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Welcome to Corporate Finance CFA Level 1 (Part 1) Course.
As the name indicates, this course covers part of syllabus of Corporate Finance Paper of Level 1 of CFA Exams.
Section 1 will cover Reading 36 - Capital Budgeting
Section 2 will cover Reading 37 - Cost of Capital
Section 3 will cover Reading 38 - Measures of Leverage.
Teaching and Learning Style:
This course is structured in self paced learning style. It is suggested to take screenshots of case studies for reference back during problem solving. Approaching the course with note book and pen or MS Excel and solving problems paralelly along with instructor will make you feel like attending real class and improve your listening and learning experience.
Teaching and Learning outcomes:
By taking this course, you will be able to
describe the capital budgeting process and distinguish among the various categories of capital projects;
describe the basic principles of capital budgeting;
explain how the evaluation and selection of capital projects is affected by mutually exclusive projects, project sequencing, and capital rationing;
calculate and interpret net present value (NPV), internal rate of return (IRR), payback period, discounted payback period, and profitability index (PI) of a single capital project;
explain the NPV profile, compare the NPV and IRR methods when evaluating independent and mutually exclusive projects, and describe the problems associated with each of the evaluation methods;
describe expected relations among an investment’s NPV, company value, and
calculate and interpret the weighted average cost of capital (WACC) of a company;
describe how taxes affect the cost of capital from different capital sources;
describe the use of target capital structure in estimating WACC and how target capital structure weights may be determined
explain how the marginal cost of capital and the investment opportunity schedule are used to determine the optimal capital budget;
explain the marginal cost of capital’s role in determining the net present value of a project;
calculate and interpret the cost of debt capital using the yield-to-maturity approach and the debt-rating approach;
calculate and interpret the cost of noncallable, nonconvertible preferred stock;
calculate and interpret the cost of equity capital using the capital asset pricing model approach, the dividend discount model approach, and the bond-yieldplus risk-premium approach;
calculate and interpret the beta and cost of capital for a project;
describe uses of country risk premiums in estimating the cost of equity;
describe the marginal cost of capital schedule, explain why it may be upwardsloping with respect to additional capital, and calculate and interpret its break-points;
explain and demonstrate the correct treatment of flotation costs.
define and explain leverage, business risk, sales risk, operating risk, and financial
risk and classify a risk;
calculate and interpret the degree of operating leverage, the degree of financial leverage, and the degree of total leverage;
analyze the effect of financial leverage on a company’s net income and return on equity;
calculate the breakeven quantity of sales and determine the company’s net income at various sales levels;
calculate and interpret the operating breakeven quantity of sales.
Indian scenario has been considered for explaining concepts through case studies.
Video Lectures status:
Of the above content, around 70% lectures have been added as on 01st September 2016 and balance will be added in due course.
Wishing you all the very best to excel in Finance World.