F|N2101 BUSINESS FINANCE Faculty of Business Introductory Book Semester 2 2003
FIN2101 BUSINESS FINANCE II Faculty of Business Introductory Book Semester 2 2003
University of Southern QI by Dec Distance Education Centre The University of Southern Queensland Toowoomba Qld 4350 Australia Copyrighted materials reproduced herein are used under the provisions of the Copyright Act 1968 as amended, or as a result of application to the copyright owner No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without prior permission Produced using FrameMaker5.5.6 on a Pentium workstation
The University of Southern Queensland, 2003. Published by Distance Education Centre The University of Southern Queensland Toowoomba Qld 4350 Australia http://www.usq.edu.au Copyrighted materials reproduced herein are used under the provisions of the Copyright Act 1968 as amended, or as a result of application to the copyright owner. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without prior permission. Produced using FrameMaker5.5.6 on a Pentium workstation
TABLE OF CONTENTS PAGE Course Specification Course Introduction Course Personnel Course Outline Communication Student Enquiries USQConnect Study Schedule Course Evaluation(External Students Only) 2344567889 Course Assessment Assessment Schedule Faculty of Business Policy Course Resources T Assignment 1 66672 Assignment 2 Past Examination Solution to Final examination Student Feedback
TABLE OF CONTENTS PAGE Course Specification Course Introduction 1 Welcome 1 Course Personnel 1 Course Overview 2 Course Outline 3 Communication 4 Student Enquiries 4 USQConnect 5 Study Schedule 6 Course Evaluation (External Students Only) 7 Course Assessment 8 Assessment Schedule 8 Submission Details 9 Faculty of Business Policy 10 Course Resources 16 Study Material 16 Text 16 Assignment 1 17 Assignment 2 21 Past Examination 27 Solution to Final Examination Student Feedback 29
TheUniversity of Southern Queensland Course Specification AUSTRALIA Cat-Nbr Class Term Mode 2101 24115 2,2003 TWMBA Academic Group: FOBUS Academic Org: FOB009 HECS Band ASCED Code 081101 STAFFING Examiner: Rex Zeeman OTHER-REQUISITES It is highly recommended that you successfully complete either UsQ511ll or FINI101 before enrolling in this course. If you have not, you may find it difficult to successfully complete this course. SYNOPSIS Financial decisions within a firm can be divided into the investment, financing and dividend decision. The course Business finance i introduced students to the investment decisions This course completes the coverage of this decision, as well as examining the financing and dividend impacts. It examines working capital management, mergers/acquisitions and leasing. This course also recognises the need to consider international ramifications on the decision making proces OBJECTIVES On completion of this course students will be able understand and apply modern portfolio theory and the capital asset pricing model and discuss the efficient market hypothesis determine the optimal investment in working capital evaluate a takeover proposal and discuss the effects of takeovers/mergers in analyse and advise management in respect of capital structure decisions, including dvice on the appropriate sources of finance for business organisations dvise management on lease financing discuss the implications of alternative dividend policies for the firm examine the interaction of the investment and financing decisions discuss financial decision making in an international context
The University of Southern Queensland Course Specification Description: Business Finance II Subject Cat-Nbr Class Term Mode Units Campus FIN 2101 24115 2, 2003 EXT 1.00 TWMBA Academic Group: FOBUS Academic Org: FOB009 HECS Band: 2 ASCED Code: 081101 STAFFING Examiner: Rex Zeeman OTHER-REQUISITES It is highly recommended that you successfully complete either USQ51111 or FIN1101 before enrolling in this course. If you have not, you may find it difficult to successfully complete this course. SYNOPSIS Financial decisions within a firm can be divided into the investment, financing and dividend decision. The course Business Finance I introduced students to the investment decisions. This course completes the coverage of this decision, as well as examining the financing and dividend impacts. It examines working capital management, mergers/acquisitions and leasing. This course also recognises the need to consider international ramifications on the decision making process. OBJECTIVES On completion of this course students will be able to: • understand and apply modern portfolio theory and the capital asset pricing model, and discuss the efficient market hypothesis; • determine the optimal investment in working capital; • evaluate a takeover proposal and discuss the effects of takeovers/mergers in Australia; • analyse and advise management in respect of capital structure decisions, including advice on the appropriate sources of finance for business organisations; • advise management on lease financing; • discuss the implications of alternative dividend policies for the firm; • examine the interaction of the investment and financing decisions; • discuss financial decision making in an international context. Page - 1
