EFN406 Managerial Finance
Topic 3
Valuation of Debt and Equity
8/21/16
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
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%