REVISION

Week 1: Introduction to corporate finance

- 3 important questions
o long term investments
o long term financing
o manage daybyday financial activities
- Financial management decision
o Capital budgeting
o Capital structure
o Working capital
- Forms of business organization
- Goal of financial management:
- Agency problem
- Financial market
Week 2: Financial statement and cash flow
- Balance sheet
o A snapshot
o Total assets = Total liabilities + stockholder equity
o NWC= CA-CL
o BV and MV
- Income statement
o A video
- Taxes
- Marginal tax rate and average tax rate
- CFFA= OCF – NCS – change in NWC
Week 3,4 : Time value of money
- What is this ? why?
- Determine FV and PV of cash flow
o FV= PV(1+r)^t
- Single cash flow
o Simple interest
o Compound interest
 - MULTIPLE CASH FLOW
- Multiple equal cash flow
o Annuity
o Perpetuity
o Growing annuity/ perpetuity
- EAR and APR
- Loan types
Week 5: Bond valuation
- Long term debt
- Key terms:
- Bond value : Pv of coupon payment + PV of face value (
par value)
Week 6 : Stock valuation
- Cash flow
- Stock market
Week 7.8 _ Capital budgeting technique
- Payback
- Discounted payback
- NPV
- PI
- The AAR
- IRR
- Modified IRR
CFFA for a project

- Depreciation
- After tax salvage

Week 10: Risk and historical return

- Return:
- DOLLAR/ %
- Mean
- Risk premium = Return – Rf-
- - Risk return tradeoff
- Variance and SD
- Efficient capital market
Week 11: Expected return
- Individual asset
- Portfolio
- Risk = Systematic risk + unsystematic risk
- Diversification
- SMl – CAPM
- E(Ra) = Rf + beta(E(Rm- Rf
-
- Week 12: Cost of capital
- Cost of debt
- Cost of equity
- Cost of PS
- WACC:
o Weights of capital structure
o After tax cost of debt
o Floatation cost
Week 13: raising capital

Venture capital
- IPO
- Issue new equity
- Underwriting
- Right offering
- Dilution
- Self registration
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