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Module Description

Corporate Financial Management I





Corporate financial management involves making decisions related to maximizing the productivity of a firm's assets and minimizing the cost of paying for those assets. This module introduces students to the applications of the concept of present value. Most of the module explains the valuation of bonds, equity, and projects requiring the purchase of long-term assets (called capital budgeting).


The following is a list of the specific topics this module covers.

  1. Free Cashflow:
    • Asset perspective, cashflow from operations, investment in assets, financing perspective.

  2. Ratio Analysis:
    • Evaluating a firm's asset management, profit performance, and market value, through the computation and interpretation of financial ratios. Limitations of ratios.

  3. Bond Valuation:
    • Ordinary bonds, zero-coupon bonds, perpetual bonds, premia and discounts.

  4. Stock Valuation:
    • Common stock, preferred stock, growth rate, finite holding period, infinite holding period.

  5. Cost of Capital:
    • Cost of debt, cost of preferred stock, cost of equity, role of income tax, capital structure, weighted average cost of capital, marginal cost of capital.

  6. Capital Budgeting - Payback Period:
    • Initial cash outlay, ordinary cashflow, discounted cashflow, project life, decision rule, strengths and weaknesses.

  7. Capital Budgeting - Net Present Value:
    • Initial cash outlay, discounted cashflow, discount rate, project life, decision rule, strengths and weaknesses.

  8. Capital Budgeting - Internal Rate of Return:
    • Initial cash outlay, discounted cashflow, project life, decision rule, strengths and weaknesses.

  9. Optimal Capital Budget:
    • Project ranking, mutually exclusive projects, capital rationing, investment opportunities schedule, capital cost schedule.

  10. Capital Budget Financing:
    • External funds, internal funds, capital structure, flotation fees.

  11. Comprehensive Examples:
    • Applications of these financial management principles to various scenarios.

  12. Questions: 1,025 practice questions with explained solutions.



Pre-requisites for this Module


Knowledge of financial statements and the principles of future value and present value are needed for this module. That is the knowledge one will have after completing the Introduction to Financial Accounting II and the Principles of Finance modules.


This module is a pre-requisite for the Corporate Financial Management II and Investment Analysis modules.




Sample Module.



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