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<<< Previous FINAL REVIEW OF ENTIRE COURSE ON FINANCIAL MANAGEMENT:Financial Statements and Ratios
 
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Financial Management ­ MGT201
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Lesson 45
FINAL REVIEW OF ENTIRE COURSE ON FINANCIAL MANAGEMENT.
Outline of 5 Major Areas of FM:
1- Interest Rates
­  Compounding (money grows with time)
Discrete Annual (FV=PV (1+r) t) vs.
Discrete Multiple / Fractional (FV = PV (1+ (r/m))  mn)
"n" number of years,
"r" is the Discount Rate or Opportunity Cost of Capital or WACC depending on your
perspective
"m" times a year interest is compounded
­
Discounting (or Reverse-Compounding)
PV = FV / (1+r)  t
­
Annuity and Perpetuity
FV Annuity = CCF [(1+r) n -1] / i. Limited time period.
PV Perpetuity = CCF / r.
­
Yield Curves and Term Structure
·  Normal Yield Curve is Upward Sloping. Interest Rates rise with maturity or life
of Bond.
Geometric Average:
·  (1 + 2Yr Bond YTM)
= (1 + 1Yr Bond YTM 1st year) x (1 + 1Yr Bond YTM in 2nd Year).
·  Nominal i = Real i + Inflation + Risk Premiums (i.e. Liquidity Risk + Maturity Risk
+ Sovereign Risk)
­
Financial Statements and Ratios
·  Balance Sheet, Profit and Loss Account (Income Statement) and Cash flow
statement
·  DuPont = Profit Margin x Asset Turnover x (Assets/Equity),
·  Margin = Net Income/Sales
·  Turnover = Sales / Assets
·  Important ratios: ROA, ROE, EPS, P/E, Plough back Pb, Current ratio,
Debt/Capitalization, TIE
·  ROA ( = (NI + Interest) / Total Assets) and ROE (= NI / Equity)
·  EPS (= NI / No. of Shares Outstanding) and P/E and Plough back (Pb = g /
ROE where "g" is Dividend growth rate %)
·  Current Ratio (=Current Assets / Current Liabilities), Debt/Capitalization or
Leverage Ratio, TIE
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Financial Management ­ MGT201
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FM Perspective of Balance Sheet
Own Stock
Issued by
Company to
Raise Cash
Copyright: M. S. Humayun
4
Graphical View of
Simple, Discrete Compound, &
Continuous Interest - Important
Future Value (FV)
CONTINUOUS COMPOUNDING
in Rupees
DISCRETE COMPOUNDING
SIMPLE INTEREST
Time (Years)
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Yield Curve for Bonds
Term Structure of Interest rates
Annualized
Interest Rate %
(Bond Yield)
Time
(Years)
Now
1 Year
5 Years
10 Years
2- Capital Budgeting and Investment Decisions to Rank Projects - Fixed assets Side of Balance
Sheet
­  Objective of Financial Management: Maximization of Shareholders' (Owners')
Wealth. Maximization of Value of Firm. Maximization of Value of Shares of the Firm.
­  Cash Flows = CF
=Net After Tax Incremental Cash Flows
= NOI + Depreciation + Cost Savings ­ Extra Taxes + Any Salvage Value
Cash Flow Diagrams / Time Line: Cash Inflows (Upward Arrows)
­  NPV or DCF  (Best Criterion) ­ Highest NPV Project is Best.
NPV uses Discount Rate
= Required ROR or WACC which can be changed for every year and varies depending
on the Investor's Risk Profile.
NPV= PV - Io
= -Io + CF1/ (1+r) + CF2/ (1+r)  2 + CF3/ (1+r)  3 + ...,
For comparison of projects with Unequal Lives use Adjusted NPV
= NPV x EAA where EAA Factor = [i x (1+i)  n / (1+i) n -1]
­  IRR (%) - Higher IRR is better. Fixed throughout life of project,
If Multiple IRR then use (1+MIRR) n = FV Inflows / PV Outflows.
