Q1. You invested $3,000 in a portfolio with an expected return of 10 per cent and $2,000 in a
portfolio with an expected return of 16 per cent. What is the expected return of the combined
portfolio? 1
Cost of common stock: TwoStage 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 ye
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
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 infor
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; cor
8.2 Bond price: Felix Sani just received a gift from his grandfather. He plans to invest in a
5year bond issued by Nuforce Pty Ltd that pays annual coupons of 5.5 per cent. If the current
market rate
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.
De
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
BFC2140 Week 10 Cost of Capital (ch. 13)
Risk, Return and the COC

The return demanded by investors is effectively a cost (cost of capital). It is an
opportunity cost as capital suppliers will requir
BFC2140 Week 7 Risk and Return 1 (ch. 7)
What is return?


Return is a measure of value increase on an investment, usually expressed
as a percentage
Return can be measured over any interval of time,
BFC2140 Week 1 Investors, Firms & Markets (ch.1)
What is corporate finance?

The management of a business finances (Financial Management)
The management of the relationship of a firm with external fi
BFC2140 Week 10 Cost of Capital (ch. 13)
Risk, Return and the COC


The return demanded by investors is effectively a cost (cost of capital). It
is an opportunity cost as capital suppliers will requ
BFC2140 Week 5 Project Evaluation with Risk (ch. 12)
Variable Costs, fixed costs and project risk
Variable costs (VC): costs that vary directly with the number of units sold
Fixed costs (FC): Costs th
BFC2140 Week 2 Financial Mathematics (ch.5 & 6)
Fundamental concepts

Cash flows: The funds that flow between parties either now or in the
future as a consequence of a financial contract
Rate of retu
BFC2140 Week 6 Working Capital Management (ch.
14)
Working capital basics

Working capital management involves two key issues
1. What is the appropriate amount and mix of current assets for the
compa
BFC2140 Week 4 Project Evaluation (ch. 11)
Capital Budgeting Process

Capital Budgeting (Investment):
Cash outlay(s) now in the exception of benefits (net cash inflows) later

Most of the informatio
BFC2140 Week 3 Valuation of Bonds and Equities (ch.8
& 9)
Valuing a financial asset

Value of financial asset = PV of expected future cash flows

Information required for valuation
Expected future c
MONASH
BUSINES
S
SCHOOL
Week 8: Risk and Return I
Reading: Chapter 7
Thanh Huynh
Learning objectives
Know how to calculate realized returns, holding
period returns, average returns, and standard
devi
MONASH
BUSINES
S
SCHOOL
Week 3: Valuation of
Bonds and Equities
Readings: Chapters 8 and
9
Thanh Huynh
Learning Objectives
Use the tools of financial mathematics to
value debt securities (e.g. bonds,
MONASH
BUSINES
S
SCHOOL
Week 4: Project Valuation I
Readings: Chapter 10
Thanh Huynh
Learning Objectives
Evaluate projects using the Net Present Value
method.
Understand the following alternative me
MONASH
BUSINES
S
SCHOOL
Week 1: Introduction and
Financial Mathematics
Readings:
Unit Guide
Chapter 1 and Chapter 5
Thanh Huynh
What is Corporate Finance?
To study how a manager makes decision
to max
MONASH
BUSINES
S
SCHOOL
Week 6: Project Evaluation
III
Readings: Chapter 12
Thanh Huynh
Learning Objectives
Understand the association between variable costs,
fixed costs and project risk.
Analyse p
MONASH
BUSINES
S
SCHOOL
Week 5: Project Evaluation
II
Readings: Chapter 11
Thanh Huynh
Learning Objectives
Explain principles used in estimating project cash
flows.
Understand the impact of taxes on
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
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 bus
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
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 r
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 r
Cost of equity
1 Method: CAPM
2 Method: Dividend Discount Model
WACC:
= Weighted average cost of capital
The companies overall cost of capital
What exactly does the WACC discount?
the aftercorporat