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Financial Decision Making

The document outlines the mid-term and final term syllabus for a course on financial decision making. The mid-term syllabus covers topics like corporate financial policies, impact of interest rates, capital structure theory, importance of capital structure, dividend policies, and weighted average cost of capital calculations. The final term syllabus delves deeper into initial public offerings, stock purchases, ideal capital markets, hedging, dividend and capital structure irrelevance, exchange rates, currency options, country and economy risks, and structuring international trade transactions. The syllabus provides an overview of the key concepts and calculations that will be examined over the course of the term.

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zaigham abbas
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95 views

Financial Decision Making

The document outlines the mid-term and final term syllabus for a course on financial decision making. The mid-term syllabus covers topics like corporate financial policies, impact of interest rates, capital structure theory, importance of capital structure, dividend policies, and weighted average cost of capital calculations. The final term syllabus delves deeper into initial public offerings, stock purchases, ideal capital markets, hedging, dividend and capital structure irrelevance, exchange rates, currency options, country and economy risks, and structuring international trade transactions. The syllabus provides an overview of the key concepts and calculations that will be examined over the course of the term.

Uploaded by

zaigham abbas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Financial Decision Making

Mid Term Syllabus

1. Write a note on corporate financial polices and strategies?

2. What is the impact of interest rate on a business decisions?

3. Explain the capital structure theory? How we can calculate cost of debt and cost of equity?
a. If cost of debt is9% and cot of equity is 13% and firm was financed in proportion of 40% debt and
60% equity than calculate cost of capital?
b. If rate on T bills is 9 % and beta is 0.5, rate of return in market is 15% than calculate cost of equity
by using Capital Asset Pricing Model (CAPM).

4. Write down the importance of capital structure in decision making

5. Write a short note on theories of dividend policies?

6. The current ex div ordinary share price is $4.50 per share. An ordinary dividend of 35 cents per share
has just been paid and dividends are expected to increase by 4% per year for the foreseeable future.
The current ex div preference share Price is 76.2 cents. The loan notes are secured on the existing
non-current assets of Droxfol Co and are redeemable at par in (8) eight years’ time. They have a
current ex interest market price of $105 per $100 loan note. Droxfol Co pays tax on profits at an
annual rate of 30%.
Ordinary shares, par value $1 5,000
10% loan notes $ 5,000
9% preference shares, par value $1 2,500
Required
Calculate the current weighted average cost of capital of Droxfol Co?

7. Investors want to be able to get their money back at short notice whereas companies want borrowing
for long term. How this mismatch in liquidity requirement is managed in practice explain.

8. What is the two part decision rule that arises out of the Hirshliefer separation theorem?

9. What are the four main assumptions of the single period investment consumption model?

10. Why should allocated fixed costs be excluded from project cash flows in an NPV analysis?

Final Term Syllabus


11. What are initial public offerings? Explain its benefits with recent example of local company.

12. Define stock purchases .Write down advantages and disadvantages of purchases

13. Write a note on financial decisions in an ideal capital market

14. What is hedging? Explain of international trade transactions

15. Define and explain dividend irrelevance and capital structure irrelevance. Explain the link between the
two.

16.
a. US inflation is expected 5% next year and UK 3%. If the current dollar/ pound spot rate is 1.4555,
forecast the spot rate in 12 months’ time.

b. Describe different type of exchange rate systems.

17. $/£ 5 month forward 1.7460, 6 month forward 1.7650. A company wishes to hedge via a five to six
month time option forward dollar sale contract. What will be the contract’s exchange rate?
18. What advantages do over the counter options have over traded currency options?

19. What are country risk and economy risk and how they can be managed?

20. How we can structure international trade transactions? Explain in detail.

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