浙江财经大学公司金融期末复习(共8页).doc

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1、精选优质文档-倾情为你奉上Problem:1.Function of financial market and list some financial intermediarieAnswer1:A. contributing to higher production and efficiency in the economy B. Improving the well-being of consumers by allowing them to their purchases betterAnswer2:(1) facilitate investment and financing. (2)

2、a reasonable guidance of capital flow, which contributes to the concentration of capital and promotes the transfer of high-efficiency units. (3) convenient and flexible turnover of funds. (4) to achieve risk diversification, reduce transaction costs. (5) are conducive to enhancing the flexibility of

3、 macro-control. (6) to help strengthen economic ties between regions and countries.Intermediaries: or companies The investment decision is the most important of the firms three major decisions when it comes to value creation. It begins with a determination of the total amount of assets needed to be

4、held by firm.Financing decision: financial manager is concerned with the makeup of the right-hand side of the balance sheet.Asset management decision: once assets have been acquired and appropriate financing provided, these assets must still be managed efficiently.2.Why profit maximization is not an

5、 ideal corporate finance objective?(1) The primary goal of corporate finance is maximize or increase shareholder value not profit(2)To a skilled accountant, however, a decision that increases profits under one set of accounting rules can reduce it under another. (3)Accounting profits are not necessa

6、rily the same as cash flows. (4)The problem with profit maximization as a goal is that it does not tell us when cash flows are to be received. (5)Profit maximization ignores the uncertainty or risk associated with cash flows. 总：For the fact that a firm cannot survive with mere profit maximization ,b

7、ut must increase long-term security through investment and meeting shareholder expectations. This will increase their productive capacity for the future as well as encourage the risky capital investment of the shareholders.3. Characteristics of business organization:(1) sole proprietorship: A busine

8、ss owned and managed by a single individual. Features: Cheapest to form. no formal charter, few government regulations Pays no corporate income taxes Unlimited liability for business debts and obligations. Its life is limited by the life of the sole proprietor The money raised is limited by the prop

9、rietors personal wealth(2) partnership: A business formed by two or more individuals or entities.General partnership: All partners share in gains or losses, all have unlimited liability for all partnership debts.Limited partnership: One or more general partners will run the business and have unlimit

10、ed liability. The limited partners liability is limited to their contribution to the partnership. Features: Often inexpensive and easy to form Difficult to transfer ownership Difficult to raise large amounts of cash Income is taxed as personal income(3) Corporation: Is a legal “person” separate and

11、distinct from its owners . Features: Limited liability for stockholders. Unlimited life for the business. Ownership can be easily transferred. These characteristics make it easier for corporations to raise capital. The disadvantage to corporations is double taxation.4. What is corporate finance and

12、describe their decisions?Corporate finance is the study of the answers to the following questions: (1) What long-term investments should you take on?(2)Where will you get the long-term financing to pay for your investment?(3) How will you manage your everyday financial activities?(WIKI)Corporate fin

13、ance is the area of dealing with the sources of funding and the of corporations and the actions that managers take to increase the of the firm to the , as well as the tools and used to allocate financial resources.Investment Decisions: Concerning non-current assent or capital budgeting. Evaluating t

14、he size, timing and risk of future cash flow. Cash flow versus accounting profitFinancing Decisions: Determine how the assets will be financed. What is the best type of financing? What is the best financing mix? What is the best dividend policy (dividend decision)? Capital structureAsset Management

15、Decisions: How do we manage existing assets efficiently? Greater emphasis on current asset management than fixed asset management. Working capital management.5. Evaluate IRR ruleFor the fact that internal rate of return is a rate quantity, it always is used to be an excellent indicator of the effici

16、ency, quality, or yield of an investment. However, As an investment decision tool, the calculated IRR should not be used to rate mutually exclusive projects, but only to decide whether a single project is worth investing in.The IRR does give you a rate of return, but the IRR could be for a small inv

17、estment or for only a short period of time.6. Financial managementFinancial management is concerned with the acquisition, financing, and management of assets with some overall goal in mind.The investment decision is the most important of the firms three major decisions when it comes to value creatio

18、n. It begins with a determination of the total amount of assets needed to be held by firm.Financing decision: financial manager is concerned with the makeup of the right-hand side of the balance sheet.Asset management decision: once assets have been acquired and appropriate financing provided, these

19、 assets must still be managed efficiently.7. Describe net operation theory，traditional theory, MM theory without(with)corporate tax, with bankruptcy and agency costNet Operating Income Approach - A theory of capital structure in which the weighted average cost of capital and the total value of the f

20、irm remain constant as financial leverage is changed.Traditional Approach - A theory of capital structure in which there exists an optimal capital structure and where management can increase the total value of the firm through the judicious use of financial leverage.The relationship between financia

