Financial Management
Microsoft Word - Fin303_Formula_Exam 1.docx Fin303 Formula Sheet 1 Equation Description Formula 2.1 Fisher equation i = r + ∆Pe+ r∆Pe 2.2 Fisher equation simplified i = r + ∆Pe 3.1 Balance sheet identity Total assets = Total liabilities + Total stockholders’ equity 3.2 Net working capital Net working capital = Total current assets – Total current liabilities 3.3 Income Statement identity Net income = Revenues – Expenses 4.1 Current Ratio sLiabilitieCurrent AssetsCurrent 4.2 Quick Ratio sLiabilitieCurrent InventoryAssetsCurrent 4.9 Total debt ratio assetsTotal debtTotal 4.10 Debt-to-equity ratio equityTotal debtTotal 4.11 Equity multiplier equityTotal assetsTotal 4.15 Operating profit margin salesNet EBIT 4.16 Net profit margin salesNet incomeNet 4.18 Return on assets (ROA) assetsTotal incomeNet 4.19 Return on equity (ROE) equityTotal incomeNet 4.20 Earnings per share Net income Shares outstanding 4.21 Price-earnings ratio Price per share/Earnings per share 4.22 Market-to-book ratio shareperequityofvalueBook shareperequityofvalueMarket 4.23 ROA turnoverassetTotalinmprofitNet arg 4.24 ROE multiplierEquityROA Fin303 Formula Sheet 2 Name__________________________________ 4.25 ROE multiplierEquityturnoverassetTotalinmprofitNet arg 4.26 ROE equityTotal assetsTotal assetsTotal salesNet salesNet incomeNet 5.1 Future value of an n-period investment with annual compounding FVn = PV (1 + i)n 5.2 Future value with more frequent than annual compounding FVn = PV (1 + i/m)m n 5.3 Future value with continuous compounding FV∞ = PV ei n 5.4 Present value of an n-period investment PV FVn (1 i)n 5.5 Rule of 72 TDM = 72 i 6.1 Present value of an ordinary annuity PVAn = 1 ] 6.2 Future value of an ordinary annuity FVAn = ??? 1 ? ? 1 6.3 Present value of a perpetuity CFPVP i 6.4 Value of an annuity due Annuity due value = Ordinary annuity value (1 + i) 6.5 Present value of a growing annuity 1 CF 1+PVA = 1- ( - ) 1+ n n g i g i 6.6 Present value of a growing perpetuity 1 CFPVP i g 6.7 Effective annual interest rate EAR = (1 + Quoted interest rate/m)m – 1 Microsoft Word - Fin303_Formula_Exam 2.docx Fin303 Formula Sheet 1 Fin303 Formula Sheet Equation Description Formula 5.1 Future value of an n-period investment with annual compounding FVn = PV (1 + i)n 5.2 Future value with more frequent than annual compounding FVn = PV (1 + i/m)m n 5.3 Future value with continuous compounding FV∞ = PV ei n 5.4 Present value of an n-period investment PV FVn (1 i)n 6.1 Present value of an ordinary annuity PVAn = 1 ] 6.2 Future value of an ordinary annuity FVAn = 1 ? 1 6.3 Present value of a perpetuity CFPVP i 6.4 Value of an annuity due Annuity due value = Ordinary annuity value (1 + i) 6.5 Present value of a growing annuity 1 CF 1+PVA = 1- ( - ) 1+ n n g i g i 6.6 Present value of a growing perpetuity 1 CFPVP i g 6.7 Effective annual interest rate EAR = (1 + Quoted interest rate/m)m – 1 7.1 Total holding period return 1 0 1T CA I 0 0 P -P CFR = R + R = + P P 7.2 Expected return on an asset Asset i i 1 E R R n i p 7.8 Expected return for a portfolio Portfolio i i 1 E R E(R ) n i x 7.9 Variance for a two-asset portfolio 2 1 2 12 2 2 2 2 2 R 1 R 2 R 1 2 R2Asset Portfolio x x x x 7.11 Correlation between two assets ? , ? , ? ? 7.12 Expected return and systematic risk E(Ri) = Rrf + βi(E(Rm) – Rrf) 7.13 Portfolio beta 1 n n Asset Portfolio i i i x Fin303 Formula Sheet 2 Equation Description Formula 8.1 Price of a bond 1 2B 2 C + FC CP = + + + 1+ (1+ ) (1+ ) n n ni i i 8.2 Price of a bond semiannual compounding B 2 3 C +FC C CP = + + + + 1+ (1+ ) (1+ ) (1+ ) mn mn mm m m i m i m i m i m 8.3 Price of zero coupon bond B FP = (1+ ) mn mni m 9.2 Zero-growth dividend model P0 = D/R 9.3 Value of a dividend at time t in a constant-growth scenario. Dt = D0 x (1 + g) t 9.4 Constant-growth dividend model )R( DP 10 g 9.5 Value of a stock at time t when dividends grow at a constant rate. )( 1 gR DP tt 9.6 Supernormal growth stock-valuation model t t t t 2 21 0 )R1( P )R1( D )R1( D )R1( DP 10.1 Net present value 10.2 Payback period Remaining cost to recoverYears before cost recovery Cash flow during the year PB 10.4 Internal rate of return NPV t t 0 NCF= =0 (1+IRR) n t 10.5 Modified internal rate of return PVCost = TV/ (1 + MIRR)n 13.3 After-tax