The Objective in Corporate Finance “If you don’t know where you are going‚ it does not matter how you get there” Aswath Damodaran Stern School of Business Aswath Damodaran 2 First Principles Invest in projects that yield a return greater than the minimum acceptable hurdle rate. • The hurdle rate should be higher for riskier projects and reflect the financing mix used - owners’ funds (equity) or borrowed money (debt) • Returns on projects should be measured based on cash flows
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BANK: TIME VALUE OF MONEY (Difficulty: E = Easy‚ M = Medium‚ and T = Tough) Multiple Choice: Problems Easy: FV of a single payment Answer: d Diff: E . You deposit $2‚000 in a savings account that pays 10 percent interest‚ compounded annually. How much will your account be worth in 15 years? a. $2‚030.21 b. $5‚000.00 c. $8‚091.12 d. $8‚354.50 e. $9‚020.10 FV of a single payment Answer: c Diff: E . You deposit $1‚000 in a savings account that pays 9 percent interest
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Ch: 4-Exchange rate movement in recent months AUD per USD BDT per USD Month Rate % change Rate % change Sep-13 0.9303 76.3765 Oct-13 0.9519 0.023218317 76.2753 -0.00132501 Nov-13 0.9324 -0.020485345 76.4057 0.001709597 source: foreign exchange rate‚(dec 2‚ 2013) The above currencies are showed in the indirect quotations reflects the average rates of exchange rate. The Bangladeshi taka and Australian dollar are here showed against the US dollar to measure the currency
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If it follows the residual dividend policy‚ what is its forecasted dividend payout ratio? (a) 40.61% (b) 42.75% (c) 45.00% (d) 47.37% (e) 49.74% Student Answer: Answer: d. 47.37% Dividends paid = $475‚000 - (40%)($625‚000) = $225‚000 Dividend payout ratio = $225‚000/$475‚000 = 47.37% Instructor Explanation: Answer is: d Chapter 17 Capital budget $625‚000 Equity ratio 40% Net income (NI) $475‚000 Dividends paid = NI - (Equity ratio)(Capital budget) $225‚000 Dividend payout ratio = Dividends
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TASKS FOR SUBMISSION TO YOUR TUTOR NAME: Radionenko Vladislav E-MAIL ADDRESS: vlad201414@yahoo.com TASK 1 Look at the 10 multiple choice questions on the assessment sheet overleaf. This is part 1 of a level assessment which is sent out to our overseas students. You will obviously have no problem in finding the correct answer‚ but explaining your choice can be more problematic. What do you think is being tested in each question? Explain in your own words or use grammatical terms if you
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Aswath Damodaran 2 THE OBJECTIVE IN CORPORATE FINANCE “If you don’t know where you are going‚ it does’nt maCer how you get there” First Principles 3 Aswath Damodaran 3 The Classical Viewpoint 4 ¨ ¨ ¨ ¨ Van Horne: "In this book‚ we assume that the objecKve of the firm
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Annuity – fixed stream of cash flows that has a final period t * A(C‚r‚t) = C/r [1-1/(1+r)t] * Growing Perpetuity – G(C‚r‚g) = C/(r-g) C is initial cash flow‚ r is discount rate‚ g is growth rate * P/E = 1/(r-g) * High P-E multiple means the firm has good growth opportunities (high g)‚ investments have low risk (low r)‚ or both * Computing NPV – obtain the proper CF to use in the calculation * Rule: Determine all CF which will be realized if the project is taken
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British- Iroquois 4. The French had claimed the Ohio River Valley and were trading furs to the Native Americans. The British wanted to settle on the river and trade furs as well. Conflict came about for fur trading between the French and British. 5. The leaders of the Great Awakening placed an importance on religion. The believed that it was your inner religious emotion that was more important than the outward religious behavior. 6. The Great Awakening encouraged ideas of equality‚ helping others
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Multiple Choice Questions Choose the correct answers from the following: 1. _________ described the circulation of blood in 13th century. (Bu Ali Sina‚ Ali Bin Isa‚ Ibn-Al Nafees) 2. Each fore limb of frog has _________ fingers. (4‚ 5‚ 6) 3. Fruit is formed by the enlargement of _________. (Stigma‚ Style‚ Ovary) 4. The earthworm belongs to the phylum _________. (Nematoda‚ Annelida‚ Mollusca) 5. The saliva contains an enzyme known as _________‚ which acts on carbohydrates
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Chapter 1 Multinational Financial Management An Overview Lecture Outline Managing the MNC Facing Agency Problems Management Structure of an MNC Why Fimrs Pursue International Business Theory of Comparative Advantage Imperfect Markets Theory Product Cycle Theory How Firms Engage in International Business International Trade Licensing Franchising Joint Ventures Acquisitions of Existing Operations Establishing New Foreign Subsidiaries Summary of Methods Valuation Model for an MNC Domestic
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