FV = Future Value and PV = Present Value
­  Capital Rationing ­ Limited Budget, % Budget Utilization
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NPV ­ IRR Diagram
Combined Use of NPV & IRR
to Compare 2 Projects - Important
NPV (Rs)
PROJECT A: LOWER IRR BUT
HIGHER NPV BECAUSE ACTUAL
"r" IS VERY LOW.
PROJECT B: HIGHER IRR BUT
LOWER NPV
NPV A
NPV FAVORS PROJECT A
SO PROJECT A IS BETTER.
NPV B
Discount
Rate % (r)
ACTUAL
IRR
IRR
Required
Project B
Project A
Return or
WACC for
Investor
Non-Normal Cash Flow Diagram
Multiple IRR Example
(1+MIRR)n = (FV Cash Inflows) / (PV Cash Outflows)
CF 1 = +Rs 500
Sign Change #1
Yr 0
Yr 1
Yr 2
Sign Change #2
Io = - Rs 500
Note: More than 1 Sign Change
CF 2 = -Rs 500
in Direction of Cash Flow
Arrows suggests Multiple IRR's
3- Securities Valuation
­ Fair vs. Market Value - PV Formula gives Fair (Intrinsic)Value
­ Market Value is determined by Investors in Market and buying /selling of securities.
­ Bond Pricing and YTM - Bond is Legal Paper representing Debt
·  Use PV Formula to Calculate Bond Price:
PV = CF1 / (1+rD) + CF2 / (1+rD)  2 + ... + PAR value / (1+rD)  n
·  Cash Flows = CF = Coupon
= Coupon Rate (%) x Par Value
·  Coupon Rate (fixed) vs. Discount Rate (rD Required Return for
Bond Investor)
·  YTM = IRR for Bond. Set PV = 0 and solve for "rD" using Iteration.
·  Bond Ratings of FIRMS by Moodys and S&P.
­ Share Pricing and Yields:
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Stock is Legal Paper representing Ownership
·  Market Price of Share = Po = EPS x P/E
·  Gordon's Formula is IMPORTANT: rE = Required Return on Equity for
Shareholders
= (DIV1 / Po) + g = Dividend Yield + Capital Gains Yield.
Note: DIV1 is expected future Dividend NEXT year. Po is price THIS year.
·  Earnings Approach: Po = (EPS / rE) + PVGO.
­  PVGO = NPV1/(rE - g) =[-Io +(C/rE )] / (rE -g)
­  Io = Value of Reinvestment = Pb x EPS where Pb= Plough back = 1 -
Payout = 1 - (DIV/EPS)
·  Shareholders' Required ROR (= rE) vs. ROE (= NI / Equity)
Bond Cash Flow Diagram
Savings Certificate Example
Rs 1,000
Coupon Annuity :
(Monthly)
Time (Months)
12
01 2
6
Rs 100,000
Par Receipt :
(at Maturity)
0
12
2 Cash Flow
Arrows at
SAME point in
time can be
Combined
added.
Time (Months)
12
Cash Flow Diagram 0 1 2
6
4- Risk and Return
­  Securities
·  Single Stock Risk = Standard Deviation
­  Single Stock Return: measured by Share Price or Capital Gain or
Return (rE)
­  Single Stock Risk = Standard Deviation = Sq. Root of Variance in the
Expected Return
­  Total Risk
= Diversifiable (Company Specific) Risk + Market Risk
·  Portfolio Theory and CML
­  Portfolio Return - Weighted Average Formula
­  Portfolio Risk: Risk Matrix , Covariance of each stock with entire
Market , Correlation Coefficient
­  Risk ­ Return Graph: Hook-shaped Curve, Efficient Frontier, T-Bill
Portfolio and CML
­  Portfolio of Stocks Return: Weighted Average Formula.
2-Stock Portfolio's Expected Return
= rP * = xA rA + xB rB
­  Portfolio Risk: Measured by Sigma P (standard deviation).
2 Stocks:
P = XA2 σ A 2 + XB2 σ B 2 + 2 (XA XB σ A σ B ρ AB).