cost of debt kDebt after-tax = kDebt pretax × (1 − t) 13.4 CAPM formula for the cost of common stock kcs = Rrf + (βcs × Market risk premium) 13.5 Constant-growth dividend formula for the cost of common stock kcs = (D1 / P0 )+ g 13.6 Perpetuity formula for the cost of preferred stock kps = Dps / Pps 13.7 Traditional WACC formula WACC = xDebtkDebt pretax(1 − t) + xpskps + xcskcs n 0t t t n n 2 2 1 1 0 )k1( NCF )k1( NCF )k1( NCF )k1( NCFNCFNPV Microsoft Word - Sp2021_FIN303_13522 Syllabus.docx Page 1 of 5 Spring 2021 Financial Management FIN303 #13522 Dr. Hsin‐Hui “Sheen” Chiu Office Hours: Friday 10‐11am or by appointment Zoom Meeting ID: 126 539 270 (Password: 13522) Email:
[email protected] Note: Please indicate your full name and FIN303 13522 in your email. A quick note on accessing learning materials… All learning materials and resources are provided to you on Canvas. There is no need to access another site for assignments etc. Even though we will be using WileyPLUS platform for reading and assignments, please register for an account via Canvas the first time so Canvas can capture your grades properly. Do NOT use any external site for registration. A bit about the course… You’ve probably seen many financial decisions made by your family, friends, and even yourselves on car/student loans, security investments, credit card applications, etc. Some important questions may arise along the process: Can I analyze a company’s financial statements in order make a sound investment? Can I apply time value of money concepts to assist my family with their retirement planning or home mortgage? This course introduces the foundational knowledge in finance so that you can build skills and critically think about financial decisions you make on a daily basis. My personal belief is that everyone can use a little bit of finance regardless where you come from in backgrounds. Together, we will explore various topics such as financial statements, time value of money, valuation of stocks and bonds, risk and return and capital budgeting. *Prerequisites: ACCT 220, ECON 160, SOM 120 (may be taken concurrently), and BUS 302 and 302/L are co/prerequisite for BABA majors. What you’ll learn along the way… Sound financial decisions require understanding the concepts of valuation and the ability to integrate and draw inferences from various financial topics. This course is designed to help you develop these skills. Specifically, you will learn to: 1. Describe the structure of financial system in domestic and international financial markets. 2. Assess and analyze financial statements to assert firm performance. 3. Explain the concept of time value of money and apply it to make financial decisions. 4. Define the concepts of risk‐return tradeoff, diversification effect, systematic risk, and formulate Capital Asset Pricing Model (CAPM). 5. Compare and contrast different types of securities and calculate their values based on discounted cash flow models. 6. Evaluate projects based on estimated cash flows pertaining capital budgeting decisions. 7. Associate finance topics to reflect in personal experience Page 2 of 5 A few things to get you started… 1. Canvas The class canvas site will have the syllabus, chapter PowerPoints and online assignments. The modules on Canvas are based on all chapters covered. Everything you need is through Canvas access. DO NOT go to any external website to access assignments etc. Follow the chapter modules to make sure you are on top of readings and assignments. You will also register for the WileyPlus online learning environment via Canvas site. 2. Textbook+ WileyPLUS access code This course will be using Parrino, Fundamentals of Corporate Finance WileyPLUS course. The digital access for the course is being delivered through myCSUNDigitalAccess, the CSUN Campus Store’s Immediate Access program. The cost of the digital materials includes access to the online e‐textbook, assigned homework, media, and practice content. This cost will automatically be charged to your student account at this deeply discounted price. You are responsible for paying for charges applied to your student account. When you log‐in to your course through the CSUN Student Portal and click on any WileyPLUS content link and you will automatically be taken to your ebook and assignments. If you wish to opt out of this program and not purchase access to the required digital materials you will need to follow the steps below by February 12, 2021: 1. Go to https://accessportal.follett.com/0150 . 