Business Finance –ACC VU. © Copyright Virtual University of Pakistan. 2 o Portfolio Management o Security Analysis. Financial Institutions. • Businesses. Business Finance (ACC). Handouts (pdf) / Powerpoint Slides (PPTs). Handouts / Power Point Slides. Lessons () (pdf format). Course Codes. Select a. ACC - Business Finance Complete Handouts See Attached Files.. Views: Attachments: ACC - osakeya.info, 3 MB.
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Business Finance - ACC osakeya.info - Ebook download as PDF File .pdf), Text File .txt) or read book online. Virtual University Handout. Business. Virtual University Handout. Business Finance. Download Business Finance - ACC osakeya.info ACC Business Accounting & Finance. Business Finance –ACC BUSINESS FINANCE The Primary textbook for the course is. VU LESSON 1 • • • Essentials of Corporate Finance, by Ross.
Public issue bonds offered to 4eneral 3ublic Pri. The denomination of the bonds is I1. The firm ill make annual 3ayments to ard the sinkin4 fund. U1U1K I1. SU1 Security Sinkin4 fund None -nnual. U1US Not callable The bonds ha. The 3rinci3al ill be 3aid in? The bonds ha. Offer 3rice 1''' face. The trust com3any must 8 0o3yri4ht 1irtual 9ni. Each bondholder ill recei.
AO initially. The cor3orate bonds are usually in re4istered form The com3any kee3s a re4ister recordin4 the o nershi3 of each bond and any chan4es thereof. The 3ar. Earlier re3ayment is handled throu4h a sinkin4 fund.
The com3any ill 3ay the interest and 3rinci3al by che5ue mailed directly to the address of the o ner of record. O nershi3 is not recorded. The bond may be registered and a! To obtain the interest 3ayment.
Since they do not address the issue of interest rate risk. The amount of 3remium. The definitions of credit orthiness used by the ratin4 a4encies are based on ho likely the issuer firm is to default and the 3rotection creditors ha. These co. These ratin4s are concerned only ith the 3ossibility of the default.
K' 1''. Su33ose N com3any issues a I1''' face. K' EK9. Such bonds ha. So real rate of return is 1'T. Qour real return is the 3ercenta4e chan4e in the amount of stuff you can actually download. Thus real rate does not really determine the sha3e of the term structure rather it influences the o. This extra com3ensation is called the interest rate risk premium The lon4er the term to maturity.
Plottin4 the treasury yields relati. IKA is the. This extra 3remium is called default risk 3remium We kno that 4o. So the 3er share. Note that no matter hat the stock 3rice is. The di. H 2 H constant So the. The com3any. With this in mind the 3rice 3er share is 4i.
What it tells us is that if the cash flo s on an in. We can then calculate the 3resent. The same is true if 4ro th rate and discount rate are e5ual.
So the stock 3rice is infinitely lar4e. Ex3ected 2i. The ex3ression e came u3 ith for the constant 4ro th case ill ork for any 4ro in4 3er3etuity. OO 21 8 0o3yri4ht 1irtual 9ni. AA H IA?. So e ha. Total 2i. The next di. H I1'. What return does this stock offer you if this is correct7 The di. Qou ex3ect that this 4ro th rate to last for? So if only t o directors are u3 for election at any one time. This is a routine 3ractice in lar4e cor3orations.
So Sami ill finish fourth at orst. So unaid ill elect all the candidates. This may result in a 3roxy fi4ht to retain or re3lace mana4ement by electin4 enou4h directors. The directors may decide not to 3ay the di. The 3rimary reason for such stocks concerns ith the control of the firm. Preference means only that the holders of the 3referred shares must recei. This is called the 3reem3ti. The amount of the di.
Some im3ortant characteristics 9nless a di. Sometimes these delayed 3ayments are com3ensated by. NP1 is a measure of ho much. The reason is that e are then faced ith 3roblem of estimatin4 the. When the ork is com3leted. No hat you as a mana4er has to do is to identify the feasibility of in.
So your total in. The market. The 3ro: Su33ose the cash re. The true NP1 can be found by 3uttin4 the in. S3readin4 this ratio o. OAn in! Su33ose e are asked to decide hether or not a ne 3roduct be launched. The 3rocess of discountin4 cash flo s ould only 4i. O1O E 1. The cash flo s o. So based on the NP1 rule e should take on the 3ro: F 4EK9. The Pro: K years. A years or about t o years and fi. F The 3ro: A' years to do this. KK 1''. KK 1K. NP1 for the in.
T are correct. So it has hi4her NP1 at lo er discount rates 8 0o3yri4ht 1irtual 9ni. This could be 4ood in. So it measures. The tax rate is? Sales of 1'. So in. The firm. So the immediate outflo is I? O' A Closer ook on N"C 9ntil no e ha. KT Should the firm in.
