...CHAPTER 10 CONCH REPUBLIC ELECTRONICS, PART 1 This is an in-depth capital budgeting problem. The initial cash outlay at Time 0 is simply the cost of the new equipment, $21,500,000. The sales each year are a combination of the sales of the new PDA, the lost sales each year, and the lost revenue. In this case, the lost sales are 15,000 units of the old PDA each year for two years at a price of $290 each. The company will also be forced to reduce the price of the old PDA on the units they will still sell for the next two years. So, the total change in sales is: Sales = New sales – Lost sales – Lost revenue Year 1 = (74,000 × $360) – (15,000 × $290) – [(80,000 – 15,000) × ($290 – 255)] = $20,015,000 Year 2 = (95,000 × $360) – (15,000 × $290) – [(60,000 – 15,000) × ($290 – 255)] = $28,275,000 | |Sales |Year 1 |Year 2 |Year 3 |Year 4 |Year 5 | | |New |$26,640,000 |$34,200,000 |$45,000,000 |$37,800,000 |$28,800,000 | | |Lost sales |–4,350,000 |–4,350,000 | | | | | |Lost revenue |–2,275,000 |–1,575,000 | | | | | |Net sales |$20,015,000 |$28,275,000 ...
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...Corporate Finance 1 Group assignment (Version 1) Group assignment instructions The objective of the group assignment is to promote deep thinking on a selected range of topics and to develop your practical quantitative modelling skills. The assessment is a group assignment and should be performed in your allocated groups (usually between 4 and 6 people). Seeking assistance from anyone outside your group or providing assistance to any other group constitutes academic misconduct and will be taken seriously by the university (however, you are allowed to provide assistance to the other members of your own group). If there is any significant similarity between the reports submitted by two or more groups for a particular question, then those group leaders will score zero for that question in the assignment. The mark for the rest of the group will be unaffected. Further action may be taken by the university against any specific group members who have obtained or provided assistance The assignment includes 6 questions (each with sub-parts). Your group must attempt one question for each person in the group (minimum 4 and maximum 6). Four of the questions are compulsory and must be attempted by all groups. The remaining two questions are optional and will be attempted by groups with more than 4 people (or individuals in a group of 4 who would like to lead 2 questions). Each member of your group should take the role of leader for 1 or 2 questions. It is expected that the leader...
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...Chapter 1 An Overview of Financial Management LEARNING OBJECTIVES After reading this chapter, students should be able to: • Explain the career opportunities available within the three interrelated areas of finance. • Identify some of the forces that will affect financial management in the new millennium. • Briefly explain the responsibilities of the financial staff within an organization. • Describe the advantages and disadvantages of alternative forms of business organization. • State the primary goal in a publicly traded firm, and explain how social responsibility and business ethics fit in. • Define an agency relationship, give some examples of potential agency problems, and identify possible solutions. • Identify major factors that determine the price of a company’s stock, including those that managers have control over and those that they do not. • Discuss whether financial managers should concentrate strictly on cash flow and ignore the impact of their decisions on EPS. LECTURE SUGGESTIONS Chapter 1 covers some important concepts, and discussing them in class can be interesting. However, students can read the chapter on their own, so it can be assigned but not covered in class. We generally spend much of the first day going over the syllabus and discussing grading and other mechanics relating to the course. To the extent that time permits, we talk about the topics that will be covered in the course and the structure...
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...decisions often yield a dilemma. Suppose that you were the CEO of investment bank XYZ in 2005. The debt/equity ratio of the bank was 20. All of your competitors raised their debt/equity ratios to 30 to please the stock market so that their stock prices could be higher than otherwise would be. You knew that raising the debt/equity ratio to 30 was rather risky and could destroy the bank if business went wrong. But you knew the investors would be disappointed by the otherwise lower share price if you did not raise the debt/equity ratio. So, what is the answer? I do not have an answer for this kind of ethical question because it is a dilemma; otherwise, I would not use the word “dilemma.” All I know is that you, as professional managers, are expected to behave ethically. One thing I know for sure is that never do anything that will put you in a prison cell; you are too cute for a prison cell. • The Corporate Financial Manager’s Goals • Maximize profit? – Earnings reflect past performance,...
