Business finance
Dr Robert Faff
6 points * Two 1-hour lectures and one 1-hour tutorial per week * Second semester * Clayton * Prerequisites: AAF1021/2 and AAF1031/2 (pass division I), ECO1020/1030 or first year maths
Objectives On completion of this subject students should have a basic understanding of the theory of finance to enable the evaluation of investment, financing and dividend decisions of the firm; have a competence in financial mathematics; be familiar with the fundamentals of capital budgeting as applied to the investment decision; be able to explain and have a basic understanding of the theory of pricing of risky assets; be able to identify the basic instruments of corporate funding and have an elementary grasp of the issues underlying capital structure theory.
Synopsis This subject considers the impact of financing and investment decisions on business enterprises, with particular focus on public companies. Topics covered include a consideration of the goals of the firm and investors, investment evaluation models, valuation of equity and debt instruments, fixed interest securities, sources and types of available finance, issues in risk and return, portfolio theory, asset pricing models, issues in capital structure and dividend policy, and the efficiency of capital markets.
Assessment Examination (3 hours): 80% * Mid-semester examination (1 hour): 20%
Prescribed texts
Bishop S and others Corporate finance 3rd edn, Holt Rinehart and Winston, 1993
or
Peirson G and others Business finance 6th edn, McGraw-Hill, 1994