Acton plan
Short-term action plan
1. Embrace change
Changing is important for a company. The manager should learn the good
things which are useful for company, and the bad things which are useless or
behindhand for company. Empower and encourage employee
RISK AND RETURN IN CAPITAL
MARKETS
RISK AND RETURN
How does risk relate to returns?
Risk is what an investor will have to undertake
when taking a chance in investing in future
investments.
Thus, investors will demand a return, which is
compatible to risk
FUNDAMENTALS OF CAPITAL
BUDGETING
1
THE CAPITAL BUDGETING PROCESS
Forecasting projects revenues and cost (we will not be covering this)
Part 1. Incremental Earnings The amount by which a firms earnings are
expected to change as a results of an investment
Lecture 8
COST OF
CAPITAL
Objectives
Understand the basic concepts underlying a
firms overall cost of capital and its
components
Cost of debt
Cost of preference share
Cost of equity Dividend growth model & CAPM
Calculate the Weighted Average Cost of
Cap
Chapter 3 Time Value of Money: An Introduction
Problem 4
Suppose Bank One offers a risk-free interest rate of 5.5% on both savings and loans, and
Bank Enn offers a risk-free interest rate of 6% on both savings and loans.
a.
b.
c.
hWatprofiunysv?ble
Whicba
Chapter 6 Bonds
Problem 4
The following table summarizes prices of various default-free, zero-coupon bonds
(expressed as a percentage of face value):
a.
Computehdyilarfcbn.
b.
oPthlezr-cupnyidv(fsa).
c.
hIsetuyildrvcpwaong, ?f
a. Use the following equatio
Chapter 9 Fundamentals of Capital Budgeting
Problem 11
Castle View Games would like to invest in a division to develop software for video
games. To evaluate this decision, the firm first attempts to project the working capital
needs for this operation. It
Chapter 5 Interest Rates
Problem 4
Which do you prefer: a bank account that pays 5% per year (EAR) for three years or
a.
b.
c.
nAoahuctpys2.5%evxrimf?
Anoahuctpys7.5%evr18mf?
Anoahuctpys0.5%ermf?
If you deposit $1 into a bank account that pays 5% per year
Chapter 8 Investment Decisions Rules
The question 20, 28 (b, c, d) and 31 will not be examinable for mid semester test.
Problem 7
Your factory has been offered a contract to produce a part for a new printer. The
contract would last for five years and your
Chapter 8 Investment Decisions Rules
Problem 7
Your factory has been offered a contract to produce a part for a new printer. The
contract would last for five years and your cash flows from the contract would be $3
million per year. Your upfront setup cost
Chapter 11 Risk and Return in Capital Markets
Problem 12
Using the data in the table below, calculate the return for investing in this stock from
January 1 to December 31. Prices are after the dividend has been paid.
Stock and Dividend Data
Date
Price Div
Chapter 1 Corporate Finance and the Financial Manager
Problem 4
What are the main advantages and disadvantages of organizing a firm as a corporation?
The advantages of organizing as a corporation are: (1) limited stockholder liability, (2) easy
transfer o
INVESTMENT DECISION
RULES:
THE BASICS OF CAPITAL
BUDGETING AND EVALUATING
CASH FLOWS
1
WHAT IS CAPITAL BUDGETING?
Analysis of potential projects.
Long-term decisions; involve large
expenditures.
Budgeting for capital expenditure (i.e.
investment in proje