Chapter 10 The Cost of Capital LEARNING OBJECTIVES After reading this chapter‚ students should be able to: • Explain what is meant by a firm’s weighted average cost of capital. • Define and calculate the component costs of debt and preferred stock. • Explain why retained earnings are not free and use three approaches to estimate the component cost of retained earnings. • Briefly explain why the cost of new equity is higher than the cost of retained earnings‚ calculate the
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Question 1 (1 mark) The methods that a firm can use to evaluate a potential investment: 1) ‘Discounting’ Methods: Net Present Value (NPV): the present value of the future after-tax cash flow minus the investment outlay made initially. The decision rule for the NPV as follows: invest if NPV> 0‚ do not invest if NPV< 0 Internal Rate of Return (IRR): calculates the interest rate that equates the present value of the future after-tax cash flows equal that investment outlay;
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understanding of Finance function of a corporation and build capacity to apply theory in real world situations. The course will present the ‘Big Picture’ of Corporate Finance so that students understand how things fit together. After successfully completing the course‚ students should be able to take optimal decisions in a corporate setting‚ when working as professionals in the field. COURSE OUTLINE Introduction to Corporate Finance: Financial Management; Corporate Finance; Corporate Finance vs. Financial
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CORPORATE FINANCE Formative Assessment Some reading: Adams‚ R. B.‚ Hermalin‚ B. E.‚ and Weisbach M. S. (2010) The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey‚ Journal of Economic Literature‚ Vol 48‚ No.1‚ pp. 58–107. Aggarwal‚ R. et al (2009) Differences in governance practices between US and foreign firms: measurement‚ causes and consequences‚ Review of Financial Studies‚ Vol. Bhagat‚ S.‚ and Bolton B. (2008) Corporate Governance and Firm
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MAF302 Corporate Finance Study Guide Important Instruction This study guide provides you of an overview for each of the topic taught in this unit. These overviews however are not sufficient to learn all the materials in each of the topic. I therefore would suggest you to follow the materials in lecture notes and workshops. It is also essential to read and consult the corresponding text book chapters to develop your concept and knowledge in this unit. You will also find some references
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To what extent does a mature and cyclical product market drive corporate restructuring? Use an extended example to discuss whether restructuring transforms market and financial performance. An organization which is operating in a mature market means that the product does not have the scope to grow anymore. The product has reached its peak‚ with no prospects to increase‚ as the product is has become most popular in the market and no one else will be willing to buy it. A cyclical market is one which
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1.1 The Role of The Financial Manager LEARNING OBJECTIVE 1 Identify the key financial decisions facing the financial manager of any business firm. The financial manager is responsible for making decisions that are in the best interests of the firm’s owners‚ whether the firm is a start-up business with a single owner or a billion-dollar corporation owned by thousands of stockholders. The decisions made by the financial manager or owner should be one and the same. In most situations this means
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CORPORATE FINANCE EXERCISE 2012-2013 ---------------------------------------------------------------------------------------------------------------------------------CHAPTER 4. ASSETS IN A COMPANY EXERCISE 1 In order to run the business effectively‚ Enterprise X purchased a set of 4 computers by the beginning of Year N+1. Its purchasing price is 15 million VND per item (excluding VAT). The total transportation and testing cost is 5 million VND. Their estimated useful life is 5 years. Required:
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CHAPTER 4 Engagement Planning LEARNING OBJECTIVES | Review Checkpoints | Exercises‚ Problems and Simulations | 1. List and describe the activities auditors undertake before beginning an engagement. | 1‚ 2‚ 3‚ 4 | 53‚ 54‚ 55‚ 62‚ 66 | 2. Identify the procedures and sources of information auditors can use to obtain knowledge of a client’s business and industry. | 5‚ 6‚ 7‚ 8‚ 9 | 52‚ 56‚ 59‚ 65 | 3. Perform analytical procedures to
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CONCEPT QUESTIONS - CHAPTER 1 1.1 ( What are the three basic questions of corporate finance? a. Investment decision (capital budgeting): What long-term investment strategy should a firm adopt? b. Financing decision (capital structure): How much cash must be raised for the required investments? c. Short-term finance decision (working capital): How much short-term cash flow does company need to pay its bills. ( Describe capital structure. Capital structure
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