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# FIN MODELING FINA 4920

UGA

GPA 3.67

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This 8 page Class Notes was uploaded by Jackie Gleason on Saturday September 12, 2015. The Class Notes belongs to FINA 4920 at University of Georgia taught by Howell in Fall. Since its upload, it has received 96 views. For similar materials see /class/202610/fina-4920-university-of-georgia in Finance at University of Georgia.

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Date Created: 09/12/15

FINA 4920 Spring 2011 Guide for the Final Page 1 of 9 Make sure you can do the projects and quizzes Finance Chapter 2 Time Value of Money Understand present and future value how to calculate them Understand what NPV is Understand what IRR is Chapter 3 Applications of TVM Know how to calculate mortgages 0 Loan Amortization Tables wo Points Chapter 4 Capital Budgeting Know the NPV rule 0 Mutually Exclusive 0 Independent Know the IRR rule 0 Mutually Exclusive 0 Independent Know the capital budgeting principles slide with all of these on it Ignore sunk costs Cash Cash Cash not net income Don t forget the salvage value Don t forget the cost of forgone opportunities Pay attention to life spans Consider the timing of cash flows Don t forget inflation Chapter 5 Issues In Capital Budgeting More capital budgeting principles Calculate the crossover rate the IRR of the differential cash flows Chapter 6 Choosing a Discount Rate What is a discount rate and what is it used for In the NPV criterion you discount by the discount rate In the IRR criterion you compare the IRR to the discount rate Know what WACC is and how to calculate it a The funding cost for many corporate projects FINA 4920 Spring 2011 Guide for the Final Page 2 of 9 E WACCr quot I lmT E D Dlt c on immune m p u nirqmlyus lo nidzbllm 0 mile riinn nndnuimnmi where rm 5 6031 af Equity 7 he return n qilircd by the lm39s Shareholders I D the rul s can If dl39bfi ll return required by Illl ran debrholdnrx E market value offw rm x equity D mar I value UfIIL rm 3 debt TC he firH39s fax rate Gordon dividend model for calcula ng oost of equity Div0 1g I E Po Different ways of getb39ng growth P jec e Lon 4Determine the Value of the ir m ty by Subtracting Debt Do a Sensi vity Ana ysis do you ca culate free cash ows p227 and slide for this firm s operations 7 Increase in fix assets atc st Afmrc x nterest Free Cash Flows FCF 3 m Know how m calculam mrminal value 7Use Constant growth formu a h rate and last Cash ow member the above terminal value discoums die mrminal value one year you FCFied 19WACC9 DAI must then discount it back no time 0 FINA 4920 Spring 2011 Guide for the Final Page 3 of 9 What is a sensitivity analysis Chapter 8 Risk Three risk characteristics we talked about in class a Horizon How long does it take to get your money back b Safety Is there a guarantee c Liquidity Can you sell the asset or are you stuck with it Know what ex post and ex ante is a Exante In the financial world the eX ante return is the expected return of investment portfolio Wikipedia b Expost A measure of past performance Wikipedia An idea of what variance and standard deviation is Chapter 9 Statistics for Portfolios Be aware of how dividends and splits would affect stock returns Know how to calculate the covariance and correlation between two stocks Know how to calculate the following for a two asset portfolio 0 Mean Variance Standard Deviation Use varp stdevp average Know how to do regressions in Excel 0 Using Excel Functions slope intercept and rsq Portfolio variance 0 717fo l Ingag 2W139mgConaNr 7392 Chapter 10 Portfolio Returns and the Efficient Frontier Understand diversification and how correlation affects it 0 Correlation when correlation is negative that is when you get the most bene t from diversi cation Know what the efficient frontier is 0 Everything bove the MVP which is the tip of the bullet Know what the M39nimum Variance Portfolio is and how to solve for it 39n solver o l 39 M quot rim 1 I F1nd1ng the MVP go to Data Solver select portfolio Std Dev minimize by changing MCD weight I Graphing MVP go to graph rightclick select data Xvalues will be the Std Dev And yvalues with be the return just calculated above Chapter 11 CAPM and SML Know what is the Capital Market Line formula 0 Know the Sharpe Ratio Shalpe ratio excess returnrisk ERportfolio RFS TD DEVp01tfolio FINA 4920 Spring 2011 Guide for the Final Page 4 of 9 Know what Beta is and how to calculate the Beta of a portfolio It measures the sensitivity of the stock s return to the return of the market 