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­
Risk Matrix , Covariance of each stock with entire Market , Correlation
Coefficient
­
Risk ­ Return Graph for Portfolio of Stocks
Hook-shaped Curve:  possible to reduce risk and raise return
together
Efficient Frontier shows all possible efficient portfolios
"Risk Free" T-Bill Portfolio is always available to all investors
CML connects Risk Free Return and Tangent to Efficient
Frontier
3-Stock Portfolio Risk Formula
RISK MATRIX
S to ck A
S to ck B
S to ck C
S to ck X A2    A 2
XA XB
XA XC
A
B
AB
A
C
AC
A
X B2
2
S to ck X B X A  B
XB XC
A
BA
B
B
C
BC
B
X C2
2
S to ck X C X A  C
XC XB
A
CA
C
B
CB
C
C
Portfolio Size vs Risk Graph
P
Unique or Diversifiable or
Specific or Non-Systematic Risk
M
Market or Systematic or Non-
Diversifiable or Beta Risk =
Minimum Possible Portfolio Risk
n
7
20
40
Number of Investments (Stocks) in the Portfolio
Note: About 100% of the Diversifiable Risk (and 50% of the Total
Risk) can be removed by Diversification across 40 stocks. Just 7
carefully chosen Un-Correlated Stocks might be enough to remove
30% of the Total Risk.
·
CAPM and SML -Efficient Markets, Beta, Non-diversifiable Market Risk,
Risk Premium, Required ROR on Equity
(rE = rRF + (rM ­ rRF)Beta)
·  CV (Coefficient of Variation) = Risk / Return
Criterion combines BOTH Risk and return in deciding which is the Best Investment
(Capital Budgeting)
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Portfolio Efficient Frontier & CML -
Important
P Efficient Frontier for
rP* = rRF + [ (rM - rRF) / M ]
rP*
3-Stock Portfolio
e
Lin
30%
t
rke
Stock C
a
lM
"The Parachute"
a
pit
Ca
Stock A
20%
Optimal Portfolio Mix
(50%A, 30% B, 20%C) if
10%=
Stock B
rRF
Risk Free T-Bill ROR = 10%
40%
20%
2.5%
P
Portfolio with Negative
Portfolio Risk
3.4%
or Zero Correlation
Coefficient
Security Market Line (SML)
ALL Efficient Stocks in Efficient Markets
Important
Required
rA = rRF + (rM - rRF )
. IMPORTANT
Return (r*)
A
rA= 30%
ne
i
et L
rk
a
ty M
rM= 20%
Market Risk
uri
Sec
Premium for
Risky Stock A's
Avg Stock = 10%
rRF= 10%
Total Risk
Premium =
30-10 = 20%
A =+ 2.0
M =+ 1.0
Beta Risk (
)
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Financial Management ­ MGT201
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Combined Risk & Return
Graphical Comparison of
Investments
T-Bill B: Low Risk
& Low Return
Project C: High
Risk B
Risk & High Return
Risk C
Exp Return C
Exp Return B
Rate of Return ( r ) %
­
Entire Firm
·  Return - ROA = (NI + Interest) / (D+E) or ROE = NI / E
·  Risk - Standard Deviation in ROE (stand alone), FIRM BETAS (market Risk)
·  Firm's Overall Level of Risk = Business Risk + Financial Risk
­  Business Risk caused by changes in price and cost of raw materials and
products and Operating Leverage
­  Business Risk and Operating Leverage
­  (OL = Fixed Costs / Total Cost). OL can be good if Sales > Breakeven
Point
­  Financial Risk, Financial Leverage:
­  Financial Risk caused by Financial Leverage or Debt
­  (FL = Debt / Total Assets = D / (D+E)). FL can be good if EBIT / Total
Assets > Cost of Debt
Probability Distribution
Many Possibilities for Forecasted Returns of
Single Stock ­ Uncertainty & Risk
"BELL"
0.45
Curve
0.4
0.35
0.3
Possible
0.25
Outcomes
0.2
0.15
"Expected ROR"
0.1
or Most Likely
0.05
or Mean ROR =
0
10%
-20
10
40
Rate of Return After 1 Year < r >
5- Capital Structure and Corporate Financing - Long Term LIABILITIES Side of Balance Sheet
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Maturity Matching or Hedging Principle
of Financing ­ Important
Value (Rs)
Spontaneous
Financing ie.
