subject : c 306 business financial management
... automate part of their production facilities. Project A costs $120,000 and would
produce net cash flows of $37,000 annually for 5 years. Project B also costs
$120,000 and will produce annual net cash flows of $25,000 for 10 years. Creative's
cost of capital is 11 percent. Using the equivalent annual ...
SYLLABUS COURSE TITLE Managerial Finance Faculty/Institute
... COURSE OBJECTIVES
Students are acquainted with:
fundamental concepts in Financial Management,
(dis-) advantages of forms of business organization,
linkage between stock price and intrinsic value,
capital structure and dividend policy,
investing in long-term assets.
Basic acco ...
Cost of Capital Corporations often use different costs of capital for
... average cost of capital (WACC) were used as the hurdle rate for all divisions, would more
conservative or riskier divisions get a greater share of capital? Explain your reasoning. What are
two techniques that you could use to develop a rough estimate for each division’s cost of capital?
Your initial ...
1) Corporate financial plans are often used as a basis
... The ability to meet or exceed the targets embodied in a financial plan is
obviously a reassuring indicator of management talent and motivation.
Moreover, the financial plan focuses attention on the specific targets that top
management deems most important. There are, however, several dangers.
... Suppose we want to prepare a set of pro forma financial statements for a project for Norma Desmond
Enterprises. In order to do so, we must have some background information. In this case, assume:
a. Sales of 10,000 units/year @ $5/unit.
b. Variable cost/unit is $3. Fixed costs are $5,000/year. Projec ...
The cost of capital reflects the cost of funds
... A) determining the appropriate mix of short-term and long-term financing.
B) deciding which individual short-term sources are best at a given point in time.
C) analyzing quarterly budget and performance reports.
D) deciding which individual long-term sources are best at a given point in time.
39. Th ...
Bundle 4 Vocabulary
... Total amount of new funds the business generates
from operations; broadest measure of profit for a
firm because it includes both net income and
MODEL ANSWERS TO FINANCIAL ECONOMICS (IOBM
... investment and savings on the economy determine the
level of long term interest rates while short term
interest rates are determined by an economy’s financial
and monetary conditions
key components of the demand for lonable funds
net investments and net additions to liquid reserves
key components of ...
During the last few years, Harry Davis Industries has
... maturity is $1,153.72. Harry Davis does not use short-term interestbearing debt on a permanent basis. New bonds would be privately
placed with no flotation cost.
The current price of the firm’s 10%, $100 par value,
quarterly dividend, perpetual preferred stock is $116.95. Harry Davis
would incu ...
AIRLINE VALUATION USING DISCOUNTED CASH FLOW METHOD
... Abstract: Since the beginning of the 1990s value based concept is discussed intensively as a
new way for company management. According to its keynote capital augmentation and company’s
value growth are priority aims of any organization. This article is devoted to discounted cash flow
method, which i ...
Syllabus - Baylor University
... Each investor group has the same amount of money to invest and their total net worth equals the value of all
securities. In other words, all the interest income from muni’s as well as all corporate NOI mentioned above must
flow through securities purchased by the three investor groups listed above.
... c. The returns that can be paid to common shareholders are diluted by the increase in
dividends paid to preferred shareholders if the firm’s profits rise.
d. Increasing the reliance on preferred shares will increase the firm’s weighed-averagecost-of-capital (WACC).
e. Preferred shareholders may vote ...
Highlights of Chapters 19, 16, 33, and 25
... Projects of different risk - If the project under consideration is more (or less) risky than the firm's existing assets,
then calculate an "industry" WACC for the project's industry.
Note: We didn’t take into account bankruptcy costs, agency costs, personal taxes, etc. in this analysis. See Chapter
9.2. International Financial Management
... institution, and markets. What strategies may regulatory bodies
implement for efficient working of financial markets in changing
How does the notion of risk and reward govern the behavior of
Year-end accounting balance sheet. Current Assets $500,000
... Expected sales for the upcoming year are $4,100,000. Costs of goods sold are 65% of sales and
other operating expenses are $850,000. The interest rate on ABC’s short-term debt is 10% per
annum. ABC’s tax-rate is 23%. Ignore depreciation in this problem.
(c) ABC intends to expand its operations. Sale ...
The Investment Environment
... policies are different.
Banking industry gives high return but
limited capital appericial.
IT gives high return and high cap app but
growth potential after 2002 is not
Corporate finance is the area of finance dealing with the sources of funding and the capital structure of corporations and the actions that managers take to increase the value of the firm to the shareholders, as well as the tools and analysis used to allocate financial resources. The primary goal of corporate finance is to maximize or increase shareholder value. Although it is in principle different from managerial finance which studies the financial management of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms.Investment analysis (or capital budgeting) is concerned with the setting of criteria about which value-adding projects should receive investment funding, and whether to finance that investment with equity or debt capital. Working capital management is the management of the company's monetary funds that deal with the short-term operating balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-term borrowing and lending (such as the terms on credit extended to customers).The terms corporate finance and corporate financier are also associated with investment banking. The typical role of an investment bank is to evaluate the company's financial needs and raise the appropriate type of capital that best fits those needs. Thus, the terms ""corporate finance"" and ""corporate financier"" may be associated with transactions in which capital is raised in order to create, develop, grow or acquire businesses. Recent legal and regulatory developments in the U.S. will likely alter the makeup of the group of arrangers and financiers willing to arrange and provide financing for certain highly leveraged transactions.Financial management overlaps with the financial function of the Accounting profession. However, financial accounting is the reporting of historical financial information, while financial management is concerned with the allocation of capital resources to increase a firm's value to the shareholders.