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...course in finance utilizing comprehensive cases to simulate the role of the financial manager. 3 seminar-discussion. Prerequisite: GBA 546, all required 500-level courses, and microcomputer proficiency. Concurrent enrollment in GBA 646. Unconditional standing requirement. EXPANDED DESCRIPTION OF THE COURSE AND INSTRUCTIONAL METHODS: A. Expanded Description of the Course: This course reinforces the basic concepts of financial management. The course provides an in-depth discussion of key topics that are critical to financial management: (1) the goals of the firms, (2) financial statement analysis, planning, and forecasting, (3) working capital policy and management, (4) capital budgeting techniques without and with risk, (5) capital structure theory and application, (5) the cost of capital estimation, and (6) long-term financing decisions. In addition, the course examines issues such as lease financing, merger and acquisition, and international financial management. B. Instructional Methods: The delivery system throughout this course will be a combination of class discussion and case analysis. The case analysis will be both in a written format and oral presentation. The amount of lecture will be limited to detailed coverage of concepts pertaining to each individual case. REQUIRED BACKGROUND OR EXPERIENCE: A. Prerequisites: Fundamental of Financial Management (GBA 546), all required 500-level courses, and microcomputer proficiency. If a basic finance course...
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...programme :To provide students with a fundamental understanding of financial management principles and exposure towards analysis and application of finance principles.This course aims to enable students to: 1. Introduce with the various aspects of financial management. 2. Develop essential skills in making financial decisions. 3. Apply the appropriate techniques in making decisions. | 4. | Total Student Learning Time (SLT) | Total Face to Face | Total | 5. | | L | T | P | O | A | B/O | IL | | L = LectureT = TutorialP = Practical(Lab)O= Others A= AssessmentB/O=Blended /Online learningIL= Independent learning | 28 | 14 | | | 4 | 14 | 60 | 6. | Credit Value: 3 credits | 7. | Prerequisite (if any): Nil | 8. | Learning outcomes:On completion of the course, students will be able to: 1. Identify the goal of a firm and the role of a financial manager. 2. Analyze the financial performance of a company 3. Apply the concept of time value of money 4. Calculate the expected rate of return. 5. Perform capital budgeting analysis 6. Apply skills and technique in financial decisions. | 9. | Synopsis: This course focuses on the basic business finance theory both quantitative and qualitative with some simple application. Topics addressed in this course will include the mathematics of finance, time value of money, valuation concepts, capital budgeting, working capital management, the financial market, capital market, and the banking...
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...Continuing and Professional Studies Fundamentals of Corporate Finance New York University School of Continuing & Professional Studies Course #X51.9140 Spring 2011 James Berman 212.388.9873 jberman@jbglobal.com Description: In this introduction to corporate finance, emphasis is on utilizing long-term debt, preferred stock, common stock, and convertibles in the financial structure of a corporation. Learn to analyze methods of financing using internal and external funds. Topics include: financial management; corporate growth; business failures; return on investment; risk leverage; the time value of money; dividend policy; debt policy; and leasing. Instructor Biography: James Berman, the president and founder of JBGlobal.com LLC, a Registered Investment Advisory Firm, specializes in asset management for high-net-worth individuals and trusts. With over thirteen years of experience managing client portfolios, Mr. Berman is a professional analyst of financial vehicles, including equity and bond mutual funds, and is an expert in global investment, asset allocation and modern portfolio theory. As the president of JBGlobal LLC, the general partner of the JBGlobal Fund LP, Mr. Berman manages a global equities fund that invests in the United States, Europe and Asia. Mr. Berman is a faculty member in the Finance Department of the NYU School of Continuing and Professional Studies where he teaches corporate finance. He serves as sub-advisor to Eitan Ventures LLC, a venture...
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...tly A sk ed Fr equen in s Question orporate C FinanCe io, a llocch ur izio D uiry, M a lv i Pa sc a l Q tonio Sa Le Fur , A n Ya nn From the team behind Pierre Vernimmen’s % = Corporate FinanCe + 3 Frequently Asked Questions in Corporate Finance Frequently Asked Questions in Corporate Finance Pierre Vernimmen, Pascal Quiry, Antonio Salvi, Maurizio Dallocchio and Yann LeFur A John Wiley & Sons, Ltd., Publication This edition first published in 2011 Copyright 2011 Pierre Vernimmen Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com The rights of Pierre Vernimmen, Pascal Quiry, Antonio Salvi, Maurizio Dallocchio and Yann LeFur to be identified as the authors of this work have been asserted in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher. Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with...
