Learning Objectives
AFC 2140
Corporate Finance
Evaluate projects using the Net Present Value
method.
Understand the following alternative methods of
project evaluation, their advantages and
disadvantages:
Teaching Week 4
Topic 4:
Project Evaluation (1)
Solutions for Tutorial 2
1.1
The two basic sources of funds for all businesses are debt and equity.
1.4
Financial managers are most concerned about the capital budgeting decision,
the financing decision, and the working capital decision.
1.5
A company sho
AFC2140 Corporate Finance
Tutorial 1: Investors, Firms and Markets
The point of this exercise is to familiarise the students with the Australian Financial
Review (AFR), and to get them thinking about some basic finance concepts.
1. See attached excel shee
Department of Accounting and Finance
Tutorial Questions
AFC 2140 Corporate Finance
Semester Two, 2012
(Weeks 2-12)
Copyright Warning:
All materials produced for teaching this course of study, including all lectures and any supplementary
materials are prot
Learning Objectives
Topic 9 (Week 11)
PART I
INSTITUTIONAL UNDERSTANDING
Understand some institutional features of dividends and
share repurchases.
Understand the tax implications of dividends.
Chapter 17
Be familiar with the nature of share buybacks, d
28/08/2012
Topic8(Week10)
Summary of objectives:
Chapter16
Understand:
The risk effect of higher leverage
The benefits and costs of using debt.
Theories of capital structure relating to
capital structure and company value
Summary of objectives (continu
28/08/2012
Topic7(Week9)
Understand the concept of the cost of capital.
Understand how to calculate the cost of debt
Chapter13
Understand how to calculate the cost of equity
(dividend discount model and CAPM).
Understand why the cost of capital for a
Weeks 7 and 8
Learning Objectives
Understand how risk and return are defined and
measured.
Understand standard deviation as a measure of risk and
how to calculate it, including the relation between
standard deviation and probability of outcomes for
norm
AFC 2140
Corporate Finance
Learning Objectives
Understand the association between variable
costs, fixed costs and project risk.
Teaching Week 6
Analyse project risk using sensitivity and breakeven analyses.
Topic 5:
Project Evaluation with Risk
Underst
Learning Objectives
AFC 2140
Corporate Finance
Explain principles used in estimating project
cash flows.
Understand the impact of taxes on project
evaluation.
Evaluate mutually exclusive projects with
different lives using:
Teaching Week 5
Topic 4:
Pro
AFC 2140
Corporate Finance
Learning Objectives
Use the tools of financial mathematics to
value debt securities (e.g. bonds, debentures)
and equities.
Teaching Week 3
Explain bond concepts and understand interest
rate risk.
Topic 3:
Valuation of Bonds an
AFC 2140
Corporate Finance
Learning Objectives
Differentiate simple interest and compound
interest.
Understand accumulating, discounting and
making comparisons using the effective interest
rate.
Calculate future value and present value of
multiple cash
Solutions for Tutorial 11
17.1 Since dividends convey information concerning the future prospects of the
company, any change in dividend levels is also believed to convey a change
in managements forecast of the companys prospects. That is, lowering the
di
Solutions for Tutorial 10
16.2 The value of the company can be described as either the total market value of
all the assets owned by the company, or the total market value of all the
claims of all the investors in the company. In that case, it means that
Solutions for Tutorial 9
13.1
13.5
The price you should be willing to pay for all of the assets of the company is
the market value of those assets. Using the market price version of the
balance sheet identity, we can add the market price of the debt oblig
Solutions for Tutorial 8
7.1
The holding period return is the total return over some investment or holding
period. It consists of a capital appreciation component and an income
component. The holding period return reflects past performance. The
expected r
Solutions for Tutorial 7
FC
$100,000
=1+
= 0.392.
1.3922
EBITDA
$250,000 + $5,000
12.5
Cash Flow DOL Automoted = 1 +
12.8
Simulation analysis is like scenario analysis except that in simulation analysis
an analyst typically uses a computer to examine a la
Solutions for Tutorial 6
11.1 Accounting earnings can differ from cash flows for a number of reasons, making
accounting earnings an unreliable measure of the costs and benefits of a
project. For example, ease of manipulating earnings components such as
ac
Solutions for Tutorial 5
10.7 PB = Years before cost recovery + (Remaining cost to recover/ Cash flow during the
year)
= 3 + ($144,312 / $318,697)
= 3.45 years
10.14 Required rate of return = 11.5%
System 100:
Cost of product line expansion = $1,750,000
n