Fall, 2015
Chinese University of Hong Kong
Econ3540 Foundations of Corporate Finance
Assignment 1
1. Lara Beal has $8,000 in cash now. She can lend and borrow at the bank at 15
percent per period. Her only investment possibility other than the bank is a p
Fall, 2015
Chinese University of Hong Kong
Econ3540 Foundations of Corporate Finance
Topic 4: The Valuation of Bonds and Stocks
Motivation Example
Firms A and B have the following stock prices, earnings per share and price/earnings ratios.
Price
EPS
Price
Why NPV is the Best
Investment Criterion?
Topic 5
1
Motivation Example
Consider a project with the following cash flows:
C0
C1
C2
C3
-925
+1000 +1400
-1500
Initial
Clean-up
Investment
Costs
Internal Rate of Return = 4.62%;
Opportunity Cost of Capital =
Risk and Asset Pricing
Topic 7
1
Example 1
Consider the following two investments.
(i) A lone prospector intends to search for gold
in the Rockies and is issuing 100 shares to
finance his expenses.
The evidence suggests that if he strikes gold he
will
How to Calculate Present
Value ?
Topic 3
1
Sum of PVs
When there are many periods and many
cash flows, how to calculate PV?
Firstly, assuming the interest rate and
hence the discount rate is the same in
every period;
Sum present values of cash flows in
Introduction
Topic 1
1
Purpose of the Course
Generate a framework for analyzing how a
firm makes investment and financing
decisions to create value for its
shareholders;
In order to do this, we also consider how
financial markets work and how investors
Fall, 2015
Chinese University of Hong Kong
Department of Economics
Econ3540: Foundations of Corporate Finance
Instructor: Julan Du
Email: [email protected]
Phone: 3943-8008
Teaching assistants: Ms. Zhang Yipei, [email protected];
Mr. Zhang
Fall, 2015
Chinese University of Hong Kong
Econ3540 Foundations of Corporate Finance
Topic 5: Why NPV is the Best Investment Criterion?
Motivation
Consider a project with the following cash flows:
C1
C2
+1000
+1400
C0
-925
Initial
Investment
C3
-1500
Clea
Fall, 2015
Chinese University of Hong Kong
Econ3540 Foundations of Corporate Finance
Topic 2: Investment Decisions - Present Value
The Objective Function for Managers
Motivation Example
Suppose you are at a GM shareholders' meeting. Three of the sharehold
Applied Forecasting Methods: Problem Set 1
6th October 2015
1. (Covariance and correlation) Suppose that the annual revenues of the
world two top oil producers have a covariance of 1,735,492.
s
(a) Based on the covariance, the claim is made that the reven
CHAPTER 14
INVESTMENT SPENDING
Chapter Outline:
Investment and the business cycle
Gross and net investment
The demand for capital
The marginal product of capital
Real and nominal interest rates
Taxes, investment tax credits, and the rental cost of capital
CHAPTER 13
CONSUMPTION AND SAVING
Chapter Outline:
The marginal propensity to consume
Current and lagged consumption
The life-cycle theory
The permanent-income theory
The random walk model of consumption
Liquidity constraints and myopia
Buffer stock savin
CHAPTER 15
THE DEMAND FOR MONEY
Chapter Outline:
The components of monetary aggregates
The importance and functions of money
Money demand for transaction
Money demand for precaution
Money demand for speculation
Empirical evidence
The income velocity of mo
Chapter 2: National Income Accounting
Difficulty: Easy
1. In calculating this year's GDP, national income accountants
A) include any increase in stock values
B) include an estimate for income from illegal activities
C) exclude Social Security payments to
RBSicat(2013)
To derive
ORIGINAL EQUATION: = 0 + 1 + 2
= 0 + 1 0 + 2
From this we then get:
= +
To derive
ORIGINAL EQUATION: = 0 + 2
= 0 + 0 + 2
From this we then get:
=
Econ 201 / F. B. Natividad-Carlos
The Classical Model
7/3/2013 Page 1 of 3
University of the Philippines
SCHOOL OF ECONOMICS
First Semester, 2013-14
Econ 201/F.B. Natividad-Carlos
.
Review of Econ 101:
THE CLASSICAL MODEL
(A Theoretical Benchmark)
ASSUMPT