Chapter Thirteen
Risk, Return, and
Capital Budgeting
CHAPTER OUTLINE
13.1 The Cost of Equity Capital
13.2 Estimation of Beta
13.3 Determinants of Beta
13.4 Extensions of the Basic Model
13.5 Estimating the Cost of Capital for Suncor Energy
13.6 Flotation
Basic Financial Analysis
Practice in class
Elena Simintzi
COMM 370
Lecture 1: Financial Analysis Practice Questions
1
Practice Q #1:
The following balance sheet and income statement
should be used for questions 1-6:
Lecture 1: Financial Analysis - Practic
Chapter 01 - Introduction to Corporate Finance
14.The common set of standards and procedures by which audited financial statements are prepared is known as:
A)
The matching principle.
B)
The cash flow identity.
C)
Generally Accepted Accounting Principles
Capital Budgeting
Elena Simintzi
COMM 370
Lecture 4: Cost of Capital
1
Capital Budgeting
Key Question: How should a firm chose
investment projects to create value for its
shareholders?
Answer: Accept all projects with
positive NPV.
What do we need to ca
Lecture 10
More on APV
1
Objectives
We now focus on the case you would use APV and not
WACC or FTE: Debt financing has a fixed schedule!
Illustrate how financing effects other than interest tax
shields can be incorporated in the APV valuation.
Flotatio
Comm 370
Elena Simintzi
COMMERCE 370 MIDTERM EXAMINATION
October 16th, 2012 6:30 8:30 pm
Student Name:
Student #
Student Signature:
Section (circle your own section): 103 ; 104 ; 110
Directions:
This examination consists of 24 pages (including this cover
COMM370 Ting Xu
Practice for Lecture 5: Capital Structure: The MM Propositions
Question 1. Prove Modigliani-Miller proposition 1 with corporate taxes. As part of your
answer, clearly state the underlying assumptions, explain the intuition underlying the p
Information about COMM 370 Final Exam
Exam Date: Friday, December 13, 2013
Exam Time: 3:30 6:00 pm
Exam Location: SWNG 121 (Alejandras Sections 103 and 104 only)
All students must bring UBC photo identification with them to the exam.
The exam is clos
COMM370 Hernan Ortiz-Molina
Massey-Ferguson, 1980: Questions to guide your reading
1. Assess the product-market strategy and financial strategy Massey
pursued thorough 1976. Where possible, compare Masseys strategy
with those of its leading competitors.
2
COMM 370 Final Exam Formula Sheet
Discounted Cash-Flow Analysis:
1
CdTC [1 .5(r )] SdTC
(r d) (1 r ) n
(r d)
(1 r )
PV of perpetual (CCA tax shield) =
Present Value of an n-payment annuity of $1
Present Value of a perpetuity of $C =
1
1
1
r
1 r n
C
r
Lecture 7
The Massey Ferguson Case
1
Objectives
Explore the concept of an optimal debt ratio based upon
basic business risk and competitive risk.
Show the implications of an aggressive debt ratio policy
that is inconsistent with an aggressive corporate st
COMM370 Hernan Ortiz-Molina
Practice for Lecture 5: Overview of Corporate Financing
Question 1. What do we mean when we say a corporations shareholders have limited
liability and why is this important?
Answer. It means that the corporation and its owners
COMM370 Hernan Ortiz-Molina
Practice for Lecture 6: Modigliani-Miller Propositions
Question 1. Prove Modigliani-Miller proposition 1 with corporate taxes. As part of your
answer, clearly state the underlying assumptions, explain the intuition underlying t
COMM370 Hernan Ortiz-Molina
Practice for Lecture 6: Modigliani-Miller Propositions
Question 1. Prove Modigliani-Miller proposition 1 with corporate taxes. As part of your
answer, clearly state the underlying assumptions, explain the intuition underlying t
COMM370 Hernan Ortiz-Molina
Practice for Lecture 4: Debt Financing & The WACC Method
Questions 1-5 are simple background questions whose answers are in the class notes:
Question 1. Suppose you decide to use a firms WACC as the discount rate for a project
COMM370 Hernan Ortiz-Molina
Practice for Lecture 4: Debt Financing & The WACC Method
Questions 1-5 are simple background questions whose answers are in the class notes:
Question 1. Suppose you decide to use a firms WACC as the discount rate for a project
COMM370 Hernan Ortiz-Molina
Practice for Lecture 5: Overview of Corporate Financing
Question 1. What do we mean when we say a corporations shareholders have limited
liability and why is this important?