A/c Receivables
Spontaneous Current
Short Term
Assets
Loans
Temporary Current Assets
Permanent Financing
ie. Equity & Long Term
Loans / Bonds
Fixed or Permanent Assets :
Life / usage more than 1 Yr
Time
Buy Permanent Fixed Assets with Permanent Financing. IMPORTANT
­
Objective: To maintain best balance of Debt & Equity Capital
Cost vs. Required Return- Net Proceeds, After-Tax Cost of Debt , Source of Equity
­
·  Compute Cost using Net Proceeds: NP = Market Price (Po) ­ Issuance Costs
·  After-Tax Cost of Debt: rD (1-Tc)
·  Source of Equity: Retained Earnings cheaper than Fresh Stock Issuance in
Stock Market
­  WACC (%) - Use MARKET VALUES of Debt and Equity,
­  FIRMS TRY TO MINIMIZE THEIR COST OF CAPITAL
·  WACC = rDxD + rExE. IMPORTANT FORMULA
­  rD and rE are "Costs" of Debt & Equity respectively. INTEREST is the
cost paid by Firm to Investors who hold Firm's Debt. DIVIDEND is
cost paid by Firm to Investors who hold Firm's Equity.
­  xD and xE based on MARKET VALUES of Debt and Equity,
­  Firm Value = Value = Debt + Equity
= Share Price x Number of Shares Outstanding
­  Two ways to compute:
NI (or EBIT) Approach (E = NI / rE
V = E+D) and Tax Shield (or NOI) Approach (VL =
VU + Tc D  EL   rE
WACC)
VL is Value of Levered Firm. VU is Value of Un levered Firm. Tc is Corporate Tax %. D is
Debt.
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Financial Management ­ MGT201
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SML ­ WACC Graph
Important
Required
FEASIBLE REGION (where
SML Line
ROR rCE (%)
IRR of investment or project
(EXTERNAL
is more than SML and
MARKET
WACC)
criterion)
IRR < SML
1
WACC
Firm's own
WACC
3
IRR < WACC
2
(INTERNAL
rRF = T-
IRR <WACC < SML
Bill rate
criterion)
Beta Risk
Visualizing Operating Leverage (OL)
Impact on Breakeven Point & Capital Budgeting
Revenues &
Sales REVENUE Line
Total COST Line
Costs (Rupees)
Company A:
OL = Fixed Cost /Total Cost
Higher OL So
Higher Breakeven
Total COST Line
Company B
Breakeven A is Higher.
A is More Risky. As
Fixed Costs A
long as Sales >
Breakeven, OL is Good.
Fixed Costs B
Sales Quantity
(# of Units)
QB*
QA*
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Financial Management ­ MGT201
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Visualizing Financial Leverage (FL)
Impact on ROE & Capital Structure
LEVERED (Debt
ROE (%)
& Equity) Firm:
77%
Higher Slope.
FL IS GOOD IF EBIT /
ROE more
ASSETS > COST OF
sensitive to
42% DEBT.
changes in EBIT
35% = <ROE>L
UN-LEVERED
(100% Equity)
21% = <ROE>UL
Firm. Safer
Capital Structure
3.5%
at Low EBIT's
0%
EBIT (Rs)
Tradeoff Theory Graph
LeveSlahgeeve&geOiptiImeaTaxCapital Structure
rig tly L  ra d F rm: nter st l
Shield Benefit. Total Return to Investors
Excessively Leveraged Firm:
Rises so Stock Value Rises. Total Return
Threat of Bankruptcy has Real
= Net Income (paid to Shareholders) +
Value of
Costs. Less Investor
Interest (paid to Debt Holders)
Firm or
Confidence and Lower Share
Price.