2. Click on Create an Account on the lower right. 3. Create an account using your CSUN email account. 4. Select the course(s) you wish to Opt‐Out from. 5. You will then need to purchase materials elsewhere on your own. If you have any questions about myCSUNDigitalAccess, this charge to your student account, or if you have any trouble please contact the Campus Store by phone at 818‐677‐2913 or via email at
[email protected]. 3. Financial Calculator For taking assignments and exams you will need a financial calculator. Your calculator must be capable of solving for PV, FV, PMT, i or i/yr, N, NPV, IRR, square root, ex, and yx . Common financial calculators include the TI BAII Plus and the HP 10bII+. I recommend TI BAII PLUS because of the free online training. Go to www.education.ti.com and click on resources to view tutorials. You will find a lot of tutorials specifically for this financial calculator. Your expertise in using your calculator is an imperative for passing this class. You can also see our tutors to get help with your calculator. How you’ll know you’re learning… Throughout the course, you will have many opportunities to explore the core concepts in finance, build Page 3 of 5 foundation skills in problem solving, and reflect your learning in finance. The following activities will help guide you through the learning process and help you measure your progress. (A) Graded Assignments I have created 11 assignments in total (you should see what topics each assignment touches upon when you open the assignment) to help you clarify concepts and build skills in problem solving in each of the core topics. There is no time limit on these assignments so you are able to log in and out at your own pace to complete these 20‐30 questions. You have three attempts per question with 100% of the credit if correct on the first and second try; 50% credit on the third try if correct. Among the three attempts, you will get to keep the highest score. These multiple attempts allow you to learn each concept through repetition and practice. All assignments are due May 14 (Friday), 11:59pm. NO make‐up or extension for online assignments. Be mindful of the due dates and time! (B) Canvas Exams There are three online exams in this course (March 12, May 7 & May 14). I will choose the highest two scores as your total exam score. If you have to miss one of the exam for any reason, you have to take the other two exams. No make‐up or extensions can be arranged. Exams will be open for 24 hours and close with no access. So make sure to plan your date accordingly. These exams are designed to assess the content knowledge and skills you develop during the semester. I encourage you to email me before or after the exam if you have concerns about your progress or learning. How your grade is determined… Your final grade consists of scores on online assignments worth a total of 310 points, online exams for a total of 690 points. Component of Grade Maximum Points 11 Assignments 310 Exams 1, 2 & 3 (choose highest two exam grades) 690 Total 1,000 Final letter grades will be determined according to the scale below. Point Range Grade 1,000 – 930 A 929 – 900 A‐ 899 – 870 B+ 869 – 830 B 829 – 800 B‐ 799 – 770 C+ 769 – 730 C Page 4 of 5 729– 700 C‐ 699 – 600 D< 599 f important note to finance majors a "c" or better in fin 303 is required for most finance courses. students not meeting this requirement will be administratively dropped (i.e. dropped by the associate dean). what are some tips for success (actual learning) in this course? i post chapter related in‐class exercise on canvas to provide additional opportunities for problem solving. you will also find great resources in “wiley course recourses” to facilitate your learning. there are a variety of learning aids to assist you including narrated powerpoint slides, solution walkthrough videos and self‐study problems. i recommend to start with each topic by listening to narrated powerpoint videos, read the chapters and work on self‐study problems. in