As the first assignment and mid-term test is coming fast upon us after the two holidays on Monday, I am arranging to have make up classes on the following days pending confirmation of classroom booking:

Monday February 29 from 7pm to 10pm,

Monday March 7 from 7pm to 10pm,

Saturday March 12 from 12pm noon to 6pm.

I will update here and via email once confirmation for classroom booking is received.

Classroom booking for the below dates was approved for our make up class:

Monday February 29 from 7pm to 10pm,

Monday March 7 from 7pm to 10pm,

Saturday March 12 from 12pm noon to 6pm.

Just confirmed more details for the mid-term test: (a) it will be held on Thursday April 7 at night, (b) there will be formula sheet provided and it will be available to you before the mid-term.

Just confirmed more details for the mid-term test: (a) it will be held on Thursday April 7 at night, (b) there will be formula sheet provided and it will be available to you before the mid-term, AND (c) EQUITY VALUATION CHAPTER WILL BE INCLUDED IN THE MID-TERM TEST. That means we will need another make up class to finish the equity valuation chapter.

We are having the make up class on Thursday March 31 6pm to 8pm (being booked now) and Monday April 4 6pm to 8pm (being booked now). I will go through the same material so you would only need to attend one of these two sessions. The first hour will be used to finish the equity valuation chapter, the second hour will be used to go through the practice questions.

There is also a mid-term review session from 7am to 9am on Wednesday April 6 to go through practice questions on bonds and equity valuation for the mid-term test to be held on Thursday April 7 at night. If there are questions that you would like me to go through, please let me know; in the mean time, I will post the answer to the recommended practice questions for each chapter.

This is the announcement for the mid-term test:

• forms of business organization,
• shareholder value,
• intrinsic value and market price,
• conflicts between managers, shareholders, and bondholders,
• capital allocation process, and
• market efficiency.

• use of ratio analyais,
• liquidity ratios,
• asset management ratios,
• debt management ratios,
• profitability ratios,
• market based ratios,
• Dupont system,
• present and future value calculations, and
• ordinary annuity and annuity due calculations.

• review of ratios,
• practice questions on ratios,
• time value of money,
• FV calculation,
• PV calcuation,
• calculate interest rate and time required,
• annuity and annuity due,
• perpetual cash flow,
• annual percentage rate (APR),
• effective interest rate (EAR), and
• preparation of amortization schedule.

• amortization practice question,
• conversion between APR and EAR,
• bond basics,
• bond valuation,
• YTM versus coupon rate,
• premium and discount bonds,
• convergence of premium and discount bonds to par at maturity,
• current yield + capital gains yield = YTM,
• yield-to-call versus yield-to-maturity,
• price risk and reinvestment risk,
• credit risk and bond ratings,
• real interest rate, inflation premium, maturity premium,
• credit risk and premium and liquidity risk premium, and
• term structure of interest rates.

• bond math practice questions,
• equity characteristics, and
• dividends discount model with no growth, constant growth, and super normal growth for equity valuation.

• dividends discount model with different growth assumptions practice questions,
• calculation of dividend yield and capital gain yield under normal and supernormal growth scenario,
• FCF with after tax EBIT to determine firm value,
• answering questions about Assignment One, and
• review of time value of money for mid-term test.

• firm valuation using FCF,
• firm valuation using economic value added (EVA),
• firm valuation using multiple approach,
• chapter 10 practice questions,
• Assignment One review with answers, and
• mid-term review.

• risk and return,
• calcution of expected return of a stock,
• calculation of expected risk / standard deviation of a stock,
• calculation of the coefficient of variation of a stock,
• calculation of expected return of a portfolio,
• calculation of expected risk of a portfolio,
• correlation of returns between stocks in a portfolio,
• market / non-diversifiable risk vs diversifiable risk,
• beta coefficient to measure risk of stock vs market risk,
• beta coefficient of a portfolio,
• securities market line, and
• finding under- or over-valued stocks.

• risk and return review,
• change in SML due to change in risk free rate,
• change in SML due to change in risk aversion,
• weighted average cost of capital,
• calculation of weights using market value of bonds, preferred shares, and common equity,
• calculation of after tax cost of debt with yield to maturity,
• calculation of cost of preferred shares using preferred share dividends and price of preferred shares, and
• calculation of cost of equity using CAPM, DCF, or bond plus premium approach.

• use of marginal cost of capital,
• the treatment of floating / issuance cost for debt and equity,
• normal vs non-normal cash flow patterns,
• independent vs mutually exclusive projects,
• calculation of NPV,
• calculation of IRR,
• shortcomings of IRR,
• calculation of MIRR,
• benefits of MIRR over IRR,
• calculation of payback period, and
• calculation of discounted payback period.

• the calculation of cash flow as input to NPV, IRR, MIRR, payback, and discounted payback,
• identification of incremental cost, sunk cost, opportunity cost,
• calculation of depreciation using MACRS,
• calculation of earnings before interest and adjustment for depreciation to derive cash flow,
• adjustment for risk due to different project risk,
• definition of project risk, corporate risk, and market risk, and
• use of sensitivity and scenario analysis to evaluate project risk.

• introduction to working capital and its management,
• restrictive and relaxed asset investment policies,
• permanent and temporary current asset levels,
• financing of working capital requirements using permanent and / or short term sources of financing,
• conservative and moderate financing policies,
• cash operating cycle and its calculation,
• cash management using cash budgets,
• inventory management,
• carrying cost, ordering cost, and cost of running short,
• accounts receivable management,
• credit period, cash discount, credit standard, and collection policy, and
• and calculation of effective interest on early payment / trade credit discounts.

Dr. Thomas Wu

Brigham, Eugene and Phillips R. Daves (2013), Intermediate Financial Management, 11th ed. Cengage Learning.

The course consists of class lectures and tutorials. Students should attend all lectures and tutorials. Attendence will be taken and there is a required minimum attendence level. Students should have read and be familiar with assigned readings and related materials before class. Students should also work through practice questions and be familiar with the use of a financial calculator.

For this course, a general purpose non-financial calcuator can be used. Students who do not have ready access to a financial calculator should be able to perform all the required analysis and calculations using a general purpose non-financial calculator for the tutorials, assignments, mid-term test, and final examination.

You can also use a non-programmable financial calculator for the tutorials, assignment, mid-term test, and final examination. Common financial calculators are HP12c and TI BAII PLUS. User manual in simplified chinese and a tutorial for the HP12c can be found here and a simple tutorial for the HP12c can be found here. User manual for the TI BAII can be found here.

Regardless of the types of calculators used for this course, students are responsible for their own equipment and they cannot be shared in a quiz, test, or examination situation. As a result, students MUST bring their own calculators to each class. In addition, each student must be proficient in the use of their own equipment.

Electronic translators CANNOT be used for quiz, test, or examination situations, but they can be used during class (only with volume off) and your own study time.

There are specific terms that apply to accounting and finance, and there are various online sources that can help students understand these terms.

Download and print for reference:

• Hong Kong Exchange glossary of terms (English to Chinese)
• 88translation.com finance dictionary (Chinese to English, English to Chinese)

Online finance dictionaries:

• Reuters Chinese to English and English to Chinese finance dictionary
• Goldman Sachs English to Chinese finance dictionary
• Goldman Sachs Chinese to English finance dictionary
• Morgan Stanley English to Chinese finance dictionary

Other unverified sources of financial references:

• Finance Street - a finance related site prepared by the government
• Financial glossary of terms
• List of dictionaries