Question 1
0.5 out of 0.5 points
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation
expense is called:
Selected
Answer:
c.
depreciation tax shield
Answers:
a.
after-tax terminal value savings
b.
after-tax depreciation

Example: Constant Growth
The relationship between P0 and PN for the constant growth model
A company has steady growth of 6% pa and is expected to continue indefinitely. The last dividend
was $0.17 and investors require a 12% pa return. What is the current

SOME INTERESTING FORMULAS
Present Value and FV of a Growing Annuity
PV 0=
[ ( )]
CF 1
1+ g
1
(r g)
1+r
[
n
n
n
(1+r ) ( 1+ g)
FV n=CF 1
rg
]
Of course once you have the PV it is easy to find the FV and vice versa.
FVn = PV (1+r)n and PV = FVn (1+r)-n
PV o

Key Rates AFR 3/201/2014
90day bank bill
2.72
3 year bonds
2.722
10 year bonds
3.433
This is an extract from The AFR Friday 3rd October 2014.
90-day bills
Note that the 90-day bill rate is 2.72. It does not say percentage (although % is implied), it
does

Equivalent Value
(Not to be confused with calculating the price of a security)
0
1
0
2
230
3
50
4
65
5
100
6
200
7
300
8
400
9
25
10
100
Given the cash flows in the table above and a rate of 10%pa, what is the equivalent value of these
cash flows at t = 7

Module Seven
1
Module 7: Portfolio Theory Risk and Return
Self-Study Questions for Module Seven
Question One
(a)
(b)
(c)
Over the last month Polycorps share price has risen from $2.20 to $2.35.
Calculate the return on Polycorps shares for the month.
Over

Historical Returns of Various Asset Classes
Annualised Returns to 31st December 2014
Aust.
CPI
Aust.
Bank
Bills
Aust.
Bonds
Listed
Propert
y
Aust.
Shar
es
1 year
2.3%
2.7%
9.8%
27.0%
5.0%
5
years
2.6%
3.7%
8.2%
12.2%
6.4%
10
years
2.8%
4.7%
6.7%
2.0%
7.3%

The SD of assets A and B are 8% (.08) and 12% (.12) respectively. A portfolio is constructed consistin
of 40% in Asset A and 60% in Asset B. Calculate the portfolio SD if the correlation is;
(a) 1
(b) 0.4
(c) 0
(d) -1
2p w A2 A2 wB2 B2 2w A wB A, B A B
C

Historical Returns of Various Asset Classes
Annualised Returns to 31st December 2014
Aust.
CPI
Aust.
Bank
Bills
Aust.
Bonds
Listed
Propert
y
Aust.
Shar
es
1 year
2.3%
2.7%
9.8%
27.0%
5.0%
5
years
2.6%
3.7%
8.2%
12.2%
6.4%
10
years
2.8%
4.7%
6.7%
2.0%
7.3%

EFN406 Managerial Finance
Topic 3
Valuation of Debt and Equity
5/22/17
EFN406 Managerial Finance
Slide1
Reading
Valuation PBEHP, Ch 4, exclude appendix
See Module 03 notes for more detail
Remember Chapters 8, 9 and 10 should be
read and studied lightly

EFN406 Managerial Finance
Module 05
Capital Budgeting Applications
Please note that there is significant overlap of Module 05 and Module 06
Learning Objectives
On completing this topic students should be able to:
Understand the principles used to project

EFN406 Managerial Finance
Module 04 - Lecture
Introduction to Capital Budgeting
Investment Evaluation Techniques
Reading
Lecture Notes
PBEHP Chapter 5, Project Evaluation:
Principles and Methods
Preview the first few pages and example 6.2
of Chapter 6

EFN406 Managerial Finance
Module 04 - Lecture
Introduction to Capital Budgeting
Investment Evaluation Techniques
Reading
Lecture Notes
PBEHP Chapter 5, Project Evaluation:
Principles and Methods
Preview the first few pages and example 6.2
of Chapter 6

Math Pointers
Slides showing the basic math and
conventions needed for finance using finance
examples
Do It Yourself
5/22/17
Maths Pointers
1
Refresher in
Mathematics for
Finance
A quick review of basic algebra
As we go through we look at applications to

A debenture is selling for $106.68. It has a maturity of five years, a face value of $100 and a coupon rate of 5.5% pa.
You are being asked to solve for kd, the implied yield. This can be done by calculating the IRR. Manually this would be d
Given
FV
Pric

Hints, Tips and Ideas Module 07 and 08
1.
Tip: You need to revise your stats - Expected Value,
Standard Deviation, Variance, Covariance, Correlation and
Regression. See the Maths Pointers Slides and/or the slides
for Module 07
2.
Rm is the return on the m

Module Seven
1
Module 07 and 08 Equations
Expected Return on a Portfolio of Two Assets
E(Rp) = a E(Ra) + b E(Rb)
a+b=1
Variance of a Portfolio of Two Assets
Var(Rp) = a2Var(Ra) + b2Var(Rb) + 2 a b Cov (Ra Rb)
a+b=1
Correlation and Covariance
or
ab
ab ab

QUESTION 1
1 out of 1 points
Given the information in the table below calculate the Beta of a portfolio that combines
investments A, B, and C in the proportions given.
Invest
Beta
Weight
ment
A
0.6
.3
Your answer should be accurate to two decimal places.

EFN406: Managerial Finance
Housekeeping
1
8/21/16
Some House Keeping
Blackboard
Assessment
My Grades
Resources
A Note on Excel
Textbook
Calculator
Tutorials
Self Study Questions and Answers
Math [Maths Slides; M4B; Pitstops;
Classes]
Language a

Tutorial 03
Tutorial 3 Questions
Tasks
1.
2.
3.
4.
5.
BF, page 93, Questions 2-6.
Self-Test Problems 1, 2 and 3. Solution are in Appendix B.
Barry buys a 90-day bill with a Face value of $100,000 at a yield of 7% pa, when it is
initially issued. He sells

Question 1
What would an investor be prepared to pay for an asset that returns $80 per
annum for 6 years, given that the investor requires an annual interest rate of 4.5%
pa?
CF (D)
n (t)
i
80
6
0.045
0
PV?
PV = D x PVIFA(n,i) = 80 x PVIFA(6,.045)
D = $80

Assignment Part A requirements
You must provide a full answer with explanation and accompanied with the calculation done in
Excel. See the example below.
You must also do the solution in Excel. You can embed your excel file in your word document.
This is

EFN406: MANAGERIAL FINANCE
2016, 2
Assignment: Part A, Financial Mathematics and Security Valuation
See Blackboard for due date:
General Information
1. Marks: 10 ten questions each worth one mark. You must have the correct answer and a correct
explanation

Module Three
1
Module 03 Valuation and Capital Markets
Topic 3.1 Security Valuation: See Chapter 4
What are you buying when you buy a financial security such as a share or a
debenture? The cost is the price being paid. What are the benefits? The benefits

1
Module Three
Module 03 Valuation and Capital Markets
Self-Study Questions for Module Three
1. What would an investor be prepared to pay for an asset that returns $80 per annum for 6
years, given that the investor requires an annual interest rate of 4.5%