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...FINANCE 611: CORPORATE FINANCE FALL 2015 Prof. Jules H. van Binsbergen Office: 2453 Steinberg Hall-Dietrich Hall Email: julesv@wharton.upenn.edu Office hours: By Appointment Course Website: Available on Canvas COURSE DESCRIPTION This course is an in-depth introduction to finance with an emphasis on applications that are vital for corporate managers. We will discuss most of the major financial decisions made by corporate managers both within the firm and in their interactions with investors. Essential in most of these decisions is the process of valuation, which will be emphasized throughout the course. Topics include criteria for making investment decisions, valuation of financial assets and liabilities, relationships between risk and return, capital structure choice, payout policy, the effective use and valuation of derivative securities (futures, options), and risk management. 1 COURSE MATERIALS Textbook The textbook for the course is: Corporate Finance (plus MyFinanceLab), Jonathan Berk and Peter DeMarzo, 3rd ed., Pearson - Prentice Hall, 2014. (SBN-10: 0-13-342415-4; ISBN-13: 978-0-13342415-7) There are several options for accessing the book and MyFinanceLab. You can purchase the book with MyFinanceLab. You can purchase the e-book and MyFinanceLab. You can purchase or rent the book, and purchase MyFinanceLab separately. Please see the last page of this syllabus for details for details on registering for MyFinanceLab. Other required readings...
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...Case Seminar Advanced Corporate Finance Tuesday 10:00 – 13:00, Room 23 Instructor: Tim Adam This case seminar discusses real-world business cases, which relate to the materials covered in Corporate Finance and Advanced Corporate Finance. The main topics are company valuation, capital structure, bankruptcy, corporate governance, project finance and corporate risk management. The main objective of the seminar is to apply the theoretical concepts of corporate finance and corporate governance to real-world situations. To do so we will discuss six Harvard Business School cases. In addition, there will be several company presentations of real-world business cases. This seminar has a high level of practical relevance, but it is also very labor intensive. Expect to spend at least eight hours each week on case preparations. Prerequisites All participants must have successfully passed Corporate Finance, and take Advanced Corporate Finance parallel or prior to this case seminar. Registration Students need to register for this seminar. Please submit your applications electronically (CV, most recent transcript) to Mrs. Bulwahn by April 8, 2016. If you do not attend the first session, your place may be given to other students on the waiting list. Evaluation Four case reports (80%), class participation (20%). Seminar attendance is obligatory. Course materials Cases can be purchased for a total cost of US$ 23.70 using a credit...
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...FIN200 Corporate Finance (2nd Term 2012-2013) Solution for Corporate Finance, Ross, Westerfield, and Jaffe, 9th edition CHAPTER 20 ISSUING SECURITIES TO THE PUBLIC Answers to Concepts Review and Critical Thinking Questions 1. A company’s internally generated cash flow provides a source of equity financing. For a profitable company, outside equity may never be needed. Debt issues are larger because large companies have the greatest access to public debt markets (small companies tend to borrow more from private lenders). Equity issuers are frequently small companies going public; such issues are often quite small. Additionally, to maintain a debt-equity ratio, a company must issue new bonds when the current bonds mature. From the previous question, economies of scale are part of the answer. Beyond this, debt issues are simply easier and less risky to sell from an investment bank’s perspective. The two main reasons are that very large amounts of debt securities can be sold to a relatively small number of buyers, particularly large institutional buyers such as pension funds and insurance companies, and debt securities are much easier to price. They are riskier and harder to market from an investment bank’s perspective. Yields on comparable bonds can usually be readily observed, so pricing a bond issue accurately is much less difficult. It is clear that the stock was sold too cheaply, so Eyetech had reason to be unhappy. No, but, in fairness, pricing the stock in such a situation...
