CHAPTER 14
Working Capital Management
Learning Objectives
1.
Define net working capital, discuss the importance of working capital management,
and be able to compute a firms net working capital.
2.
Define the operating and cash cycles, explain how they ar
Q1. Current cost of a bond: You are analysing the cost of debt for a company. You know that the
companys 14-year maturity, 9.65 percent coupon bonds are selling at a price of $953.78. The
bonds pay interest semiannually. If these bonds are the only debt o
BFC2140 FINAL EXAMINATION: LIST OF FORMULAE
FV P(1 rt )
FV
(1 rt )
PV
P0
D
R
P0
D0 (1 g )
Rg
V
P
EPS
E
FV PV (1 i) n
FV
(1 i) n
PV
NPV0
m
j
i 1 1
m
n
NCFt
1 k
t 1
NCF0
t
T
r r1 r2 r1 1
T1 T 2
1 i
i*
1
1 p
Reducing balancerate
FV PV e
M O N A S H
U N I V E R S I T Y
FEEDBACK
TO:
BFF2140 CORPORATE FINANCE 1
Department of Banking and Finance
FROM:
John Watson
DATE:
Friday 21 April, 2016
SUBJECT: SEMESTER TEST FEEDBACK
_
Attached is a distribution of marks based on the SEMESTER TEST for B
MONASH UNIVERSITY
BFC2140 Corporate Finance
MID-SEMESTER TEST (PAPER B)
2015 Semester 2
Surname (Family name)_
Given Name_ Student ID Number _
Tutors name (see list below)_ Tutorial day _ Time _
INSTRUCTIONS:
TIME ALLOWED: 90 mins writing
time (plus 5 min
Companies
On 1 July 2013 Hannah formed Hannah Limited.
The company issued 500,000 ordinary shares at 75 cents each.
On 30 November 2013 Hannah Limited paid an interim dividend of 15 cents per
share.
Profit after income tax for the year ended 30 June 2014
MONASH UNIVERSITY
BFC2140 Corporate Finance
MID-SEMESTER TEST (PAPER A)
2015 Semester 2
Surname (Family name)_
Given Name_ Student ID Number _
Tutors name (see list below)_ Tutorial day _ Time _
INSTRUCTIONS:
TIME ALLOWED: 90 mins writing
time (plus 5 min
MONASH UNIVERSITY
BFC2140 Corporate Finance
MID-SEMESTER TEST (PAPER A)
2015 Semester 2
Surname (Family name)_
Given Name_ Student ID Number _
Tutors name (see list below)_ Tutorial day _ Time _
INSTRUCTIONS:
TIME ALLOWED: 90 mins writing
time (plus 5 min
Department of Banking and Finance
Tutorial Questions
BFC 2140 Corporate Finance
Semester One, 2016
Copyright Warning:
All materials produced for teaching this course of study, including all lectures and any supplementary
materials are protected by copyrig
BTC1110 Commercial Law
Semester 1 2017
Practice Multiple Choice Test
1.
You are a judge in the Supreme Court of Victoria. You discover a number of cases similar
to the one you are hearing. Which of these decisions are you bound to follow?
a.
b.
c.
d.
2.
T
FORMULA SHEET
FV = P (1 + rt )
FV
(1 + rt )
PV =
P0 =
D
R
P0 =
D0 (1 + g )
Rg
FV = PV (1 + i ) n
V =
FV
(1 + i ) n
PV =
P
EPS
E
NPV0 =
m
j
i =+
1
1
m
n
NCFt
(1 + k )
t =1
t
NCF0
T
r = r1 + (r2 r1 ) 1
T1 T 2
1+ i
=
i*
1
1+ p
Reducing balanc
Net working capital and working capital management.
Net working capital:
= is the difference between current assets and current liabilities.
Working capital management:
Refers to the decisions made regarding the use of current assets and how they are fin
Week 2
Which is the best measure of risk for an asset which is held in isolation?
