Académique Documents
Professionnel Documents
Culture Documents
General Information
Lecturer: Dr. Rania Salem Email: Rania.salem@guc.edu.eg Lecturer Office Hour: Sunday 2nd slot (B3.209) Course Lecture: Saturday 1st & 2nd slot, hall H5
Course Agenda
Long term Investment Decisions - Capital Budgeting Cash Flows - Capital Budgeting Techniques - Risk & Refinements in Capital Budgeting Long Term Financial Decisions - The Cost of Capital - Leverage & Capital Structure - Dividend Policy Short Term Financial Decisions - Working Capital & Current Assets Management
Course schedule
Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Date 10-Sep 17-Sep 24-Sep 1-Oct** 8-Oct 15-Oct 22-Oct 29-Oct** 5-Nov** 12-Nov 19-Nov 26-Nov** 3-Dec 10-Dec 17-Dec 24-Dec** 31-Dec Topic Introduction Ch. 8: Capital Budgeting Cash Flows Ch. 9: Capital Budgeting Techniques Graduation Ceremony (no teaching activity) Ch. 9: Capital Budgeting Techniques Ch. 10: Risk & Refinements in Capital Budgeting Midterm Exams Activity Week 3rd year Eid El Adha (H) Ch. 11: Cost of Capital Ch. 11: Cost of Capital Islamic New year(1st Moharam) (H) Ch. 12: Leverage & Capital Structure Ch. 13: Dividend Policy Ch. 14:Working Capital & Current Assets Management Western Christmas (H) Revision week
Course Agenda
Long term Investment Decisions - Capital Budgeting Cash Flows - Capital Budgeting Techniques - Risk & Refinements in Capital Budgeting Long Term Financial Decisions - The Cost of Capital - Leverage & Capital Structure - Dividend Policy Short Term Financial Decisions - Working Capital & Current Assets Management
Operating expenditures:
An outlay of funds by the firm resulting in benefits received within 1 year
Dr. Rania Salem/Corporate Finance Winter 2011/7
Gain in the form of Capital gain/recaptured depreciation No gain/loss Loss asset used in the business Loss asset not used in the business
Taxed @ the firms marginal tax rate 1 No tax implications 2 Used to offset ordinary income 3 Used to offset Capital gains
SP = BV SP < BV
e.g: Hudson Industries, a small electronics company, 2 years ago acquired a machine tool with an installed cost of $100,000. The asset was being depreciated under MACRS using a 5-year recovery period*. Thus 52% of the cost (20% + 32%) would represent accumulated depreciation at the end of year two. BV = $100,000 - $52,000 = $48,000
*Note that based on MACRS dep., the dep. % for 5 years is 20%, 32%, 19%, 12%, 12%, 5%
No tax implications
SP < BV If Hudson sells the old assets for $30,000, it realizes a loss of -$18,000 ($30,000 - $48,000). 3 Used to offset Capital gains or ordinary Income
Dr. Rania Salem/Corporate Finance Winter 2011/19
Powell Corporation, a large diversified manufacturer of aircraft components, is trying to determine the initial investment required to replace an old machine with a new, more sophisticated model. The machines purchase price is $380,000 and an additional $20,000 will be necessary to install it. It will be depreciated under MACRS using a 5-year recovery period. The firm has found a buyer willing to pay $280,000 for the present machine (Purchased 3 years ago @ $240,000) and remove it at the buyers expense. The firm expects that a $35,000 increase in current assets and an $18,000 increase in current liabilities will accompany the replacement. Both ordinary income and capital gains are taxed at 40%.
Note that based on MACRs dep., the dep. % for 5 years is 20%, 32%, 19%, 12%, 12%, 5%
Dr. Rania Salem/Corporate Finance Winter 2011/21