1. I am taking Form _ of the exam.
*a. A (You are Taking this Form!)
b. B
2. My instructors name is
a. Basma Bekdache
b. Trang Doan
c. Matthew Roling
d. John Wagster
e. Ali Hammoud
*f. Chris Sullivan (This is Your Instructor!)
3. I am taking a(n) _ exam.
FIN 3290 Lecture 14
Last Class
oTHE ONLY RISK THAT MATTERS IS SYSTEMATIC
OR MARKET OR NON-DIVERSIFIABLE RISK
oWE MEASURE THIS RISK BY BETA, .
oBETA, : SENSITIVITY OF AN ASSETS RETURN
TO MOVEMENTS IN THE MARKET (COMMON
FACTOR).
Last Class
Cov(i, M )
o , BE
1. A good capital budgeting or investment decision is one in which the
benefits are worth more to the firm than the cost of the asset.
a. True
b. False
Answer: _
2. Privately held corporations are allowed to have stockholders.
a. True
b. False
Answer: _
3
Chapter 5
The Time Value of Money
Firm Maximize Shareholder Wealth
Cap. Budgeting
Decisions
Financing
Decisions
NWC
Decisions
Tools Chpt. 5
Learn to use financial calculator, formulas,
and EXCEL
2
Chapter Outline
FUTURE VALUE ONE PERIOD
SIMPLE INTEREST AN
FIN 3290 Lecture 11
Last Class
o CHAPTER 11
T0
Buy Asset
Capital
Expenditure
TT
Annual
OCFs
Sell Asset
Net Working
Capital
2
Last Class
o
EVALUATION OF PROJECTS CASH FLOWS
o
o
o
- CAPITAL EXPENDITURE 0 and T
Years
- ANNUAL CASH FLOWS 1 to T
Years
- NET WO
Chapter 10
The Fundamentals of Capital
Budgeting
Firm Maximize Shareholder Wealth
Cap. Budgeting
Decisions
Financing
Decisions
NWC
Decisions
Tools Chpts. 5 & 6
Applications Chpts. 8 & 9
Rules Chpt. 10
2
Chapter Outline
o
o
o
o
o
o
o
o
NET PRESENT VALUE
TH
WAYNE STATE UNIVERSITY
School of Business Administration
Department of Finance
FIN 3290: Business Finance
CRN: 23879, Section: 003, Winter 2015
Instructor: Norkeith Smith, MA
Office: 328.10 Prentis
Class Meetings: Monday 6:00 p.m. - 8:45 p.m., 017 Prentis
Consider a bond with a coupon rate of 10% and annual coupons. The par value
is $1,000 and the bond has 5 years to maturity. The yield to maturity is 11%. What is the
value of the bond?
N =5
I/Y =11
PV=CPT
PMT =-100
FV = F = -1000
i (YTM) < c%, P(Bond) > $
Consider a bond with a coupon rate of 10% and semi-annual coupons. The par value is
$1,000 and the bond has 5 years to maturity. The yield to maturity is 11%. What is the
value of the bond?
Frequency of payments:
Interest per period:
i or Yield per period
Bonds and Bond Valuation
Maturity and Bond Valuation
Semi-annual Bond Valuation
Some Different Types of Bonds
Bond Yields
Interest Rate Risk
Determinants of Bond Yields
Bond Ratings
A bond is an instrument of debt. The borrower takes a loan with a face (p
Why is finding the P(Bond) important?
- To determine how much to lend
- If owner of the bond, how much should you sell the asset if you need money
- if you want to buy the asset how much should you pay for the asset.
Consider a bond with a coupon rate of
21. Suppose a project costs $2,500 and produces cash flows of $400 over
each of the following 3 years. What is the IRR of the project?
A) There is not enough information; a discount rate is required
B) 3.22%
C) 5.34%
D) 4.11%
E) 12.01%
Answer: C
3
Respons
1.Which of the following statements regarding dividend yields is true?
A) It measures how much the stock's price will increase in a year.
B) It incorporates the par value of the stock into the calculation.
