Time Value of Money
1. The concept of future value and present value.
2. The future value and the present value of both
an ordinary annuity and an annuity due, and
the present value of a perpetuity.
3. The future value and the present value
Cost of Capital
1. The key assumptions that underlie cost of capital and the
basic concept of cost of capital.
2. The cost of long-term debt and the cost of preferred stock.
3. The cost of common stock equity, the cost of retained
Capital Budgeting Techniques
1. Understand the role of capital budgeting techniques in the
capital budgeting process.
2. Calculate and evaluate the payback period.
3. Calculate and evaluate the net present value. (NPV).
4. Calculate and eva
Cash Flow and
1. The effect of depreciation on the firms cash
flows, the depreciable value of an asset, its
depreciable life, and tax depreciation methods.
2. The firms statement of cash flows, operating
cash flow, and fr
And Bond Valuation
1. Interest rate fundamentals, the term structure
of interest rates, and risk premiums.
2. The basic model used in the valuation process.
3. The basic valuation model to bonds and
describe the impact of req
Risks and Return
1. The fundamentals of risk, return, and risk aversion.
2. The procedures for assessing and measuring the risk.
3. The measurement of return and standard deviation for a
4. The risk and return characteristics of
1. Debt and equity.
2. The rights, characteristics, and features of both common and
3. The concept of market efficiency and basic common stock
valuation under the zero growth, constant growth, and
Introduction to Corporate
1. Define finance, and the various forms of business
2. The relationship to economics and accounting.
3. Explain why wealth maximization, rather than profit
maximization, is the firms goal and
Chapter 17 Mutual Funds and Hedge Funds
Answers to Chapter 17
1. Dollar Return = $4.00, Rate of Return = 8%
NAV for open-end, A = $6.375
NAV for open-end, B = $6.375
NAV for open-end, A = $6.375, % change = 0%
NAC for open-end, A
Chapter 12 - Commercial Banks Financial Statements and Analysis
Answers to Chapter 12
1. The treasury security offers 7% before tax and 4.9% after tax. This is less than the 5% offered
by the municipal. Alternatively, the municipal offers a 7.14
Capital Budgeting Cash Flow
1. The motives for key capital budgeting expenditures and the
steps in the capital budgeting process.
2. The major components of relevant cash flows, expansion
versus replacement cash flows, sunk costs and opport
1. The residual theory of dividends and the key arguments with regard
to dividend irrelevance and relevance.
2. The key factors involved in formulating a dividend policy.
3. Review and evaluate the three basic types of divid
Working Capital and Current Asset
1. Short-term financial management, net working capital, and the
related trade-off between profitability and risk.
2. The cash conversion cycle, its funding requirements, and the
key strategies f
1. The key components of a firms credit terms.
2. The effects of stretching accounts payable on their cost
and the use of accruals.
3. The interest rates and basic types of unsecured bank
sources of short-term
Leverage and Capital Structure
1. The basic types of capital and capital structure theory.
2. The optimal capital structure using a graphical view of
the firms cost of capital functions and a zero-growth valuation
3. The EBIT-EPS app
Chapter 10 - Derivative Securities Markets
Answers to Chapter 10
1. a. The settlement price is 99.155 percent of the face value of the contract ($1 million).
b. A total of 680,499 5-year Treasury note futures contracts traded on August 31, 2010.
Chapter 11 - Commercial Banks: Industry Overview
Answers to Chapter 11
Fed funds sold
Liabilities and Equity
TUTORIAL week 6 (Foreign Currency Derivatives)
Samuel Samosir trades currencies for Peregrine Funds in Jakarta. He focuses nearly all of his
time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is
Tutorial Week 14
American Airlines is trying to decide how to go about hedging SFr70 million in ticket sales receivable
in 180 days. Suppose it faces the following exchange and interest rates.
Forward rate (180 days):
TUTORIAL Week 12 (Foreign Direct Investment)
Problem 1-5 illustrate an example of trade induced by comparative advantage. They
assume that China and France each have 1,000 production units. With one unit of
production (a mix of land, labor, capital, and t
Tutorial Week 11
a) You entered in to a 36 forward rate agreement that obliged you to borrow $10,000,000 at 3%.
Suppose at the maturity of the FRA, the correct interest rate is 3%. Clearly you are better off since you
have the ability to borrow
TUTORIAL Week 5 (International Parity Conditions)
The East Asiatic Company (EAC), a Danish company with subsidiaries all over Asia, has
been funding its Bangkok subsidiary primarily with U.S dollar debt because of the cost
and availability of d
Tutorial week 10
PespsiCo. U.S. would like to hedge its C$40 million payable to Alcan, a Canadian aluminum
producer, which is due in 90 days, suppose it face the following exchange and interest rates:
Forward rate (90 days)
TUTORIAL Week 13
Deming Pipelines, Inc., is a large U.S. natural gas pipeline company that wants to raise $120 million to finance expansion. Deming
wants a capital structure that is 50% debt and 50% equity. Its corporate combined federal and state income
FIN304 GLOBAL FINANCIAL MANAGEMENT
FIN340 INTERNATIONAL FINANCE
TUTORIAL week 4 The Foreign Exchange Market
(For question 1 to 8, Home Country is Australia)
On 12 August, a Commonwealth Bank dealer in Melbourne concluded a transaction with a
1. How can a central bank use direct intervention to change the value of a currency? Explain why a
central bank may desire to smooth exchange rate movements of its currency.
2. Should the governments of Asian countries all
TUTORIAL week 9
a) Assume that Carbondale Co. expects to receive S$500,000 in one year. The existing
spot rate of the Singapore dollar is $0.60. The one-year forward rate of the Singapore
dollar is $0.62. Carbondale created a probability distri