0 The beta is the SLOPE function the y values are first the asset excess returns and the x values are second the SampP or market excess returns R squared uses the RSQ function and alpha uses the INTERCEPT function Know what the Security Market Line is and what is the formula for it Know how to get the market portfolio the portfolio which maximizes the Sharpe Ratio MVP I Setup a Sharpe Ratio calculation I Maximize it using solver I Do data solver objective cell sharpe ratio maximize by changing MCD weight Chapter 12 SML and Investment Performance Know how to analyze the performance of a stock by looking at a regression 0 Positive alpha over performance negative alpha under performance Know how to manipulate the SML formula to solve for various things Chapter 13 SML and Cost of Capital Know how to use the SML CAPM formula to get the cost of equity Know how to calculate WACC using CAPM to calculate the cost of equity Chapter 14 Market Efficiency Know the three types of market efficiency 0 Weak form Semi strong form Strong form Strong form efficiency You cannot predict the future price of a financial asset by examining ALL public and private information Hardly anyone believes this Semistrong form efficiency You cannot predict the future price of a financial asset by examining all publicly available information Weakform efficiencyYou cannot predict the future price of a financial asset by carefully examining the asset s past and current prices or volume technical analysis Chapter 15 Bond Valuation Understand what a bond is and the basic terminology Know what a zero coupon bond is 0 bond bought at a price lower than its face value with the face value repaid at the time of maturitvdi1 It does not make periodic interest payments or have socalled quotcouponsquot hence the term zerocoupon bond Know how to calculate the yield to maturity using XIRR and the Excel Yield function Know how to calculate accrued interest and what it is d 5 law n a Icnp ctc eeraeHeHLr W FINA 4920 Spring 2011 Guide for the Final Page 5 of 9 Know what a callable bond is Some bonds are callable by the corporation This means once the bond reaches a certain date the company can prepay the loan off In these cases we need to calculate the yield to call as well as the yield to maturity Chapter 16 Stock Valuation Know the four different types of stock valuation 0 Efficient Markets DCF Valuation Equity Payout Valuation Multiples Approach Chapter 20 Introduction to Options Know what a call and put is and why you would buy one Know the difference between an American and European option 10ptions with more time to maturity are worth more 2Calls with higher exercise prices are worth less puts with higher exercise prices are worth ore 3When the stock price goes up call option prices go up and put option prices go down Option strategies Put hedge portfolio insurance Bull spread You think the stock will go up somewhat or at least is a bit more likely to rise than to fall Good position if you want to be in the stock but are unsure of bullish expectations Bear spread You think the stock will go down somewhat or at least is a bit more likely to fall than to rise Good position if you want to be in the stock but are unsure of bearish expectations Long butterfly You believe the stock price will move very little Short butterfly You believe that the stock price will move substantially FINA 4920 Spring 2011 Guide for the Final Page 6 of 9 FINA 4920 Spring 2011 Guide for the Final Page 7 of 9 Excel Importing Data Know what a csv file and txt file are Know how to import a fixed width file Know how to import a delimited file Exporting Data from Excel to Word As a table in word copy and paste As a picture in word copy and paste special picture As a live spreadsheet copy and paste link Functions Basic Math Functions 0 SUM o SQRT Financial 0 00000 390 Z 39 O Statistics 0 MIN 0 MAX 0 AVERAGE o VARP o STDEVP Logical o TRUEampFALSE AND OR NOT IF Know what a nested IF statement is IF inside of another IF 0 IFERROR Lookup Functions 0 VLOOKUP amp HLOOKUP Text Functions 0 Left 0 Right 0 Mid o Concatenate OOOO FINA 4920 Spring 2011 Guide for the Final Page 8 of 9 Other Commands Charts 0 Advanced charts and graphs Goal Seek Solver Data Table 0 One Way VariableampTwo Way Variable 0 Used with Sensitivity Analysis Sorting Data 0 Normal Sorting 0 Data Filters Pivot Tables Data Validation SubTotals Google Spreadsheets Know the benefits of using Google Spreadsheets Online just need browser Free Great for collaboration Be familiar with the GoogleFinance function

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