The 125732 Advanced Corporate Finance (TCA) Information
Final exam: TCA
Completion requirements
Opens: Monday, 9 June 2025, 2:30 PM
Closes: Tuesday, 10 June 2025, 2:30 PM
This is a Time Constrained Assessment (TCA).
This examination contributes 50% to the final mark.
Please read all the information provided in the TCA section in Stream
https://stream.massey.ac.nz/course/view.php?id=73857#section-20
AI category of the final examination: AI Planning – please see Assessment section in Stream
You’ll need to complete an AI Use Declaration once you complete and submit your TCA. Please note that using an AI tool to generate answers to the questions in the TCA is cheating.
125732 ADVANCED CORPORATE FINANCE
Time Allowed: THREE (3) hours
Calculators are permitted with no restrictions
Answer ALL Questions
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Section A - Multi-choice questions
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Q1 - 15
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(15 x 3=)
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45 marks
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Section B - Short-answer questions
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QB1 - B3
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(3 x 12=)
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36 marks
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Section C - Calculation questions
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C1 - C2
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(6+13=)
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19 marks
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Total
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100 marks
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Final Review outlines: The list is of important topics for the course. Most of the questions used in the final examination are from these topics.
(The quizzes questions, supplied in the Stream, are good examples of questions to be tested in the final examination. They are important materials for your final review.)
A. Financial evaluation theory and calculation methods (Weeks 1-4, and Week 10):
• Understand the definition ofFCF (include the meaning of NOPAT,
NOA, ROIC, and EVA) and understand how it is generated and used.
• Understand the major financial statements (such as Income Statement and Balance Sheet). How to calculate Free Cash Flows (from Financial Statements information)?
• Estimate the cost of equity (pricing model for stock) (Notice the definition of book value and market value)
• Estimate the cost of debt (pricing models for bond) (Notice the definition of book value and market value)
• Interpret the meaning and usage of WACC and APV and their application in calculating project or firm value (especially in acquiring another firm).
• Understand the specialty ofWACC, especially how to include the tax shield value and bankruptcy costs in this method.
• How to apply the FCF and WACC method in project analysis? What is the incremental concept (such as sunk cost, opportunity cost etc.)?
• International capital budgeting (Week 10): real options (definition, types and ideas on value creation), specialties in capital budgeting (currency exchange and relative advantages to the domestic project evaluation) Domestic project:
Foreign investment project:
B. Capital Structure (Weeks 5-6)
• Understand the basic (no other side effects involved) capital structure issue and dividend issue.
• Understand the relation between business risk and financial risk, the relative factors influencing a firm’s debt policy and firm value.
• Understand the theories of trade-off, pecking order, market timing, window of opportunity, and their application in practical analysis.
• What is the signaling theory in describing a debt ratio change?
• Definition of optimal debt ratio (maximizing firm value, equity value and stock price under the same optimizing condition)
C. Dividend Policy (Week 7)
• The nature (definition) of dividend (including share repurchasing, Are these two exactly same?) (Including the dividend reinvestment plan)
• The optimal dividend theories: Irrelevant, positive, and negative to firm value.
• Information signaling theory: market response to dividend change.
• What is the signaling theory in describing dividend change?
• What is the residual dividend theory and how does the theory explain a dividend increase/decrease.
D. Corporate Governance (Week 8)
• The definition ofCG, Components ofCG and their functions
• The major problem is agent problem; its fundamental cause is interest conflicts.
• The major theory is Agent-Principal Theory and the theory explains the common methods to control the agency costs (the benefits and costs determine their application).
• The Board plays a pivotal role in corporate governance and its Structure is important in its efficiency of applying its functions.
• CEO compensation design is effective in controlling the behavior in their decision making. How could a compensation package possibly work in adjusting a CEO’s risk-taking behavior (in investments) and in balancing long-term vs. short term interests ofa company?
• Stick and carrot (including Anti-takeover restrictions, poison pills and green mails)
E. Financial planning (Week 8)
• Forecasting financial statements and additional funds needed (AFN).
• Forecasting FCF and intrinsic value of operations.
• Financing deficit (or surplus) and external financing (new debt or equity).
F. Merging and Acquisition (Week 9)
• Types (definitions and relative application considerations, emphasizing the importance of evaluation in the process) and Motivations (in terms of real economic value to a firm or the society)
• Synergies and relative anticompetition challenges (related merging usually have larger synergy and horizontal merging has the highest chance of being challenged for anticompetition problem).
• What is synergy? Understand operating synergy and financial synergy.
• Understand how the synergy could be “fairly” distributed among target and acquirer shareholders.
• Describe the major empirical results in firm values because of merging & acquisition. Do mergers really create value and how can you explain the result (with the available theory or your understanding)?