FINANCIAL MANAGEMENT THEORY CHAPTER 11
INCREMENTAL AFTERTAX FREE CASH FLOWS

The incremental aftertax free cash flows are the cash flows discounted in an NPV analysis.

The term incremental refers to the fact that these cash flows are the difference/i
Week 05 Tute questions
Chapter 07
www.buseco.monash.edu
1
Question 7.20
Portfolios with more than one asset: Given the
returns and probabilities for the three possible
states listed here, calculate the covariance
between the returns of Share A and Share B
Week 11 tute questions
Chapter 17
Question 17.1
Dividends: Poseidon Shipping Ltd has paid a
$0.25 dividend every 6 months for the past 3
years. Poseidon just lowered its declared
dividend to $0.20 for the next dividend
payment. Discuss what this new info
Suggested solutions for a set of select exercise questions  Chapter 8 questions
Yield to maturity: Elders Ltd has 4year bonds outstanding that pay a coupon rate of 6.6 per
cent semiannually. If these bonds are currently selling at $914.89, what is the
Tutorial
1.1 Capital: What are the two basic sources of funds for all
businesses?
> Debt and equity.
1.6 Management role: What is capital structure, and why is
it important to a company?
> Capital structure shows how a company is financed. It is the
mix
Tutorial
7.20 Portfolios with more than one asset: Given the returns and
probabilities for the three possible states listed here, calculate
the covariance between the returns of Share A and Share B.
For convenience, assume that the expected returns of Sha
Nominal and Real interest rates
If the nominal interest rate (quoted to you by a bank) is 5%p.a. what is borrowing cost if
the interest rate is calculated and credited to your loan account:
a) Annually
b) Monthly
c) Daily
Capital Budgeting Question
News P
BFF5925
Week 9 tute solutions
Chapter 13
13.24 WACC for a company: Imaginary Products Ltd currently has $300 million of market value
debt outstanding. The 9 per cent coupon bonds (semiannual pay) have a maturity of 15 years
and are currently priced at $1,
Tutorial
21.3 In Australia, managers are asked to focus on maximising
shareholder value. Is this consistent with the goals of companies in
Germany and Japan?
In countries such as France and Germany, shareholders are treated
no differently than any other
Tutorial
8.20 Yield to maturity: Elders Ltd has 4year bonds
outstanding that pay a coupon rate of 6.6% semiannually. If
these bonds are currently selling at $914.89, what is the yield
to maturity that an investor can expect to earn on these
bonds? What i
AFF9250
Week 11 tute solutions
Chapter 17
17.1
Dividends: Poseidon Shipping Ltd has paid a $0.25 dividend every 6 months for the past 3
years. Poseidon just lowered its declared dividend to $0.20 for the next dividend payment.
Discuss what this new inform
Chapter 7 suggested solutions
7.20 Portfolios with more than one asset: Given the returns and probabilities for the three
possible states listed here, calculate the covariance between the returns of Share A and
Share B. For convenience, assume that the ex
1
BFF5925 Financial management theory, semester 1, 2016 week 5
Case One: Trading Case RE1
This will be the first FTS trading session. The questions you must provide answers for are provided
at the end of this trading case.
Case Objective
The objective of
1
BFF5925 Financial management theory, semester 1, 2016 w eek 6
Case Two: Trading Case B02A
Case Objective
To understand the time value of money; to understand the cash flows from coupon and zero coupon
bonds; to determine the prices of bonds given a yiel
Week 08 tute questions
Chapter 11
www.buseco.monash.edu
1
Question 11.13
Projects with different lives: You are starting a family pizza
restaurant and need to buy a motorcycle for delivery orders.
You have two models in mind. Model A costs $9,000 and is
e
Tutorial
15.3 Venture capital: What are some viable exit strategies
for a startup company?
A company can choose to either sell the business at some period,
take it public, or in some instances remain a private company with
few shareholders.