A but in. A1 So the cash costs for the year are I? AS 8 0o3yri4ht 1irtual 9ni. So cash re. AS 1A. The class establishes asset.?? A Pro3erty 0lass? K 1''. A' KS1. K' K KS1. K' KS1. KAO S. K 2e3reciation I? O'' AK.
Tax rate is? This e5ui3ment comes under year! KAO for tax 3ur3oses. OAS 9nit Sales?. KO' 1?. Business Finance —ACC 1''. So the total after tax cash flo from the sale is a I1K. S' 1K. AA' I1'?. K'' Pro: S3endin4 Total 3ro: So after tax 3roceeds ill be I1K'.
S3 c Total 3ro: K'' I OS. A1K O1. OT 8 0o3yri4ht 1irtual 9ni. T and ST o. The bi44est the number is the more the actual returns tend to differ from the a.
AO T 8 0o3yri4ht 1irtual 9ni. We ha. Standard de. L and 9. This indicates that com3any N is more. O T more than t ice 0om3any Q. Product '.? Product '. A' 1'T '. OT E 1U? AT E 1U? Su33ose e ha. A1 1'' 1S. S SourceW! This minimum le. The first t o can be directly obser. The stock. Business Finance —ACC 9nsystematic risk is also called di.
R2 is. T bond O years a4o. So the "enTech. The bond is currently sellin4 for SKT of it. What is "enTech. E by multi3lyin4 the number of shares outstandin4 by the 3rice 3er share. What is the cost of 3referred stock of 0" inc. S' 3er share. So O'T of the firm. SAT 8 0o3yri4ht 1irtual 9ni. This amount is tax deductible.?
A x IS'. N 0or3oration has. The result is called the Wei4hted -. The book.? So for e. EU1 is '. K billion on a book. N on market. To calculate the cost of debt. N 3aid I1. FHG 3 99 E3. AO x N has four lon4 term bond issues that account for essentially all of its lon4 term debt. N on book. A1] E '.? K 3er share in di.? The cou3on rate is irrele.
T W e 4et usin4 book. W tells us that the firm. Financial e! The com3any is considerin4 a restructurin4 that ould in.
The more debt financin4 a firm uses in ca3ital structure. EPS and return on e5uity.
P2 0or3oration currently uses no debt financin4 and it has decided to 4o for ca3ital restructurin4 hich ould incor3orate I1 million debt at ST debt, 8 0o3yri4ht 1irtual 9ni. Thus - R. Often the short term financin4 is called net orkin4 ca3ital mana4ement. Cas paid for in! O million H K.
A times. S days S. Short term borro in4 is used hen the reser. A million in interest before taxes for the year. So you ha. Customer payments Firm sales office Local bank deposits Customer payments Statements are sent by mail to firm for receivables processing Post office lockbox receipts Customer payments Customer payments Funds are transferred to concentration bank Concentration bank Firm cash manager Maintenance of cash reserves Cash manager analyzes bank balance and deposit information and makes cash allocation revision.
The 3rocess of mo. Disbursements activity Short-term investment of cash Maintenance of compensating balance at creditor bank 8 0o3yri4ht 1irtual 9ni. The sur3lus is in. Seasonal demand for current assets is lo. This means that the customer has? The financial deficit is financed by the sellin4 of marketable securities and bank borro in4.
Seasonal demand for assets is hi4h. The shorter these are. U1' net? T discount if he 3ays ithin 1' days. The draft is sent to the customer. T discount to 3ay on day? Business Finance —ACC discount. These costs 4o do n hen credit is 4ranted. They are 3ositi. Some of the accounts are only a fe days old. K'' units of a 3articular item in in.
K'' units and start o. N carryin4 in. O'' units. O'' U?. The cor3orate form of business is the standard method for sol. Net income Retained earnin4s6 2i. A 1'',''1?? O 1O,??? T 1'','T 1'','T 8 0o3yri4ht 1irtual 9ni. T of total assets,!
S times Interest Co! AA So days it took to turno. Since book. N cor3oration 3ays out A'T of net income in form of di. N is IO'', ho much did stockholders actually recei. H IA'' U 1,?? This tells us that e only ha. P1 H Present. T 3er 3eriod, the future. K The. KK H I1'? K 8 0o3yri4ht 1irtual 9ni. A',AK 3resent. U1US Not callable The bonds ha. Note that no matter hat the stock 3rice is, the 3resent. H 2 H constant So the.
H IA x 1,'K? Ex3ected 2i. Total 2i. K E KS,S? So based on the NP1 rule e should take on the 3ro: T are correct, makin4 it a! A ',O? O' A Closer ook on N"C 9ntil no e ha. A but in. A Pro3erty 0lass? OK,''O I1?
T, e need to kno ho far the actual return de. T and ST o.