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Advanced Corporate Finance
AFIN353
Topic 3 Cost of Capital and Market Efficiency
AFIN353
ADVANCED CORPORATE FINANCE
LEARNING OUTCOMES.TOPIC 3, WEEK 3
1. To estimate the equilibrium level of return required for a
risky asset.
2. To estimate a companys cost
98
18.
19.
20.
2E.
23.
24.
25.
27.
PART 2 PORTFOLiO MYSES
w. "An Induced Theory of the Firm under Risk: The Pure Mutual Fun , Journal of
Financial and Quantitative Analysis, V, No. 2 (May 1970), pp. 155-478.
Merton, Robert. An Analytic Derivation of the E
Advanced Corporate Finance
AFIN353
Topic 4 Debt and Taxes The Capital Structure Decision
AFIN353
ADVANCED CORPORATE FINANCE
LEARNING OUTCOMES.WEEK 4, TOPIC 4
1.
Illustrate the effect of a change in debt on weighted average
cost of capital in perfect capit
AFIN352 Applied Portfolio Management:
Introduction
Department of Applied Finance and Actuarial Studies
Macquarie University
February 25, 2016
Week 1
1/30
Assessment Components
Mid-Semester Test (20%)
Major Assignment (20%)
Week 7, 60 mins, covering weeks
ENROLMENT INFORMATION
Adding, Dropping and Changing Units
Please read this section carefully. If you do not understand something, the Centre staff will be happy
to answer your questions and assist you.
Adding a unit
You may add a unit to your study progra
ECON131 - Quiz Week 6
Student Name: _
Student ID:
_
Tutorial Day & Time: _
Question 1
Solve each of the following quadratic equations.
Instructions:
(i) Enter the exact value of the roots.
(ii) Enter the smallest root first and the largest root last.
a)
R
Note on Tutorial Week 3 Solution
Problem 1:
Portfolio management problem
We need to solve problem:
(1)
R RF
max P
X1 ,X 2 , X 3
P
subject to
.
3
X
i 1
i
1
This is a constrained optimization problem, which is usually more difficult to solve than an
unconst
AFIN352 Tutorial Due: Week 3
Download the Excel spreadsheet: demo_data_s1.xlsx
The spreadsheet contains 6 worksheets:
Data_1, Data_2 and Data_3 are the discrete monthly returns on 5 Industry portfolios
over 3 distinct 60-mth periods.
ff_1, ff_2 and ff_3 c
AFIN252 Applied Financial Analysis and Management
Tutorial 12 Chapter 20
Derivative Securities-Futures
26.
A cotton grower anticipates a 2000-tonne crop, due for harvest in January. A cotton
futures contract is for 50 tonnes and the price of a February co
Calculation of WACC
Assumptions
Date
Risk-free rate
Company
Warrnambool Cheese
8-Oct
4.07%
ASX
Code
WCB
Taken from Bloomberg web-site
10-year Australian government bond rate
Beta
0.90
Figures for cost of debt are assumptions.
Market-risk premium
Corporate
AFIN252 Applied Financial Analysis and Management
Tutorial 11 Chapter 20
Derivative Securities-Options
2
What is a call option? A put option? Under what circumstances might you
want to buy each? Which one has greater potential profit?
Answer:
A call optio
ACCG252 Applied Financial Analysis and Management
Tutorial 9 Chapter 18
Rewarding shareholders:setting dividend policy
2
On Thursday 16 March, Timebands board of directors declares a dividend of 50 cents
per share payable on Thursday 25 May, to shareholde
AFIN252 Applied Financial Analysis and Management
Tutorial 10 Chapter 19
Financial leverage and capital structure policy
1
The Extension Co Pty Ltd is comparing alternative capital structures: an all-equity plan
(Plan I) and a levered plan (Plan II). Unde
AFIN252 Applied Financial Analysis and Management
Tutorial 8 Chapter 17
Shareholder Value and the Cost of Capital
4. The Tired Co Ltd has a target debt/equity ratio of 0.333. Its cost of equity is 18 per cent, and
its cost of debt is 8 per cent.
a
What is
AFIN252 Applied Financial Analysis and Management
Tutorial 6 Chapter 12
Current investment decisions
1 The Room Care Company has a net book worth of $3000. Long-term debt is $1000. Net
working capital, other than cash, is $850. Fixed assets are $2000. How
AFIN252 Applied Financial Analysis and Management
Tutorial 7 Chapter 11
Return, risk and the security market line
1. What are the portfolio weights for a portfolio that has 200 shares that sell for $10 per share and 100
share that sell for $4 per share?
A
AFIN252 Applied Financial Analysis and Management
Tutorial 5 Chapter 10
Lessons from capital market history
1.
Business shares have an initial price of $6.60 per share, paid a dividend of $0.396 per
share during the year, and had an ending price of $5.874
AFIN252 Applied Financial Analysis and Management
Tutorial 4 Chapter 8
Making capital investment decisions
1.
a. If a proposed new investment is undertaken by the Home Care Company, it is expected
to produce projected sales in year 5 of $550 000. Variable
AFIN252 Applied Financial Analysis and Management
Tutorial 3 Chapter 7
Net present value and other investment criteria
1.
An investment offers $20 000 per year for 10 years. What is the payback if the
investment costs $70 000? If it costs $150 000? If it
AFIN252 Applied Financial Analysis and Management
Tutorial 2 Chapter 6
Valuing shares and bonds
7.
A particular bond is observed to have a coupon rate of 10 per cent and a yield to maturity that is
also 10 per cent. What do you know about the value of the
AFIN252 Applied Financial Analysis and Management
Tutorial 9: Chapter 17
Shareholder value and the cost of capital
Question 1
Equity in the Abby Group has a beta of 1.27. The market risk premium is 7 per cent,
and the risk-free rate is 4 per cent. Abbys l
AFIN252 Applied Financial Analysis and Management
Tutorial 4: Chapter 7
Net present value and other investment criteria
Question 1
An investment offers $200 000 per year for 10 years. What is the payback if the
investment costs $700 000? If it costs $1 50
Company
Commonwealth Bank of Australia
Qantas Airways
GUD Holdings Limted
Warrnambool Cheese
Steamships Trading Company
ASX
Code
CBA
QAN
GUD
WCB
SST
Number of
Shareholders
788,709
130,168
12,248
3,257
379
AFIN252 Applied Financial Analysis and Management
Tutorial 8: Chapter 12
Current investment decisions
Question 1
For the year just ended, you have gathered the following information on Flanders
Ltd:
(a) Fixed asset were sold for $4000.
(b) A $1600 dividen
AFIN252
Applied Financial Analysis
and Management
Semester 2, 2013
Tutorial Problem for Tutorial 8.
(In addition to ones from the text book).
Warrnambool Cheese & Butter Factory Co. Holdings Limited
In the lecture on Current Investment Decisions we discus
Chapter 12 Slide 25
Economic Order Quantity with Cash Discounts
Price
Quantity per Total rolls
before
order
per annum discount
1,000
10,000
$3.20
2,000
10,000
$3.20
3,500
10,000
$3.20
Discount
$0.02
$0.03
Discounted Total cost Number of
Price
per annum
or
AFIN252 Applied Financial Analysis and Management
Tutorial 7: Chapter 11
Return, risk and the Security Market Line
Question 1
If there is investment in two securities and the total risk of the portfolio is less than
the total risk of either security what
AFIN252: Applied Financial Analysis and Management
Extra Question for Tutorial 9: Cost of Capital
Please calculate the Weighted Average Cost of Capital for
Warrnambool Cheese and Butter Factory Co. Holdings Ltd (WCB). If
you need a value for beta assume a