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Corporate Finance

INTRODUCTION TO SUBJECT
COMPARISON OF FINANCIAL STATEMENTS
TIME VALUE OF MONEY
Discounted Cash Flow, Effective Annual Interest Bond Valuation - introduction
Features of Bond, Coupon Interest, Face value, Coupon rate, Duration or maturity date
TERM STRUCTURE OF INTEREST RATES
COMMON STOCK VALUATION
Capital Budgeting Definition and Process
METHODS OF PROJECT EVALUATIONS, Net present value, Weighted Average Cost of Capital
METHODS OF PROJECT EVALUATIONS 2
METHODS OF PROJECT EVALUATIONS 3
ADVANCE EVALUATION METHODS: Sensitivity analysis, Profitability analysis, Break even accounting, Break even - economic
Economic Break Even, Operating Leverage, Capital Rationing, Hard & Soft Rationing, Single & Multi Period Rationing
Single period, Multi-period capital rationing, Linear programming
Risk and Uncertainty, Measuring risk, Variability of return–Historical Return, Variance of return, Standard Deviation
Portfolio and Diversification, Portfolio and Variance, Risk–Systematic & Unsystematic, Beta – Measure of systematic risk, Aggressive & defensive stocks
Security Market Line, Capital Asset Pricing Model – CAPM Calculating Over, Under valued stocks
Cost of Capital & Capital Structure, Components of Capital, Cost of Equity, Estimating g or growth rate, Dividend growth model, Cost of Debt, Bonds, Cost of Preferred Stocks
Venture Capital, Cost of Debt & Bond, Weighted average cost of debt, Tax and cost of debt, Cost of Loans & Leases, Overall cost of capital – WACC, WACC & Capital Budgeting
When to use WACC, Pure Play, Capital Structure and Financial Leverage
Home made leverage, Modigliani & Miller Model, How WACC remains constant, Business & Financial Risk, M & M model with taxes
Problems associated with high gearing, Bankruptcy costs, Optimal capital structure, Dividend policy
Dividend and value of firm, Dividend relevance, Residual dividend policy, Financial planning process and control
Budgeting process, Purpose, functions of budgets, Cash budgets–Preparation & interpretation
Cash flow statement Direct method Indirect method, Working capital management, Cash and operating cycle
Working capital management, Risk, Profitability and Liquidity - Working capital policies, Conservative, Aggressive, Moderate
Classification of working capital, Current Assets Financing – Hedging approach, Short term Vs long term financing
Overtrading – Indications & remedies, Cash management, Motives for Cash holding, Cash flow problems and remedies, Investing surplus cash
Miller-Orr Model of cash management, Inventory management, Inventory costs, Economic order quantity, Reorder level, Discounts and EOQ
Inventory cost – Stock out cost, Economic Order Point, Just in time (JIT), Debtors Management, Credit Control Policy
Cash discounts, Cost of discount, Shortening average collection period, Credit instrument, Analyzing credit policy, Revenue effect, Cost effect, Cost of debt o Probability of default
Effects of discounts–Not effecting volume, Extension of credit, Factoring, Management of creditors, Mergers & Acquisitions
Synergies, Types of mergers, Why mergers fail, Merger process, Acquisition consideration
Acquisition Consideration, Valuation of shares
Assets Based Share Valuations, Hybrid Valuation methods, Procedure for public, private takeover
Corporate Restructuring, Divestment, Purpose of divestment, Buyouts, Types of buyouts, Financial distress
Sources of financial distress, Effects of financial distress, Reorganization
Currency Risks, Transaction exposure, Translation exposure, Economic exposure
Future payment situation – hedging, Currency futures – features, CF – future payment in FCY
CF–future receipt in FCY, Forward contract vs. currency futures, Interest rate risk, Hedging against interest rate, Forward rate agreements, Decision rule
Interest rate future, Prices in futures, Hedging–short term interest rate (STIR), Scenario–Borrowing in ST and risk of rising interest, Scenario–deposit and risk of lowering interest rates on deposits, Options and Swaps, Features of opti
FOREIGN EXCHANGE MARKET’S OPTIONS
Calculating financial benefit–Interest rate Option, Interest rate caps and floor, Swaps, Interest rate swaps, Currency swaps
Exchange rate determination, Purchasing power parity theory, PPP model, International fisher effect, Exchange rate system, Fixed, Floating
FOREIGN INVESTMENT: Motives, International operations, Export, Branch, Subsidiary, Joint venture, Licensing agreements, Political risk

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