Which is the best measure for an asset held as part of a diversied portfolio? (1994, Q14)
Select one:
a. Variance; correlation coecient
b- Standard deviation; correlation co
Week 4
The Merriam Company has determined that its return on equity is 15 percent. Management is interested in the various components that
went into this calculation. You are given the following information:
Total debt/Total assets = 0.35,
Total assets tu
Other things equal, the price ofa share of constant growth common stock falls as the
Select one:
o a. required return rises s] Correct. The price of a constant growth common stock falls as the required rate of return rises. Since the
question states othe
Week 3
When using the debugger it is possible to pause the execution of a program using a:
Select one:
a. Step into.
b. Watch.
0 c. Break Point. s/ Yes. Toggle a breakpoint.
d. Yellow line.
e. None of the above.
Function costofcapital(riskfree, riskmarket
Week 6
Oakdale Furniture, Inc., has a beta coefcient of 0.7 and a required rate of return of 15 percent. The market risk premium is currently 5
percent. If the ination premium increases by 2 percentage points and Oakdale acquires new assets which increase
Week 5
Which of the following statements is most correct? (1993, Q16)
Select one:
a. The expected return on a portfolio of nancial assets is equal to the summation of the products of the expected returns of the
individual assets multiplied by the probabil
Question 1
Roy Gross is considering an investment that pays 5 percent. How much will he have to invest today
so that the investment will be worth $23,000 in six years?
(Do not enter the $ sign in your answer, if you solve this problem with algebra round
i
Learning Objectives
BFC 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)
1
CHAPTER 18
Business Formation, Growth, and Valuation
Learning Objectives
1.
Explain why the choice of organizational form is important, and describe two
financial considerations that are especially important in starting a business.
2.
Describe the key c
1
Chapter 6
Discounted Cash Flows and Valuation
Learning Objectives
1. Explain why cash flows occurring at different times must be discounted to a
common date before they can be compared, and be able to compute the present
value and future value for multi
BRIEF BCF2140 NOTES
WEEK 1 - Investors, Firms and Markets
-Corporate Finance is the management of a business finances and relationship of a firm with external financial markets
-A firm Generates Cash Flows by selling the goods and services produced
BFC2140 Corporate Finance
Week 12: Dividend Policy
Reading: Chapter 17
Learning Objectives
PART I
INSTITUTIONAL UNDERSTANDING
!Understand some institutional features of dividends and
share repurchases.
! Understand the tax implications of dividends.
!Be f
BFC 2140 Corporate Finance
Week 7: Working Capital
Management
Reading: Chapter 14
1
Learning Objectives
1. Define and calculate net working capital and discuss the importance of
working capital management
2. Define the operating and cash conversion cycles
BFC2140 Corporate Finance
Week 11: Capital Structure
Reading: Chapter 16
Learning Objectives
! Capital structure components
! The benefits and costs of using debt (leverage)
! The risk effect of higher leverage
! Theories of capital structure relating to
information in the problem statement in Problem 13.36? Assume that the average and marginal
tax rates for Coral Gables are both 25 percent.
The Balanced, Inc., has three different product lines of business. Its least risky product line has a
beta of 1.7,
Payout policy
Future value: Your bank pays 5 percent interest semiannually on your savings account. You
dont expect the current balance of $2,700 to change over the next four years. How much
money can you expect to have at the end of this period?
Multiple
Cost of common stock: Two-Stage Rocket paid an annual dividend of $1.25 yesterday, and it is
commonly known that the firms management expects to increase its dividends by 8 percent for
the next two years and by 2 percent thereafter. If the current price o
Project evaluation
Average accounting rate of return (ARR): Capitol Corp. is expecting a project to generate
after-tax income of $63,435 over each of the next three years. The average book value of its
equipment over that period will be $212,500. If the f
next
eight years, starting today. At the end of eight years, Jeremy will turn 30 years old and plans
to use his savings toward the down payment on a house. If his investment in a mutual fund
will earn him 10.3 percent annually, how much will he have saved