15.4 IPO: Br
MONASH
BUSINESS
SCHOOL
Lecture 3
CAPITAL BUDGETING 1
BFF5925 FINANCIAL MANAGEMENT THEORY
REFERENCES
Parrino et al. (2014): chapter 10
2
MONASH
BUSINESS
SCHOOL
LECTURE OUTLINE
What is capital budgeting?
Investment evaluation methods
NPV vs IRR comparis
MONASH
BUSINESS
SCHOOL
Lecture 2
VALUATION OF SHARES AND BONDS
BFF5925 FINANCIAL MANAGEMENT THEORY
REFERENCES
Parrino et al. (2014): chapters 8 and 9
2
MONASH
BUSINESS
SCHOOL
LECTURE OUTLINE
Bond components
Valuation of coupon paying bonds
Zero coupon bo
MONASH
BUSINESS
SCHOOL
Lecture 1
UNIT ADMINISTRATION & INTRODUCTION
BFF5925 FINANCIAL MANAGEMENT THEORY
PART I
UNIT ADMINISTRATION
2
MONASH
BUSINESS
SCHOOL
UNIT ADMINISTRATION
Contacting staff
Resources
Course structure
Unit assessment
House keeping rules
MONASH
BUSINESS
SCHOOL
Lecture 4
CAPITAL BUDGETING II
BFF5925 FINANCIAL MANAGEMENT THEORY
Example
Mutually Exclusive Projects with Different Lives
2
MONASH
BUSINESS
SCHOOL
EXAMPLE MUTUALLY EXCLUSIVE PROJECTS WITH DIFFERENT LIVES
There are times when direc
MONASH
BUSINESS
SCHOOL
Lecture 5
Risk and Return I
BFF5925 FINANCIAL MANAGEMENT THEORY
Overview
Return (single and multiple assets)
Risk
Single asset versus multiple assets
Risk and return tradeoff:
Coefficient of variation (compare single assets)
Nominal and Real interest rates
If the nominal interest rate (quoted to you by a bank) is 5%p.a. what is borrowing cost if
the interest rate is calculated and credited to your loan account:
a) Annually
b) Monthly
c) Daily
Solutions:
EAR = (1+ Quoted IR /
AFF 9250 MAIN Exam
AFF 9250 Final Exam Semester 2, 2012
Question One
Mica Inc. is considering introducing a new product line. The product line is able to produce
280,000 units every year for 5 years. There are three possible selling prices for the product
AFF9250
Week 10 tute solutions
Chapter 16
16.1
M&M Proposition 1: The Modigliani and Miller theory suggests that the value of the
companys assets is equal to the value of the claims on those assets and is not dependent on
how the asset claims are divided.
Week 10 tute questions
Chapter 16
Question 16.1
M&M Proposition 1: The Modigliani and Miller theory suggests
that the value of the companys assets is equal to the value of the
claims on those assets and is not dependent on how the asset
claims are divide
OFFICE USE ONLY
AFF9250 FINANCIAL MANAGEMENT THEORY
Monash University
Semester Two Main Examination 2012
Faculty of Business and Economics
Department of Accounting and Finance
EXAM CODES:
AFF9250
TITLE OF PAPER:
FINANCIAL MANAGEMENT & THEORY
EXAM DURATION
Chapter 15 suggested solutions
15.3
Venture capital: What are some viable exit strategies for a startup company?
A company can choose to either sell the business at some period, take it public, or in some
instances remain a private company with few share
Week 09 tute questions
Chapter 13
www.buseco.monash.edu
1
Question 13.24
WACC for a company: Imaginary Products Ltd currently has
$300 million of market value debt outstanding. The 9 per
cent coupon bonds (semiannual pay) have a maturity of 15
years and a
OFFICE USE ONLY
AFF9250 FINANCIAL MANAGEMENT THEORY
Monash University
Semester One Examination 2011
Faculty of Business and Economics
Department of Accounting and Finance
EXAM CODES:
AFF9250
TITLE OF PAPER:
FINANCIAL MANAGEMENT & THEORY
EXAM DURATION:
3 h