Value of Flexibility
Option
Option to expand
Option to de