FIN 361:
Adv Managerial Finance Lecture 6
Wendell Licon
Chapter 18
1
Valuation and Capital Budgeting
for the Levered Firm
Three approaches to valuation of projects or
firms
WACC: weighted average cost of capital
(sometimes called Free Cash Flow to the F
Fill Across Columns Jan
Qtr 1
Lesson 1
Sequental Numbers
Fill Down Rows
1
10
January
20
INCOME STATEMENTS
(In millions, except per share amounts)
Year Ended June 30,
2011
2010
2009
2008
2007
Revenue
Operating expenses:
Cost of revenue
Research and develop
Hammes 1
Hammes, Christopher
Extra credit: leadership reflection paper
MGT303
Throughout the semester, I have learned a lot about management, leadership, and myself as a full.
To start, this is the first management class I have taken in my history at ASU,
College Works Painting painted out house and we couldnt be happier! When we first met with them,
they emphasized all the right things; like the quality of the repairs, prep and paint; as well as how
important communication was.
When they got started, they
CAPITAL INVESTMENT
ANALYSIS
FINANCE 361
Arizona State University
W. P. Carey School of Business
Professor Mark Simonson
Topics
1. Free Cash Flow
The Income Statement
The Balance Sheet
FCF = OCF FA WC
2. Percent of Sales Forecasting
3. Capital Budgeting Ru
Homework #4 (Due Mar 16)
Problem 1
The project manager has a choice of adopting project A or project B and
estimates that a resonable scenario table for each of the next ten years is as
follows:
Demand
Probability
Return on Assets
(Project A)
Return on As
1
FIN 361, Spring 2016
Advanced Managerial Finance
Lecture 6
Bond Valuation Continued
Prof. Jessie Jiaxu Wang
2
Topic II: Bond Valuation cont.
3
Yield to Maturity
Yield to Maturity (YTM): the interest rate that makes the
present value of the bonds paymen
1
FIN 361, Spring 2016
Advanced Managerial Finance
Lecture 4
Rates in NPV
Prof. Jessie Jiaxu Wang
2
C1
C2
CT
PV =
+
+ . +
1
2
(1 + r) (1 + r)
(1 + r) T
T
T
Ct
1
=
= C t DFt , with DFt =
t
t
(1
+
r)
(1
+
r)
t =1
t =1
C
1
PV of annuity = 1
r (1 + r )T
Problem Set 2 (Due Feb 4)
1. Your rm has identied three potential investment projects. The projects
and their cash ows are shown here:
Project
Cash Flow today ($)
Cash Flow in One Year ($)
A
$10
$20
B
$5
$5
C
$20
$10
Suppose all cash ows are certain and
1
FIN 361, Spring 2016
Advanced Managerial Finance
Lecture 1
Finance and Corporations
Prof. Jessie Jiaxu Wang
2
Today
Introduction
Course syllabus and policies
Lecture: Finance and Corporations
3
About myself
Assistant professor of Finance
BAC 526
P
1
FIN 361, Spring 2016
Advanced Managerial Finance
Lecture 8
Equity Valuation Continued
Prof. Jessie Jiaxu Wang
2
Topics Covered
The Dividend Discount Model
The Constant Growth Formula
Two Stage Valuation
Earnings Per Share and Dividend Growth Rates
1
FIN 361, Spring 2016
Advanced Managerial Finance
Lecture 5
Bond Valuation
Prof. Jessie Jiaxu Wang
2
Topic IV of Lecture 4
Inflation and Fisher Equation
3
Inflation
Inflation  Rate at which prices as a whole are
increasing. ( i )
Nominal Interest Rate
Solution to Problem Set 4
Problem 1
The project manager has a choice of adopting project A or project B and
estimates that a resonable scenario table for each of the next ten years is as
follows:
Demand
Probability
High
Low
Expected
0.20
0.80
Return on As
CHAPTER 9 TERMS
STRATEGIC PLANNING AND SHORTTERM BUDGETS
A. Strategic Planning longterm goals, strategies & policies set for 510 years. The strengths and
weaknesses of the organization are evaluated and risk levels are assessed. Internal and external f
Advanced Managerial Finance
Chapter 6 Making Capital Investment
Decisions
Summer 2015, Lecture 4
1
Market Value
BOOK VALUE vs MARKET VALUE
BOOK VALUE the value of an asset reflected
on the companys financial statements
Why is book value not = market val
Finance 361
Chapter 10 Risk and Return: History
Chapter 11 Return and Risk
Lecture 2, Summer 2015
1
Historical Returns
We know how to discount the cash flows using
the cost of capital to be able to present value
the cash flows
We now focus on calculating
Fin 361: Lecture 3, Chapter 5
Net Present Value and Other Investment
Rules
Fin 361, Summer 2015
1
Capital Budgeting Decision Analysis
Cash Flows
Payback Period
Discounted Payback
NPV
Profitability Index
Internal Rate of Return
NPV vs IRR
Fin 361, Summer 2
Fin 361: Chapters 16,17 (just read relevant
topics in 17), Summer 2014
Capital Structure
Fin 361, Summer 2014
1
Irrelevance
Irrelevance
Include taxes and much more
Is there a definitive optimal level of
leverage?
Fin 361, Summer 2014
2
Leverage
Levera
Finance 361
Chapter 8 Bond Valuation
Chapter 9 Stock Valuation
Lecture 1, Summer 2015
1
Bonds
A bond is a promissory note where the bond
issuer/borrower agrees to pay the holder/lender a
specified amount of interest each year, in addition to
repaying the
Fin 361: Chapters 2223, Summer 2015
Derivatives
Fin 361, Summer 2015
1
Derivatives
Derive their value from the market price of another asset
Option the right, but not the obligation, to
purchase/sell an asset for a predetermined price at
some predetermi
Derivative Homework Extra Problems
1. Suppose you enter into a sixmonth forward contract on a nondividendpaying
stock when the stock price is $30 and the riskfree interest rate (with continuous
compounding) is 12% per annum. What is the theoretical fo
Derivative Homework Extra Problems
1. Suppose you enter into a sixmonth forward contract on a nondividendpaying
stock when the stock price is $30 and the riskfree interest rate (with continuous
compounding) is 12% per annum. What is the theoretical fo
FIN 361: Advanced Managerial Finance
Professor: Wendell Licon
W.P. Carey School of Business
Arizona State University
Course Outline: Summer 2015  40442
Class Time and Location:
T,W,Th: 5:25 7:30 PM, BA 341
Office:
BAC 583
Telephone:
4809653258
Email:
w
Christopher Hammes
Fin. 331 Activity 1 Assignment
Part #1
Morningstar Rating: I used this screening criterion because I do not have a vast
amount of knowledge on thee mutual funds. I thought that the Morningstar rating
system would help me to gauge whethe
Fin. 331 Extra Credit Interview
Name: Myron Hammes
Current Title: President
Company: GPS Fleet Management
1. What was the first entrylevel finance occupation you were accepted for?
a. Entry Level Financial Analyst: I analyzed financial results for key
pr
What is a business?

An entity that provides a good or service in order to make money
1. Legal entity: recognized (and allowed) by governments to operate
2. Exchange: A product is given in return for money or money substitutes.
Goods physical products,
Honors Contract Infrared Radiation
Infrared radiation is defined as one of the types of electromagnetic radiation. Radio
waves, microwaves, xrays, and ultraviolet waves are also types of electromagnetic radiation.
Infrared radiation is one of the most co
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
December 31, 2010
ASSETS
Cash and cash equivalents
Marketable securities (Note 6)
Finance receivables, net (Note 7)
Other receivables, net
Net investment in operating leases (Not