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...CORPORATE FINANCE EXERCISE SESSION I: REVIEW ANSWER CHAPTER 1. INTRODUCTION TO CF: 1. What are the nature and the objective corporate finance? * Corporate finance: any financial or monetary activity that deals with a company and its money. * Objective: maximize the profits, increase liquidity, enhance competition ability 2. Describe the financial relationships in a company. Shareholders are considered partial owners of an organization, although business owners retain majority ownership. Employees work for companies and receive wages for their job performance, but do not own any part of the company unless they purchase stock or acquire it through benefits. (Shareholder Rights When investors buy shares of a company’s stock, they acquire ownership rights to the organization. However, shareholder ownership rights are usually limited. A corporation’s bylaws outline the specific rights of shareholders. In most cases, shareholders acquire rights to vote in members of a corporation’s board of directors, and to vote on certain issues that impact the organization. The voting power of shareholders is dependent on the number of individual shares owned. Shareholders possess certain rights to a company’s assets and dividends. If a company goes bankrupt, a bankruptcy court may award shareholders the rights to receive money from the liquidation of the company’s assets. Importance of Shareholders Companies depend on shareholders to buy their stocks to raise money for...
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...analyzing the Intel case, you should come to class with a one to two page memorandum that summarizes your analysis. You may team up with one or two classmates and hand in one memorandum for the group. (I.e., I will accept a memorandum with up to, but not more than, three names on it.) Stern School of Business New York University Cases in Corporate Finance Marciano Tony Course Syllabus TENTATIVE I. Course Materials A. Packet I (Required): 1. Syllabus 2. Assignments 3. Cases 4. Readings B. Text (Very Highly Recommended but probably have it already): Brealey Myers Allen, Principles of Corporate Finance, McGraw Hill. (BM) You may already have this text. C. There will be some miscellaneous handouts during the course. AND THERE ARE FILES ON BLACKBOARD WHICH CONTAIN SPREADSHEETS FOR THE CASES WE WILL ANALYZE IN THE COURSE. EACH SPREADSHEET CONTAINS ONE OR MORE OF THE EXHIBITS IN THE CASE. THIS WILL MAKE IT EASIER FOR YOU TO SPEND TIME ON THE ANALYSIS, RATHER THAN PUNCHING IN NUMBERS. II. Course Objectives This course will use the case method to study the practical aspects of important topics in corporate finance. We will apply some of the concepts and techniques learned in intro...
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...Chapter 1 Questions 1. What is finance? What is corporate financial management? What are the three major questions that financial managers address? Finance is a discipline concerned with determining value and making decisions. The finance function allocates resources, which includes acquiring, investing and managing the resources. Financial management is an area of finance that applies financial principles within an organization to create and maintain value through decision making and proper resource management. The first major question that financial managers deal with is investment decisions. These decisions are primarily concerned with the asset (left) side of the balance sheet. They answer such questions as should we buy new computers or a new warehouse? The second major question deals with financial decisions. These decisions are primarily concerned with the liabilities and stockholders’ equity (right) side of the balance sheet. They answer such questions as how much debt should we have and should the debt be short or long term or should we borrow in foreign currency? The third major question deals with managerial decisions. These decisions are primarily concerned with firm’s policies and day-to-day operating and financial decisions. They answer such questions as how large should the firm be, and how fast should it grow? 2. What are three problems associated with using profit maximization as the goal of the firm? What is shareholder wealth...
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...Chapter 18 Capital Budgeting and Valuation with Leverage 18-1. Explain whether each of the following projects is likely to have risk similar to the average risk of the firm. a. The Clorox Company considers launching a new version of Armor All designed to clean and protect notebook computers. b. Google, Inc., plans to purchase real estate to expand its headquarters. c. Target Corporation decides to expand the number of stores it has in the southeastern United States. While there may be some differences, the market risk of the cash flows from this new product is likely to be similar to Clorox’s other household products. Therefore, it is reasonable to assume it has the same risk as the average risk of the firm. A real estate investment likely has very different market risk than Google’s other investments in Internet search technology and advertising. It would not be appropriate to assume this investment as risk equal to the average risk of the firm. An expansion in the same line of business is likely to have risk equal to the average risk of the business. The theme park will likely be sensitive to the growth of the Chinese economy. Its market risk may be very different from GE’s other division, and from the company as a whole. It would not be appropriate to assume this investment as risk equal to the average risk of the firm. d. GE decides to open a new Universal Studios theme park in China. a. b. c. d. 18-2. Suppose Caterpillar, Inc., has 665 million shares...
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