Price of
Stock
Firm Remains 100%
Equity (Un-Levered)
Financial Leverage =
OPTIMAL Capital
Debt / Assets =
Structure - MAXIMUM
D/(D+E)
VALUE & MINIMUM
WACC
­
Capital Structure Theories:
­  Tradeoff Theory: Little Debt reduces WACC. High Debt Bankruptcy Risk
­  Signaling Theory: Raising New Debt carries Positive signal to market. Fresh Equity
carries Negative Signal
­  Agency Theory: Managers' Personal Motives clash with Shareholders' (Owners')
Interest
­  Capital Structure Models
­  Miller Modigliani
(Without Taxes: rE = WACCU + (D/E (WACCU -rE),
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Financial Management ­ MGT201
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Pure MM Theory - Ideal Markets
WAFinancialGraph - Important
CC Risk.
Cost of
rE = Cost of Equity
Higher Required
Capital
Return on Equity.
=WACC+D/E (WACC-rD)
Higher rE
(%)
WACC =
rE
rDxD + rExE
rD = Cost
rD
of Debt
Debt / Equity = A
Measure of Leverage =
100%
D/E = xD / ( 1- xD )
Equity
Firm
Market Value of Firm = V = EBIT / WACC. As Debt Increases, Risk Increases so rD and rE and
WACC should increase. BUT Debt is cheaper than equity (recall Risk Theory) so as Debt
Increases, WACC should decrease! Net Effect is No Change in WACC and No Change in
Value. CAPITAL BUDEGTING is Independent of Corporate Finance / Capital Structure.
DEBT HAS NO BEARNING ON A FIRM'S VALUE!
Traditionalist Theory - Real Markets
WACC Graph - Important
Bankruptcy Risk &
Cost of
Costs. Higher
Capital
Required Return on
rE,L = Cost of Equity =
Equity. Steeper Rise.
(%)
WACCU + xD(WACCU -rD) (1-TC)
WACCL = rD(1-Tc)xD + rExE
rE
rD = Cost of Debt
rD
Interest Tax Shield
Advantage
Debt / Equity = A
100%
Optimal Capital
Measure of
Structure = Minimum
Equity
Leverage = D/E = xD
WACC and
Firm
Maximum Value
/ ( 1- xD )
Note: xD = D / (D+E)
­  Traditionalists Formulas (WACCL = rD (1-Tc) xD + rExE)
FIRM'S VALUE = EBIT / COST OF CAPITAL. MORE LEVERAGE (OR DEBT)
­
MEANS MORE RISK WHICH MEANS HIGHER COST OF CAPITAL AND
THEREFORE LOWER VALUE
­
Traditionalist View is based on Practical Reality. Leverage provides Interest Tax
Savings (or Shield) but also Increases Financial Risk. Excessive Leverage leads to
Bankruptcy Risk. Increases in Risk will Change Value of Firm and WACC.
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Financial Management ­ MGT201
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­
Practical Capital Structure Management- Target Ratios i.e. TIE of 2.5. TIE and Debt /
Capitalization
­
Dividend Policy Theories - MM, Signaling, and Agency,
­
DIV1 = DIVo (1+g) , g = Pb x ROE , If ROE < rE then better to give Dividends than to
Retain Earnings
­  MM: Dividend Policy and Debt are Irrelevant to a Firm's Value. What matters
is the Cash Flows from Underlying Assets and NOT how you divide or split up
the Cash Outflows i.e. Dividends. IMPORTANT.
­  Signaling Theory: Issuing New Debt (or taking new loan) gives positive signal
to Investors. Issuing Fresh Stock / Equity in Stock Market gives negative signal.
­  Agency Theory: Management's Personal Motives often clash with Owner /
Shareholders Objectives
Impact of Dividend Announcement and Ex-Dividend Date on Share Price
­
­
Dividend Payout restricted by Capital Expenditure Requirement, Target Debt Ratio, and
restrictions placed by Debt Contracts
DIV1 = Future Dividend
­
If ROE < rE then better to pay out Dividends rather than keep cash as Retained Earnings
­
because company is unable to generate an ROE high enough to satisfy the
Shareholder's Required Return (rE).
