Week 9:Valuation and Capital Budgeting for
the Levered Firm
Dr. Jing Xing
Antai College of Economics & Management
Shanghai Jiao Tong University
Key Concepts and Skills
Understand the effects of leverage on the value created by a
project
Be able to apply

Chapter 7
Risk Analysis, Real Options, and Capital Budgeting
KEY CONCEPTS AND SKILLS
Understand and be able to apply
scenario and sensitivity analysis
Understand the various forms of breakeven analysis
Understand Monte Carlo simulation
Understand the impo

Chapter 9
Stock Valuation
KEY CONCEPTS AND SKILLS
Understand how stock prices depend
on future dividends and dividend
growth
Be able to compute stock prices using
the dividend growth model
Understand how growth opportunities
affect stock values
Understand

Chapter 4
Discounted Cash Flow Valuation
KEY CONCEPTS AND SKILLS
Be able to compute the future value
and/or present value of a single cash
flow or series of cash flows
Be able to compute the return on an
investment
Be able to use a financial calculator
an

Chapter
12
An Alternative View of Risk and Return: The Arbitrage
Pricing Theory
KEY CONCEPTS AND SKILLS
Discuss the relative importance of
systematic and unsystematic risk in
determining a portfolios return
Compare and contrast the CAPM and
Arbitrage Pric

Chapter
14
Efficient Capital Markets and Behavioral Challenges
KEY CONCEPTS AND SKILLS
Understand the importance of capital
market efficiency
Be able to define the forms of efficiency
Know the various empirical tests of
market efficiency
Understand the im

Chapter
13
Risk, Cost of Capital, and Capital Budgeting
KEY CONCEPTS AND SKILLS
Know how to determine a firms cost of
equity capital
Understand the impact of beta in
determining the firms cost of equity
capital
Know how to determine the firms
overall cost

Chapter
15
Long-Term Financing: An Introduction
KEY CONCEPTS AND SKILLS
Describe the basic features of common
and preferred stock.
Understand the different types of bonds
and how bond characteristics impact
the required yield.
15-2
CHAPTER OUTLINE
15.1 So

Chapter
17
Capital Structure: Limits to the Use of Debt
KEY CONCEPTS AND SKILLS
Define the costs associated with bankruptcy
Understand the theories that address the
level of debt a firm carries
Tradeoff
Signaling
Agency Cost
Pecking Order
Know real world

Chapter
18
Valuation and Capital Budgeting for the Levered Firm
KEY CONCEPTS AND SKILLS
Understand the effects of leverage
on the value created by a project
Be able to apply Adjusted Present
Value (APV), the Flows to Equity (FTE)
approach, and the WACC me

Chapter
19
Dividends and Other Payouts
KEY CONCEPTS AND SKILLS
Understand dividend types and how
they are paid
Understand the issues surrounding
dividend policy decisions
Understand why share repurchases are
an alternative to dividends
Understand the diff

Chapter
21
Leasing
KEY CONCEPTS AND SKILLS
Understand the different types of
leases.
Understand how to apply NPV to the
lease vs. buy decision.
Understand the importance of tax rates
in determining the benefit of leasing.
21-2
CHAPTER OUTLINE
21.1 Types o

Chapter
29
Mergers and Acquisitions
KEY CONCEPTS AND SKILLS
Be able to define the various terms
associated with M&A activity
Understand the various reasons for
mergers and whether or not those reasons
are in the best interest of shareholders
Understand th

Appendix
4A
Net Present Value: First Principles of Finance
KEY CONCEPTS AND SKILLS
Understand the theoretical foundations
of the Net Present Value (NPV) rule
4A-2
APPENDIX OUTLINE
4A.1 Making Consumption Choices over
Time
4A.2 Making Investment Choices
4A

Chapter 6
Making Capital Investment Decisions
KEY CONCEPTS AND SKILLS
Understand how to determine the
relevant cash flows for various types of
capital investments
Be able to compute depreciation
expense for tax purposes
Incorporate inflation into capital

Chapter 1
Introduction to Corporate Finance
KEY CONCEPTS AND SKILLS
Know
the basic types of financial
management decisions and the role of
the Financial Manager
Know the financial implications of the
various forms of business organization
Know the goal

Week 10:Dividends and Other Payouts
Dr. Jing Xing
Antai College of Economics & Management
Shanghai Jiao Tong University
Key Concepts and Skills
Understand dividend types and how they are paid
Understand the issues surrounding dividend policy decisions

Week 12: Leasing &Short-term
Financing
Dr. Jing Xing
Antai College of Economics & Management
Shanghai Jiao Tong University
Key Concepts and Skills
Understand the different types of leases.
Understand how to apply NPV to the lease vs. buy decision.
Unde

LECTURE 13: CORPORATE GOVERNANCE
Dr. Jing Xing
Department of Finance
Antai College of Economics and Management
Shanghai Jiao Tong University
Outline of Todays Lecture
What is corporate governance?
Why do we need it?
Mechanisms of corporate governance:

Week 11: Issuing Securities to the
Public
Dr. Jing Xing
Antai College of Economics & Management
Shanghai Jiao Tong University
Key Concepts and Skills
Understand how securities are sold to the public and the role of
investment bankers
Understand initial

LECTURE 1: INTRODUCTION TO
CORPORATE FINANCE
Lecturer: Jing Xing
Antai College of Economics & Management
Shanghai Jiao Tong University
Lecture Outline
Course outline and assessment
Todays lecture:
What is the corporate firm?
What is corporate finance?

LECTURE 2: VALUATION AND
CAPITAL BUDGETING
Lecturer: Jing Xing
Antai College of Economics & Management
Shanghai Jiao Tong University
Lecture Outline
Present value
Net present value
Strategy and analysis in using NPV
Simple example of capital budgeting

Chapter 8
Interest Rates and Bond Valuation
Key Concepts and Skills
Know the important bond features and bond types
Understand bond values and why they fluctuate
Understand bond ratings and what they mean
Understand the impact of inflation on interest

LECTURE 6: EFFICIENT MARKET
HYPOTHESIS
&
CAPITAL
STRUCTURE
Dr. Jing Xing
Antai College of Economics & Management
Shanghai Jiao Tong University
Efficient Capital Markets
A Description of Efficient Capital Markets
An efficient capital market is one in whic

LECTURE 5: COST OF
CAPITAL
Dr. Jing Xing
Antai College of Economics & Management
Shanghai Jiao Tong University
Outline of Todays Lecture
Review of last lecture
Risk & return
CAPM
Estimate cost of capital
Review of Risk & Return
What is risk?
When fin

Chapter
10
Risk and Return: Lessons from Market History
KEY CONCEPTS AND SKILLS
Know how to calculate the return on an
investment
Know how to calculate the standard deviation
of an investments returns
Understand the historical returns and risks on
various

Chapter
16
Capital Structure: Basic Concepts
KEY CONCEPTS AND SKILLS
Understand the effect of financial
leverage (i.e., capital structure) on firm
earnings
Understand homemade leverage
Understand capital structure theories
with and without taxes
Be able t

Chapter 5
Net Present Value and Other Investment Rules
.
KEY CONCEPTS AND SKILLS
Be able to compute payback and
discounted payback and understand their
shortcomings
Be able to compute the internal rate of
return and profitability index,
understanding the

Chapter
20
Issuing Securities to the Public
KEY CONCEPTS AND SKILLS
Understand how securities are sold to
the public and the role of investment
bankers
Understand initial public offerings and
the costs of going public
Understand the venture capital market