Question 2. Who runs the corporation when the firm is
Payout Policy
Elena Simintzi
COMM 370
Lecture 10: Payout Policy
1
Methods of Cash Payments to
Shareholders
Suppose a firm generates excess cash. It can:
1. Pay it out
o As a cash dividend
o Through a share repurchase
Open market repurchase (most common)
COMM370 Hernan Ortiz-Molina
Practice for Lecture 3: The Clarkson Lumber Case
Question 1. As a new credit official at CIBC, your first assignment is to evaluate T-Gels
request for a $50,000 loan. The bank does not have a previous relationship with T-Gel,
n
COMM370 Hernan Ortiz-Molina
Practice for Lecture 3: The Clarkson Lumber Case
Question 1. As a new credit official at CIBC, your first assignment is to evaluate T-Gels
request for a $50,000 loan. The bank does not have a previous relationship with T-Gel,
n
COMM370 Hernan Ortiz-Molina
Practice for Lecture 9: The Basics: WACC, FTE, and APV
Questions 1-5 are simple background questions whose answers are in the class notes:
Question 1. Carefully explain:
i) what is the unlevered cash flow (UCF), which is also c
COMM370 Hernan Ortiz-Molina
Practice for Lecture 7: Tradeoff Theory & Other Theories
Questions 1-7 are simple background questions whose answers are in the notes:
Question 1. Consider the Modigliani-Miller world with no taxes or bankruptcy costs. Will
the
COMM 370
Elena Simintzi
COMMERCE 370 PRACTICE FINAL EXAMINATION
Student Name:
Student #
Student Signature:
Section (circle your own section):
Directions:
This examination consists of 15 pages (including this cover page). Please make sure your
exa
COMM 370
Elena Simintzi
COMMERCE 370 PRACTICE FINAL EXAMINATION
Student Name:
Student #
Student Signature:
Section (circle your own section):
Directions:
This examination consists of pages (including this cover page). Please make sure your exam
is complet
Introduction to
Corporate Finance
Elena Simintzi
COMM 370
Introduction & Overview
1
Basic Information
Instructor: Elena Simintzi
Web Page: http:/finance.sauder.ubc.ca/people/simintzi/
Office: Henry Angus 871
Phone: (604) 822-4886
Email: [email protected]
Capital Budgeting
with Debt
Elena Simintzi
COMM 370
Lecture 8: Capital Budgeting
1
Valuing projects and firms
Understand how financing decisions (debt vs. equity) affect the
valuation of a firm or project and why.
Better understand how the weighted aver
Trade-off Theory & Other Theories
of Capital Structure
Elena Simintzi
COMM 370
Lecture 6: Theories of Capital Structure
1
What can explain firms
Capital Structure choices?
We showed that increasing debt increases firm value due to interest tax
shields, b
Mergers & Acquisitions
Elena Simintzi
COMM 370
Lecture 12: Mergers & Acquisitions
1
Outline
What is a Merger and a Takeover?
Why does a firm want to merge with or acquire another firm?
Do Mergers Create Value? For Whom?
Valuation of M&A deals and NPV to a
COMM370 Hernan Ortiz-Molina
Practice for Lecture 12: Mergers & Acquisitions
Questions 1-7 are simple background questions whose answers are in the class notes:
Question 1. What is a synergy and where do they come from?
Question 2. Which kind of merger cou
Question:
A firm has 2,000,000 shares of common stock outstanding with a market price of $2 per
share. It has 2,000 bonds outstanding, each selling for $1,200. The bonds mature in 15
years, have a coupon rate of 10%, and pay coupons annually (i.e. the YTM
Chapter 3
Problems 1-30
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
NOTE: Some functions used in these spreadsheets may require that
the "Analysis ToolPak" or "Solver Add-In" be installed in Excel.
To
Chapter 6
Problems 1-78
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
NOTE: Some functions used in these spreadsheets may require that
the "Analysis ToolPak" or "Solver Add-In" be installed in Excel.
To
Chapter 10
Problems 1-36
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
NOTE: Some functions used in these spreadsheets may require that
the "Analysis ToolPak" or "Solver Add-In" be installed in Excel.
To