Classroom Visit

So what do you learn in the MSF Program? Join us for a classroom visit and see for yourself. Classes are offered Monday – Thursday 4:30pm - 7:10pm or 7:15pm - 9:55pm. Stay for part or all of the evening. Contact the Graduate Programs in Finance Office to make arrangements.

Not able to join us? We can’t cover everything, but here are a few sample questions from the General Theory in Corporate Finance mid-term exam that should give you a taste of what we have to offer:

Sample Coursework

General Theory in Corporate Finance

1)  AJ Incorporated is considering the acquisition of a new machine. The initial cost of purchasing the new machine is $80,000. It will increase earnings before depreciation and taxes by $22,000 annually. The initial investment in the machine will be depreciated using a 5-year MACRS schedule. At the end of the 5-year operating life of the project, the machine can be sold for $12,000. AJ Incorporated has a marginal tax rate of 35% and uses an 8% discount rate to evaluate projects of similar risks. Should AJ Incorporated purchase the new machine?

Answer (PDF)

2) The CFO of AJ Incorporated is analyzing the viability of an expansion project. While the incremental cash-flows appear attractive, the project is riskier than the firm’s current operations. Due to the nature of the project, he decides that the appropriate discount rate must be 3.5% higher than the firm’s cost of capital.

The firm currently has 800,000 shares of common stock outstanding. The current market price is $175.48. The firm just paid an annual dividend of $4.75 to the common stockholders. In the past, the firm has consistently increased its dividend at a rate of 5% annually and the investors expect that to continue. The firm also has 500,000 shares of 7% preferred stock outstanding with a market value of $127.68 and a par value of $100. Finally, the firm issued a bond with a face value of $135.85 million. The bond is currently priced at 98.4% of face value and it matures in 15 years. The coupon rate is 5% and is paid semi-annually. If the tax rate is 35%, what is the discount rate AJ Incorporated will use to calculate the NPV?

Answer (PDF)

3) Scott is trying to decide whether to invest in a corporate bond. The bond matures in two years. The bond has a coupon rate of 8% and the payments are made semi-annually. The face value of the bond is $1,000 and the current market price is $945.42. While the company will have no problem making the coupon payments, there is a 10% chance that it may fail to make the full payment at maturity. In this case, the payment under default will only be 60% of the promised amount. Calculate the promised yield and the expected yield on the bond.

Answer (PDF)