Corporate Finance
How firms create value with investment, financing and payout decisions: the goal of the firm, agency problems and raising capital under provincial securities law, free cash flow and financial analysis, the valuation principle and semi-annually compounded mortgage rates, annuities, growing perpetuities, loans and leases, bond pricing, duration and credit spreads, share valuation and discounted cash flow, NPV, IRR and other decision rules, project cash flows with capital cost allowance and immediate expensing, sensitivity, simulation and real options, risk, diversification and the CAPM, the weighted average cost of capital, and capital structure and payout policy with the dividend tax credit, ending in a capstone project valuation.
FIN-201 Year 2 3 credits 12 lessons · 6 h 17 min
Offered by HSM University · Business Foundations
This is the Canadian version of this course. See the American version.
What you'll learn
- Explain the investment, financing and payout decisions of corporate finance, justify value maximization as the working goal, analyse agency problems, and describe how firms raise capital under Canadian provincial securities regulation.
- Calculate free cash flow, apply the cash flow identity, use marginal tax rates, interpret financial ratios with DuPont analysis, and measure the cash conversion cycle.
- Apply the law of one price, convert between quoted and effective rates including semi-annually compounded Canadian mortgage rates, and discount real and nominal cash flows consistently.
- Value uneven streams, annuities, perpetuities, growing annuities and growing perpetuities, find loan payments and balances, measure the effective cost of loans with fees, and compare leasing with buying.
- Price bonds, find yields to maturity, calculate clean and dirty prices, estimate price changes with duration, and explain credit ratings, spreads, spot rates and the yield curve.
- Value shares with constant-growth and multi-stage dividend models, link growth to retention and return on equity, value firms by discounted free cash flow, and interpret valuation multiples.
- Apply NPV, IRR, incremental IRR, MIRR, payback and the profitability index, explain when each rule fails, and use equivalent annual cost and capital rationing correctly.
- Identify incremental cash flows, build project free cash flows with working capital and salvage, and value capital cost allowance tax shields, including accelerated and immediate expensing.
- Analyse project risk with sensitivity, scenario and break-even analysis, operating leverage, Monte Carlo simulation, decision trees and real options.
- Measure returns and risk, explain diversification and the distinction between systematic and unsystematic risk, estimate beta, and apply the capital asset pricing model.
- Estimate the costs of debt, preferred shares and equity, calculate the weighted average cost of capital with market-value weights, treat flotation costs correctly, and derive project discount rates from pure-play betas.
- Explain the Modigliani-Miller propositions, the value of interest tax shields, the trade-off and pecking order theories and payout policy, and integrate the course in a complete project valuation and recommendation.
Course content
12 lessons · 6 h 17 min total · final exam
- 1 The goal and environment of corporate finance 33 min · quiz
- 2 Financial statements, cash flow and financial analysis 29 min · quiz
- 3 Time value of money I: the valuation principle and interest rates 29 min · quiz
- 4 Time value of money II: valuing streams of cash flows 34 min · quiz
- 5 Bond valuation and interest rates 32 min · quiz
- 6 Stock valuation 32 min · quiz
- 7 Capital budgeting decision rules 34 min · quiz
- 8 Estimating project cash flows and taxes 29 min · quiz
- 9 Risk analysis in capital budgeting 34 min · quiz
- 10 Risk and return 29 min · quiz
- 11 The cost of capital 31 min · quiz
- 12 Capital structure, payout policy and capstone: valuing a project 31 min · quiz
- E Final exam 20 questions
Requirements
Recommended background. You can start any course at any time.
Description
How firms create value with investment, financing and payout decisions: the goal of the firm, agency problems and raising capital under provincial securities law, free cash flow and financial analysis, the valuation principle and semi-annually compounded mortgage rates, annuities, growing perpetuities, loans and leases, bond pricing, duration and credit spreads, share valuation and discounted cash flow, NPV, IRR and other decision rules, project cash flows with capital cost allowance and immediate expensing, sensitivity, simulation and real options, risk, diversification and the CAPM, the weighted average cost of capital, and capital structure and payout policy with the dividend tax credit, ending in a capstone project valuation.
Part of the Business stream, typically taken in year 2.