10
Making Capital Investment Decisions
Key Concepts and Skills
Understand how to determine the relevant cash flows for different types of proposed investments Be able to compute depreciation expense for tax purposes Understand alternative methods for comp
FINA1003/1310 (D/E) Corporation Finance
Tutorial 1
Question 1 (PV, FV and Number of periods)
Youre planning to save to buy a new car 3 years later. The bank pays 4.5 percent annual
interest on its accounts. You have $40,000 today that can be invested at y
FINA1003/1310 DE Corporate Finance
Problem Set 2
Due: 17/3/2015 10:00 am
Submit to Chan Kar Luns Mailbox (9/F of KKL building)
Note:
1. Late assignments will NOT be graded.
2. Show all your calculations, equations and steps in arriving at your
conclusion.
FINA1003/1310 DE Corporate Finance
Problem Set 1
Due: 27/2/2015 5:00pm
Submit to Chan Kar Luns Mailbox (9/F of KKL building)
Note:
1. Late assignments will NOT be graded.
2. Show all your calculations, equations and steps in arriving at your
conclusion.
3
Q1. Chapter 1 Question 6 (p.17)
In the corporate form of ownership, the shareholders are the owners of the firm. The
shareholders elect the directors of the corporation, who in turn appoint the firms
management. This separation of ownership from control i
Chapter 16
Financial Leverage and
Capital Structure Policy
1
Lecture Outline
Understand the effect of financial leverage on cash flows
and the cost of equity
Understand the impact of taxes and bankruptcy on capital
structure choice
h i
Understand the b
Chapter 13
Return, Risk, and the Security
Market Line
Risk and Return II
Capital A
C it l Asset P i i Model
t Pricing M d l
1
Lecture Outline
Portfolio Risk and Diversification Benefit
Risk: Systematic and Unsystematic
Beta, The Security Market Line an
Chapter 15
Raising Capital
1
Lecture Outline
Venture Capital
Selling Securities to the Public: Basic Procedures
Benefits and Costs
Issuing Methods
Issuing Costs
IPO Underpricing Puzzle
SEO Puzzle
2
Venture Capital
Private financing for relatively new
FINA1003/1310 DE Corporate Finance
Problem Set 3
Due: 28/4/2015 10:00 am
Submit to Chan Kar Luns Mailbox (9/F of KKL building)
Note:
1. Late assignments will NOT be graded.
2. Show all your calculations, equations and steps in arriving at your
conclusion.
FINA1003/1310 DE Corporate Finance
Problem Set 1
Due: 27/2/2015 5:00pm
Submit to Chan Kar Luns Mailbox (9/F of KKL building)
Name and UID:
2013554842 Chu Te Jung
2013552246 Vesta Eresta Jaya
3035097284 Tam Ka Man
3035146047
FINA1003/1310 (D/E) Corporation Finance
Tutorial 9
Question 1 (Calculating Cost of Equity)
Stock in Country Road Industries has a beta of 0.85. The market risk premium is 8 percent,
and T-bills are currently yielding 5 percent. The companys most recent di
FINA1003/1310 (D/E) Corporation Finance
Tutorial 8
the concept of risk and return; relationship of risk and return; how to
calculate risk and return(s.d., var, market/stock risk premium)
Question 1 (Calculating Returns and Standard Deviations)
Based on th
FINA1003/1310 (D/E) Corporation Finance
Tutorial 8
Question 1 (Calculating Returns and Standard Deviations)
Based on the following information, calculate the expected return and standard deviation for
the two stocks:
State of Economy
Recession
Normal
Boom
FINA1003/1310 (D/E) Corporation Finance
Tutorial 2
Question 1 (Growing Annuities)
You have 40 years left until retirement and want to retire with $2 million. Your salary is paid
annually, and you will receive $40,000 at the end of the current year. Your s
Chapter 11
Project Analysis and Evaluation
1
Capital Budgeting
2
Evaluating NPV Estimates
The NPV estimates are just that estimates
A positive NPV is a good start now we need to take a closer look
Scenario Analysis: What happens to the NPV under differe
Chapter 12
Some Lessons from Capital Market
History
Risk and Return I
1
Lecture Outline
Returns
The Historical Record
Average Returns: The First Lesson
The Variability of Returns: The Second Lesson
Expected Return and Variance
2
Dollar Returns
Total
11
Project Analysis and Evaluation
Key Concepts and Skills
Understand forecasting risk and sources of value Understand scenario and sensitivity analyses Understand the various forms of break-even analysis Understand operating leverage
Slide 11 - 1
Evaluat
9
Net Present Value and Other Investment Criteria
Concept of Capital Budgeting
Capital Budgeting Decisions
Capital budgeting decision is also called investment decision, which involves such issues as:
Whether or not to invest in a particular project? Wh
8
Stock Valuation
Common Stock Valuation
Cash Flows for Stockholders
If you buy a share of stock, you can receive cash in two ways: The company pays dividends; You sell your shares. Like bond valuation, the price of the stock is the present value of thes
7
Interest Rates and Bond Valuation
Valuation Problems
Valuation
There are different types of investment, including bonds, stocks, and projects. All valuation problems are the same: Establishing the value today of future cash flows is the central problem
5
Introduction to Valuation: The Time Value of Money
Question to be Asked
Suppose you are promised to be given $100 in year 0, $200 in year 1, $300 in year 2, and $400 in year 3. How about you receive $1,000 right now? Are you better off from receiving $1
2
Financial Statements, Taxes, and Cash Flows
Balance Sheet
The balance sheet is a snapshot of the firms assets and liabilities at a given point in time Balance Sheet Identity
Assets = Liabilities + Stockholders Equity
Assets are listed in order of decre