Part-1

Write a detailed essay on the contents of course. Indicate as to how would various market participants (corporations, financial institutions, and individuals) gain by the knowledge of finance?

Part-2

Indicate as to whether the following statements are correct (yes) or incorrect (no):

1.      If K₀ = 100m, Y = .10 (yearly compounding), then V₁ = 100m(1+.1)

2.      If K₀ = 100m, Y = .10 (bi-annual compounding), then V₁ = 100m(1+.1/2)²

3.      If K₀ = 100m, Y = .10 (quarterly compounding), then V₁ = 100m(1+.1/4)⁴

4.      If K₀ = 100m, Y = .10 (monthly compounding), then V₁ = 100m(1+.1/12)¹²

5.      If K₀ = 100m, Y = .10 (monthly compounding), then V₁ = 100m(1+.1/365)1³⁶⁵

6.      If K₀ = 100m, Y = .10 (continuous compounding), then V₁ = 100m*e^y

7.      If V_T = 192m, Y = .10, T=22, then V₀ = 192m/1.1²²

8.      If V₀ = 192m, Y = .10, T=22, then V_T = 192m*1.1²²

9.      If V₀ = 198, K₀ = 158, then NPV =40

10.  If NPV > 0, then reject the project

11.  If NPV<0, then accept the project

12.  If NPV = 0, then accept the project since all expectations have been realized

13. accept-project even if NPV<0: if the value of the additional positive-factors (real options, embedded options, positive-externalities, positive-extralities, law-suit awards, subsidy, public goodwill due to environment-improving production techniques) exceeds the NPV<0.

14. reject-project even if NPV>0: if the value of the additional negative-factors (real-obligations, negative-externalities, negative-extralities, taxation, pollution-penalties, public bad-will due to environment-damaging production techniques) exceeds the positive-NPV.

15.  IRR is the discount rate at which NPV=0

16.  RoR = -1 + (V_T/K₀)^(1/T)

17. PV = sum of the discounted cash flows

18. FV = sum of the reinvestment values of cash flows

19. Due to synergy (economies of scale incubated through merger) the merged Firm-AB would have greater levels of growth rates, lower levels of shrinkage rates, greater levels of probability of growth, lower levels of probability of shrinkage, and lower levels of cost of capital rate (bondholders and stockholders perceive the new merged-firm to be less risky; and, hence are willing to accept lower returns on their investments (bonds and stocks).

20.  Efficient working capital management is a key to success - a company must have sufficient cash flow in order to meet its short-term debt obligations and operating expenses. Swaps are a vehicle for reducing the levels of liabilities, enhancing the levels of assets, and hedging the risks

21.  WACC = r = w_d*r_d(1-t) + w_p*r_{p +} w_d*r_c

22.  CAPM:    Ri -Rf = a + b(Rm-Rf)

23.  APT:   Ri -Rf = a + b₁X₁+ b₂X₂+ b₃X₃+...+ b_nX_n

24.  APT is more general than CAPM since the former considers the effect of many factors. According to CAPM, investors' utility depends on future wealth and all security returns are jointly normal

25.  Major areas of risk exposure that all organizations, both public and private, face in operating in today's complex global marketplace:   Credit risk, Concentration risk, Market risk, Interest rate risk, Currency risk, Equity risk, Commodity risk, Liquidity risk, Refinancing risk, Operational risk, Country risk, Legal risk, Model risk, Political risk, Valuation risk, Reputational risk, Volatility risk, Settlement risk, Profit risk, Systemic risk.  Technology tools to management risk, and the role of data governance and environmental policy play in risk management.

26.  working capital:   Current assets and current liabilities

27.  net working capital = current assets - current liabilities

28.  Current assets = cash and marketable securities, accounts receivable and inventory

29.  Current liabilities include accounts payable (credit obtained from suppliers) other short-term obligations, short-term loans

30.  Financial ratios can be manipulated (window dressing and puffing)? They are being routinely manipulated (Enron, Tyco, WorlCom, Adelphia Communications, Global Crossing, ImClone, Arthur Anderson, etc.)? Ffinancial accounting standards are being regularly compromised (via "financial engineering," "aggressive accounting," and "creating stories.

31.  Real options is:  option to expand, option to extend, option to switch, option to cancel, option to exit, abandon or shut down, option to defer, option to contract, option to block the entry of competitors,option to control the output and prices of competitors, option of action, reaction, and counter-reaction to competitors strategy, growth options, swap options, political influence options (tax, subsidy, monetary policy, trade policy), monopoly power, divestiture options, location options, timing options, sequential planning

32.  Caps, Floors, and Collars can be utilized to hedge the input price risk and output price for corporations.