addition to reading the chapter and working problems, try the adaptive practice. they adapt to your level of proficiency and help you prepare for the assignments. make sure to take advantage of the help offered by the finance department ( i will be posting their zoom meeting schedule once i have it). knowing how to solve one problem may not seem like a big deal. however, being able to clarify some key concepts may help a great deal along the way! i will post the zoom tutoring information on canvas when it becomes available. please "be prepared". "being prepared" means: (a) you have read the textbook and tried to solve the questions yourself at least once already, (b) you bring your textbook, your notes, the assignments and your calculator with you, and (c) you are courteous and respectful to others. if you prefer to email me with your questions, make sure to provide details of your work so that i can identify the missing steps and assist you better. a few course policies… as a business major student, it is important to develop professionalism throughout the course; therefore, no late assignments will be accepted. keep your assignments due date and exam dates in mind. also, you should plan to take exams at the scheduled times. anyone who is absent from any exam without prior permission will receive a score of zero on the exam. no make‐up exam will be provided. i understand that everyone is juggling among several courses and life/work responsibilities so i will also remind you on important dates on a regular basis. if disability might hinder your performance in this class, please consult with me as soon as possible so that i can help you work with the university’s resources. if you are registered with the disability resources and educational services (dres) office and have special needs requiring accommodation, remind me of your accommodation via email three days prior to each exam, so i can send your exam hardcopy there in advance. it is unlikely that incompletes will be given; please review the following university policy carefully: http://www.csun.edu/sites/default/files/request‐for‐grade‐of‐incomplete.pdf. running out of time to page 5 of 5 complete the course is not a sufficient reason to be granted an incomplete. this class strictly applies the campus academic honesty policies. the csun policy on academic dishonesty will be enforced. anybody found violating the academic dishonesty policy with respect to any aspect of this class will fail not just the assignment/exam but also the entire course and will be reported to university authorities. any plagiarism or turning in the assignment/exam that is not your own is not permitted any time. what you’ll be reading… the followings are recommended study schedule. i want to provide some guides and structures on learning finance moving forward. the beauty of an online course is flexibility and you can study at your own pace. however, this could also be the drawbacks since procrastination is (sometimes) part of human nature. in general, you should plan to study one chapter per week (except for ch1 & 2). you may adjust your own pace as deem fit. week assigned chapter and exam dates 1 ch1 & ch2 2 ch3 financial statements, cash flows and taxes 3 ch4 analyzing financial statements 4 ch5 the time value of money 5 ch6 discounted cash flows and valuation 6 self‐review week 7 exam 1: ch. 1‐6 (open and due march 12, friday) 8 spring break 9 ch7 risk and return 10 ch8 bond valuation and the structure of interest rates 11 ch9 stock valuation 12 ch10 the fundamentals of capital budgeting 13 ch13 cost of capital 14 self‐review week 15 exam 2: ch. 5‐10 and 13 (open and due may 7, friday) 16 exam 3: ch. 1‐10 and 13 (open and due may 14, friday); all assignments due 5/14 f ="" ="" important note to finance majors ="" a "c" or better in fin 303 is required for most finance courses. students not meeting this requirement ="" will be administratively dropped (i.e. dropped by the associate dean). ="" ="" what are some tips for success (actual learning) in this course? ="" ="" i post chapter related in‐class exercise on canvas to provide additional opportunities for problem ="" solving. you will also find great resources in “wiley course recourses” to facilitate your learning. there ="" are a variety of learning aids to assist you including narrated powerpoint slides, solution walkthrough ="" videos and self‐study problems. i recommend to start with each topic by listening to narrated ="" powerpoint videos, read the chapters and work on self‐study problems. in addition to reading the ="" chapter and working problems, try the adaptive practice. they adapt to your level of proficiency and ="" help you prepare for the assignments. ="" ="" make sure to take advantage of the help offered by the finance department ( i will be posting their ="" zoom meeting schedule once i have it). knowing how to solve one problem may not seem like a big deal. ="" however, being able to clarify some key concepts may help a great deal along the way! i will post the ="" zoom tutoring information on canvas when it becomes available. please "be prepared". "being ="" prepared" means: (a) you have read the textbook and tried to solve the questions yourself at least once ="" already, (b) you bring your textbook, your notes, the assignments and your calculator with you, and (c) ="" you are courteous and respectful to others. if you prefer to email me with your questions, make sure to ="" provide details of your work so that i can identify the missing steps and assist you better. ="" ="" a few course policies… ="" as a business major student, it is important to develop professionalism throughout the course; ="" therefore, no late assignments will be accepted. keep your assignments due date and exam dates in ="" mind. also, you should plan to take exams at the scheduled times. anyone who is absent from any exam ="" without prior permission will receive a score of zero on the exam. no make‐up exam will be provided. i ="" understand that everyone is juggling among several courses and life/work responsibilities so i will also ="" remind you on important dates on a regular basis. ="" ="" if disability might hinder your performance in this class, please consult with me as soon as possible so ="" that i can help you work with the university’s resources. if you are registered with the disability ="" resources and educational services (dres) office and have special needs requiring accommodation, ="" remind me of your accommodation via email three days prior to each exam, so i can send your exam ="" hardcopy there in advance. ="" ="" it is unlikely that incompletes will be given; please review the following university policy carefully: ="" http://www.csun.edu/sites/default/files/request‐for‐grade‐of‐incomplete.pdf. running out of time to ="" page="" 5="" of="" 5="" complete the course is not a sufficient reason to be granted an incomplete. ="" ="" this class strictly applies the campus academic honesty policies. ="" the csun policy on academic dishonesty will be enforced. anybody found violating the academic ="" dishonesty policy with respect to any aspect of this class will fail not just the assignment/exam but also ="" the entire course and will be reported to university authorities. any plagiarism or turning in the ="" assignment/exam that is not your own is not permitted any time. ="" ="" what you’ll be reading… ="" the followings are recommended study schedule. i want to provide some guides and structures on ="" learning finance moving forward. the beauty of an online course is flexibility and you can study at your ="" own pace. however, this could also be the drawbacks since procrastination is (sometimes) part of ="" human nature. in general, you should plan to study one chapter per week (except for ch1 & 2). you may ="" adjust your own pace as deem fit. ="" week ="" assigned chapter and exam dates ="" 1 ="" ch1 & ch2 ="" 2 ="" ch3 financial statements, cash flows and taxes ="" 3 ="" ch4 analyzing financial statements ="" 4 ="" ch5 the time value of money ="" 5 ="" ch6 discounted cash flows and valuation ="" 6 ="" self‐review week ="" 7 ="" exam 1: ch. 1‐6 (open and due march 12, friday) ="" 8 ="" spring break ="" 9 ="" ch7 risk and return ="" 10 ="" ch8 bond valuation and the structure of interest rates ="" 11 ="" ch9 stock valuation ="" 12 ="" ch10 the fundamentals of capital budgeting ="" 13 ="" ch13 cost of capital ="" 14 ="" self‐review week ="" 15 ="" exam 2: ch. 5‐10 and 13 (open and due may 7, friday) ="" 16 ="">