Lecture 6: Capital Structure I
FINM7007
Capital Structure
What is capital structure?
The relative proportions of debt, equity, and other securities
that a firm has outstanding
Company
Debt/Equity ratio
Woolworths Ltd (WOW.AX)
47.09
JB Hi Fi Ltd (JBH.AX)

Tutorial 1 Solution
1. Use the formula for the future value of a single cashflow:
FV10 = 500 (1.12)10 = 1,552.92.
2. Use the formula for the future value of a single sum:
150 = 100 (1.10)n
1.5 = (1.10) n
ln (1.5) = ln [(1.10) n]
ln (1.5) = n ln (1.10)
=

Lecture 8: Capital structure III:
Trade-off theory and
Asymmetric Information
FINM7007
Outline
Trade-off theory
Asymmetric information
2
Capital Structure Theory
Development of the theory of capital structure, beginning
with the capital structure theory

THE AUSTRALIAN NATIONAL UNIVERSITY
RESEACH SCHOOL OF FINANCE, ACTUARIAL STUDIES
AND APPLIED STATISTICS
Mid-semester Exam
Semester 2, 2015
Applied Corporate Finance
(FINM7007)
Writing Period: 1.5 hours
Study Period: 15 minutes
Permitted Material: Non-progr

Lecture 7: Capital Structure II
FINM7007
Outline
Miller and Modigliani
Financial distress
Agency cost
2
Capital Structure Theory
Development of the theory of capital structure, beginning
with the capital structure theory of Miller and Modigliani:
Capit

FINM7007 Tutorial 3
1. Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza
that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new
pizza will be $20 million per year.

Lecture 1: Introduction
FINM7007
Outline
Introduction
Revision of basic finance knowledge
2
Corporate Structure Separation of
Ownership and Control
3
What is Corporate Finance?
Every decision that a business makes has financial
implications, and any dec

FINM7007 Tutorial 4
1.
What are some of the alternative sources from which private companies can raise equity capital?
Private companies can raise equity capital from angel investors, venture capitalists, institutional
investors, or corporate investors.
2

Lecture 5:
Cost of Capital
FINM7007
Outline
Cost of Capital
Cost of Equity
Cost of Debt
Project Cost of Capital
WACC
Risk-return trade-off
Risk-return trade-off: There is a reward for
bearing risk. The greater the potential risk, the
greater the ret

THE AUSTRALIAN NATIONAL UNIVERSITY
RESEACH SCHOOL OF FINANCE, ACTUARIAL STUDIES
AND APPLIED STATISTICS
Mid-semester Exam
Semester 1, 2015
Applied Corporate Finance
(FINM7007)
Writing Period: 1.5 hours
Study Period: 15 minutes
Permitted Material: Non-progr

1
The Australian National University
FINM70007 Applied Corporate Finance
AIRLINE INDUSTRY
Debt/Equity and Optimal Capital Structure
2
Contents
Executive Summary. 3
Industry and Companies. 3
Airline Industry. 3
Singapore Airlines Ltd. 3
Allegiant Travels.

Workshop 2:
Capital Budgeting: Basics
FINM7007
Incremental cash flow vs. incremental
earnings
The importance of relevance
a capital budgeting project are measured in terms of
cash flows rather than accounting earnings.
Key difference, e.g. depreciation

Week 2 Workshop:
Mutually Exclusive Projects with
Unequal Lives
FINM7007
Lecture
NPV rule
IRR rule
Payback period rule
Workshop
EAV rule
The constant chain of replacement in
perpetuity method
The lowest common multiple method
2
Comparing Projects Wi

Lecture 3:
Capital Budgeting: Basics
FINM7007
Recap
NPV is the best capital budgeting decision
methods. Recall NPV involves estimations of
two key things:
The cash inflow and out flows
Require rate of return
Today, we are focusing on estimating the
re

Lecture 4:
Equity and Debt
Financing
FINM7007
Outline
Equity financing
Private firms
Angel
Venture capital
Private equity firm
Alternative sources of funding
Public firms
IPO
SEO
Debt financing
Public debt
Private debt
Other types of debt
2
Sourc

Assessment 2: Group Assignment
You have just been hired by Dell Computers in its capital budgeting division. Your first
assignment is to determine the net cash flows and NPV of a proposed new type of portable
computer system similar in size to a BlackBerr

Lecture 2: Investment Decisions
FINM7007
Lecture Outline
1 NPV and Stand-Alone Projects
2 The Internal Rate of Return Rule
3 The Payback Rule
4 Choosing Between Projects
1 NPV and Stand-Alone Projects
Consider a take-it-or-leave-it investment
decision in

FINM7007
Applied Corporate Finance
Course Description
This course focuses on tools and techniques used in modern financial management.
Material in the course has an applied focus and is designed to provide students with the
knowledge and skills required f

Lecture 3:
Capital Budgeting: Basics
FINM7007
Recap
NPV is the best capital budgeting decision
methods. Recall NPV involves estimations of
two key things:
The cash inflow and out flows
Require rate of return
Today, we are focusing on estimating the
re

FINM7007 Tutorial 2
1. You are considering investing in a start-up company. The founder asked you for
$200,000 today and you expect to get $1,000,000 in nine years. Given the riskiness of the
investment opportunity, your cost of capital is 20%. What is th