Global Investing Makes the Efficient Frontier and
the CML (Capital Market Line) Rise Up
Higher Return for Same Level of Risk
Efficient Frontier (for
)
rP*
nts
Global Investments)
e
stm
ve
l In
ba
s)
ent
o
Gl
stm
r
e
(fo
Inv
ML
y
ntr
C
u
Co
Efficient Frontier
le
ing
S
(for Investment in
r
(fo
rRF
L
Single Country)
CM
P
Risk
Outline of 4 Minor Areas of FM:
1- Working Capital and Short Term Financing
­  Current Assets Management: Cash, Marketable Securities, Inventory.
·  Current Assets necessary for safe liquidity but earn no / little return on cash,
inventory
·  Fat Cat vs. Lean Mean , C/F Synchronization and Cheques Float ,
­  Current Liabilities and Short Term Financing: Accounts Payable and Short Term Loans.
"Spontaneous" and unpredictable source of financing.
­  Types of Financing
·  Permanent (Equity & Long Term Loan)  vs. Temporary (Short-Term Loan)
vs. Spontaneous Financing (Current Liabilities). IMPORTANT.
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Financial Management ­ MGT201
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·
Hedging Principle or Self-Liquidating Debt or Maturity Matching:
Buy
Permanent Assets with Permanent Financing. IMPORTANT.
2- Lease Financing
­  Financing Lease, Operating Lease, Sale & Lease Back
­  Ownership vs. Control
­  Valuation of Lease Finance: NAL (modified NPV) and IRR (%)
3- Mergers and Acquisitions (M&A) and Valuation of Firms
­  Mergers, Acquisitions, LBO's
­  Merger Valuation using DCF (NPV) or MMA Short-cut Formulas
­  Impact of Merger on Share Price and Value of Firm
4- International Finance
­  Impact on Major Areas of FM: Capital Structure and Corporate Financing, Financial
Accounting, Capital Budgeting
­  Foreign Exchange (F/x)
·  Markets: Spot, Forward, Futures, Options
·  Relationships: PPP, Fischer Effect, IRP
·  European Convention & Cross Rates
----------------------------THE END----------------------
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Table of Contents:
  1. INTRODUCTION TO FINANCIAL MANAGEMENT:Corporate Financing & Capital Structure,
  2. OBJECTIVES OF FINANCIAL MANAGEMENT, FINANCIAL ASSETS AND FINANCIAL MARKETS:Real Assets, Bond
  3. ANALYSIS OF FINANCIAL STATEMENTS:Basic Financial Statements, Profit & Loss account or Income Statement
  4. TIME VALUE OF MONEY:Discounting & Net Present Value (NPV), Interest Theory
  5. FINANCIAL FORECASTING AND FINANCIAL PLANNING:Planning Documents, Drawback of Percent of Sales Method
  6. PRESENT VALUE AND DISCOUNTING:Interest Rates for Discounting Calculations
  7. DISCOUNTING CASH FLOW ANALYSIS, ANNUITIES AND PERPETUITIES:Multiple Compounding
  8. CAPITAL BUDGETING AND CAPITAL BUDGETING TECHNIQUES:Techniques of capital budgeting, Pay back period
  9. NET PRESENT VALUE (NPV) AND INTERNAL RATE OF RETURN (IRR):RANKING TWO DIFFERENT INVESTMENTS
  10. PROJECT CASH FLOWS, PROJECT TIMING, COMPARING PROJECTS, AND MODIFIED INTERNAL RATE OF RETURN (MIRR)
  11. SOME SPECIAL AREAS OF CAPITAL BUDGETING:SOME SPECIAL AREAS OF CAPITAL BUDGETING, SOME SPECIAL AREAS OF CAPITAL BUDGETING