21、l leverage and the cost of capital is explained by the NOI approach.Provide behavioral justification for a constant ko over the entire range of financial leverage possibilities.Total risk for all security holders of the firm is not altered by the capital structure.Therefore, the total value of the f

22、irm is not altered by the firms financing mix.Total market value is not altered by the capital structure (the total size of the pies are the same).M&M assume an absence of taxes and market imperfections.Investors can substitute personal for corporate financial leverage.No TaxesProposition I: Firm va

23、lue is not affected by leverageVL = VUProposition II: Leverage increases the risk and return to stockholders rs = r0 + (B / SL) (r0 - rB)rB is the interest rate (cost of debt)rs is the return on (levered) equity (cost of equity)r0 is the return on unlevered equity (cost of capital)B is the value of

24、debtSL is the value of levered equitywith Corporate TaxesProposition I (with Corporate Taxes):Firm value increases with leverage VL = VU + TC BProposition II (with Corporate Taxes):Some of the increase in equity risk and return is offset by interest tax shield rS = r0 + (B/S)(1-TC)(r0 - rB) rB is th

25、e interest rate (cost of debt)rS is the return on equity (cost of equity)r0 is the return on unlevered equity (cost of capital)B is the value of debtS is the value of levered equityAgency Costs - Costs associated with monitoring management to ensure that it behaves in ways consistent with the firms

26、contractual agreements with creditors and shareholders.Value of levered firm= Value of firm if unlevered + Present value of tax-shield benefits of debt-Present value of bankruptcy and agency costsCalculation:1.Annuity;Perpetuity:PV:FVC = Cash flow per periodi = interest raten = number of paymentsC =

27、 Cash flow per periodi = interest raten = number of paymentsPV of a perpetuity = P / iIn this formula P represents your annual payment and i represents your interest or discount rate.PV of a growing perpetuity = P / (i - g)In this formula P represents your annual payment, i represents your interest

28、or discount rate and g represents the growth rate.2.Valuation of bond(half year)and stock3.Investment criterion IRR,NPV,PBP,PINPV:Given the (period, cash flow) pairs (, ) where is the total number of periods, the net present value is given by:IRR:NPV=0,i=IRRGiven the (period, cash flow) pairs (, ) w

29、here is the total number of periods, the net present value is given by:PBP:Payback Period = W + (X - Y) / Z W is the year before which the investment value is crossed in cumulative cash flows X is the initial investment or the initial cash outlayY is the cumulative cash flow just before the investme

30、nt value is crossed in cumulative cash flowsZ is the cash flow of the year in which the investment value is crossed in the cumulative cash flowsPI:PI=(PV of future cash flow )/(Initial investment)=1+NPV/(Initial investment)4.Expanding and Replacement:;EAC:EAC = NPV/A t, r where A= the present value

31、of an t = number of periods r = interest rateA t, r=(1-1/(1+r)t)/r5.WACC,CAPM:WACC:where is the number of sources of capital (securities, types of liabilities); is the required for security ; and is the market value of all outstanding securities .where D is the total debt, E is the total shareholder

32、s equity, Ke is the cost of equity, and Kd is the cost of debt.Tax effectsTax effects can be incorporated into this formula. For example, the WACC for a company financed by one type of shares with the total market value of and cost of equity and one type of bonds with the total market value of and c

33、ost of debt , in a country with corporate tax rate , is calculated as:CAPM:where: is the expected return on the capital asset is the risk-free rate of interest such as interest arising from government bonds (the ) is the of the expected excess asset returns to the expected excess market returns, or

34、also , is the expected return of the market is sometimes known as the market premium (the difference between the expected market rate of return and the risk-free rate of return). is also known as the risk premiumRestated, in terms of risk premium, we find that:Modified formula:where: is required ret

35、urn on security i is is general market risk premium is for small size is risk premium due to company-specific risk factor6. DOL,DFL,DTL,EPS-EBITDOL: =% change in / % change in salesDFL:DFL =% change in EPS / % change in EBITDTL:DTL =% change in EPS / % change in salesEPS:earnings per shareEBIT:opera

36、ting profit7. MM without and with corporate tax;arbitrageWithout taxesProposition Iwhere is the value of an unlevered firm = price of buying a firm composed only of equity, and is the value of a levered firm = price of buying a firm that is composed of some mix of debt and equity. Another word for l

37、evered is geared, which has the same meaning.Proposition IIwhere is the required rate of return on equity, or . is the company unlevered (ie assume no leverage). is the required rate of return on borrowings, or . is the .With taxesProposition Iwhere is the value of a levered firm. is the value of an

38、 unlevered firm. is the tax rate () x the value of debt (D)the term assumes debt is perpetualProposition IIwhere: is the required rate of return on equity, or cost of levered equity = unlevered equity + financing premium. is the company cost of equity capital with no leverage (unlevered cost of equity, or return on assets with D/E = 0). is the required rate of return on borrowings, or . is the debt-to-equity ratio. is the tax rate.专心-专注-专业