C) It is analogous to the current yield for a bon
FIN 3290 Lecture 8
Exam
o
o
o
o
ADDED 2 POINTS (5%)
AVERAGE: 29.21
MEDIAN: 31
STABDARD DEVIATION: 8.21
o
RANGE: 42 HIGHEST TO 8 LOWEST
2
Bonds
o
NYT 02/27/15
o THE MOST PROFOUND CHANGES ARE TAKING PLACE IN
EUROPES BOND MARKET, WHICH HAS BEEN TURNED INTO
S
FIN 3290 Lecture 9
Last Class
Assumption 3 Dividends that grow at
different rates
Dividends that grow at g1% a year until year
T and then at an annual rate of g2% forever.
2
Last Class
o
o
TO SOLVE FOR P0 APPLY THE FOLLOWING STEPS:
FIRST: SOLVE FOR THE LA
PREVIEW OF CHAPTER
9-1
9
Chapter 9 Main issues
Valuation using relative sales values
Gross profit method
9-2
Inventory value at LCM
Retail inventory method
Lower-of-Cost-or-Market
Compare HC to MV at the end of a fiscal year, and use
whichever is lower as
International Standard-Setting Organizations:
International Accounting Standards Board (IASB)
Issues International Financial Reporting Standards
(IFRS).
Standards used on most foreign exchanges.
Standards used by foreign companies listing on U.S.
securiti
FIN 3290 Lecture 13
Exam 2
Mean: 28.17
Median: 28
: 6.87
Final Exam: Thursday, April 30th 6:00 9:00 PM
Last Class
oPROJECTS WITH DIFFERENT LIVES.
oREPLACEMENT OF AN ASSET
oCOST OF USING EXISTING ASSET
oHARVESTING AN ASSET
3
Last Class
oCOST OF USING EXIST
FIN 3290 Lecture 3
2
Last Class
TEXAS INSTRUMENTS BA-II PLUS
PROFESSIONAL
FV = future value
PV = present value
I/Y = period interest rate
Interest is entered as number of percent, not a decimal
N = number of periods
PMT = regular payments
If PV is th
FIN 3290 Lecture 5
Last Class
IF M > 1
- REPLACE I BY I/M
Interest per period
o - REPLACE N BY N*M Number of periods
o PV(ANNUITY)1
PVA N *M
CF
1
i
1
m
i
m
n* m
I/Y
N
CF
1
1
n* m
i
i
m 1 m
2
Last Class
FV(ANNUITY)
n*m
i
n*m
1 1
CF
i
m
1
Chapter 13
The Cost of Capital
1
Chapter Outline
oTHE COST OF DEBT
oTHE COSTS OF COMMON STOCK
oTHE COSTS OF PREFERRED STOCK
oWEIGHTS
oTHE WEIGHTED AVERAGE COST OF CAPITAL
(WACC)
oPROBLEMS WITH WACC
oFLOTATION COSTS AND THE WEIGHTED AVERAGE
COST OF CAPITAL
FIN 3290 Lecture 6
Last Class
o
o
SEMI-ANNUAL INTEREST: INTEREST PER
PERIOD, YTM PER PERIOD, AND # OF
PERIODS
Int.Payments
m
1
i
PB =
m
PMT
I/Y
FV
Fn*m
1
n*m
n*m
i
i
1 1
m m
N
2
Last Class
o
QUOTED PRICE: % OF $1,000
o
IN EXCEL
PRICE(Settlem
Chapter 8
Bond Valuation and the Structure
of Interest rates
1
Firm Maximize Shareholder Wealth
Cap. Budgeting
Decisions
Financing
Decisions
NWC
Decisions
Tools Chpts. 5 & 6
Applications Chpt. 8
2
Chapter Outline
o
o
o
o
o
o
o
o
BONDS AND BOND VALUATION
M
Chapter 1
The Financial Manager and the
Firm
Chapter Outline
FORMS OF BUSINESS ORGANIZATION
THE GOAL OF FINANCIAL MANAGEMENT
KEY FINANCIAL DECISIONS
THE AGENCY PROBLEM AND CONTROL
OF THE CORPORATION
ETHICS IN CORPORATE FINANCE
2
Forms of Business Organiza
FIN 3290 Lecture 10
Last Class
o
o
NPV AND IRR WILL GENERALLY GIVE US
THE SAME DECISION
EXCEPTIONS
Non-conventional cash flows cash
flow signs change more than once
Multiple IRRs
2
Last Class
o
o
NPV AND IRR WILL GENERALLY GIVE US
THE SAME DECISION
EXCEP