  12. CAPITAL RATIONING AND INTERPRETATION OF IRR AND NPV WITH LIMITED CAPITAL.:Types of Problems in Capital Rationing
  13. BONDS AND CLASSIFICATION OF BONDS:Textile Weaving Factory Case Study, Characteristics of bonds, Convertible Bonds
  14. BONDS’ VALUATION:Long Bond - Risk Theory, Bond Portfolio Theory, Interest Rate Tradeoff
  15. BONDS VALUATION AND YIELD ON BONDS:Present Value formula for the bond
  16. INTRODUCTION TO STOCKS AND STOCK VALUATION:Share Concept, Finite Investment
  17. COMMON STOCK PRICING AND DIVIDEND GROWTH MODELS:Preferred Stock, Perpetual Investment
  18. COMMON STOCKS – RATE OF RETURN AND EPS PRICING MODEL:Earnings per Share (EPS) Pricing Model
  19. INTRODUCTION TO RISK, RISK AND RETURN FOR A SINGLE STOCK INVESTMENT:Diversifiable Risk, Diversification
  20. RISK FOR A SINGLE STOCK INVESTMENT, PROBABILITY GRAPHS AND COEFFICIENT OF VARIATION
  21. 2- STOCK PORTFOLIO THEORY, RISK AND EXPECTED RETURN:Diversification, Definition of Terms
  22. PORTFOLIO RISK ANALYSIS AND EFFICIENT PORTFOLIO MAPS
  23. EFFICIENT PORTFOLIOS, MARKET RISK AND CAPITAL MARKET LINE (CML):Market Risk & Portfolio Theory
  24. STOCK BETA, PORTFOLIO BETA AND INTRODUCTION TO SECURITY MARKET LINE:MARKET, Calculating Portfolio Beta
  25. STOCK BETAS &RISK, SML& RETURN AND STOCK PRICES IN EFFICIENT MARKS:Interpretation of Result
  26. SML GRAPH AND CAPITAL ASSET PRICING MODEL:NPV Calculations & Capital Budgeting
  27. RISK AND PORTFOLIO THEORY, CAPM, CRITICISM OF CAPM AND APPLICATION OF RISK THEORY:Think Out of the Box
  28. INTRODUCTION TO DEBT, EFFICIENT MARKETS AND COST OF CAPITAL:Real Assets Markets, Debt vs. Equity
  29. WEIGHTED AVERAGE COST OF CAPITAL (WACC):Summary of Formulas
  30. BUSINESS RISK FACED BY FIRM, OPERATING LEVERAGE, BREAK EVEN POINT& RETURN ON EQUITY
  31. OPERATING LEVERAGE, FINANCIAL LEVERAGE, ROE, BREAK EVEN POINT AND BUSINESS RISK
  32. FINANCIAL LEVERAGE AND CAPITAL STRUCTURE:Capital Structure Theory
  33. MODIFICATIONS IN MILLAR MODIGLIANI CAPITAL STRUCTURE THEORY:Modified MM - With Bankruptcy Cost
  34. APPLICATION OF MILLER MODIGLIANI AND OTHER CAPITAL STRUCTURE THEORIES:Problem of the theory
  35. NET INCOME AND TAX SHIELD APPROACHES TO WACC:Traditionalists -Real Markets Example
  36. MANAGEMENT OF CAPITAL STRUCTURE:Practical Capital Structure Management
  37. DIVIDEND PAYOUT:Other Factors Affecting Dividend Policy, Residual Dividend Model
  38. APPLICATION OF RESIDUAL DIVIDEND MODEL:Dividend Payout Procedure, Dividend Schemes for Optimizing Share Price
  39. WORKING CAPITAL MANAGEMENT:Impact of working capital on Firm Value, Monthly Cash Budget
  40. CASH MANAGEMENT AND WORKING CAPITAL FINANCING:Inventory Management, Accounts Receivables Management:
  41. SHORT TERM FINANCING, LONG TERM FINANCING AND LEASE FINANCING:
  42. LEASE FINANCING AND TYPES OF LEASE FINANCING:Sale & Lease-Back, Lease Analyses & Calculations
  43. MERGERS AND ACQUISITIONS:Leveraged Buy-Outs (LBO’s), Mergers - Good or Bad?
  44. INTERNATIONAL FINANCE (MULTINATIONAL FINANCE):Major Issues Faced by Multinationals
  45. FINAL REVIEW OF ENTIRE COURSE ON FINANCIAL MANAGEMENT:Financial Statements and Ratios