TOPICS Description Weighting I. Risk/return analysis and portfolio theory 2. Capital asset pricing model( CAPM) 3. Application of CAPM 4. Working capital management 15.00 6. Sources of finance 10.00 7. Capital structure Leases 9. Investment and financing decisions 11. International financial management 7.00 TEXT and MaTErials required to be purchased or accessed Books can be ordered by fax or telephone For costs and further details use the Book Search facilityathttp://bookshop.usq.eduaubyenteringtheauthorortitleofthetext itman, LJ, Juchau, RH& Flanagan, J2002, Principles of managerial finance, 3rd edition, Pearson Education Australia, French,s Forest, New South Wales Zeeman, ra Simpson, KA 2002, Study guide to accompany'Principles of manageric inance, 3rd edition, Pearson Education Australia, French's Forest, New South wales REFERENCE MATERIALS Reference materials are materials that, if accessed by students, may improve their knowledge and understanding of the material in the course and enrich their learning experience It is not necessary to obtain the above titles, but if available, they will provide supplementary material to the set text Ball,R, Brown, P, Finn, FJ& officer, RR(eds)1989, Share markets and portfolio theory 2nd edition, University of Queensland Press, St Lucia, Queenslan (copies available in reserve section of library -latest edition. Bishop, SR, Crapp, H, Faff,r& Twite, G 2000, Corporate finance, 4th edition, Pearson Education Australia, Frenchs Forest, New South Wales Brealey, R, Myers, S, Partington, G& Robinson, D 2000, Principles of corporate finance, Irwin McGraw-Hill, Sydney Bruce, R, McKern, B, Pollard, I& Skully, M 1997, Handbook of Australian corporate finance, 5th edition, Butterworths, Sydne
TOPICS Description Weighting (%) 1. Risk/return analysis and portfolio theory 10.00 2. Capital asset pricing model (CAPM) 10.00 3. Application of CAPM 7.00 4. Working capital management 15.00 5. Takeovers 8.00 6. Sources of finance 10.00 7. Capital structure 10.00 8. Leases 8.00 9. Investment and financing decisions 7.00 10. Dividend policy 8.00 11. International financial management 7.00 TEXT and MATERIALS required to be PURCHASED or ACCESSED: Books can be ordered by fax or telephone. For costs and further details use the 'Book Search' facility at http://bookshop.usq.edu.au by entering the author or title of the text. Gitman, LJ, Juchau, RH & Flanagan, J 2002, Principles of managerial finance, 3rd edition, Pearson Education Australia, French's Forest, New South Wales. Zeeman, RA & Simpson, KA 2002, Study guide to accompany 'Principles of managerial finance', 3rd edition, Pearson Education Australia, French's Forest, New South Wales. REFERENCE MATERIALS Reference materials are materials that, if accessed by students, may improve their knowledge and understanding of the material in the course and enrich their learning experience. It is not necessary to obtain the above titles, but if available, they will provide supplementary material to the set text. Ball, R, Brown, P, Finn, FJ & Officer, RR (eds) 1989, Share markets and portfolio theory, 2nd edition, University of Queensland Press, St Lucia, Queensland. (copies available in reserve section of library - latest edition.) Bishop, SR, Crapp, H, Faff, R & Twite, G 2000, Corporate finance, 4th edition, Pearson Education Australia, French's Forest, New South Wales. Brealey, R, Myers, S, Partington, G & Robinson, D 2000, Principles of corporate finance, Irwin McGraw-Hill, Sydney. Bruce, R, McKern, B, Pollard, I & Skully, M 1997, Handbook of Australian corporate finance, 5th edition, Butterworths, Sydney. Page - 2
a& wilson, K 2001, Introduction to corporate finance, Pearson Education Australia. French's Forest. New South Wales Peirson, G, Brown, R, Easton, S& Howard, P 2002, Business finance, 8th edition, McGraw-Hill, Sydney Financial management, 3rd edition, Pearson Education Australia, Sydner tin. JD 2003, Petty, JW, Peacock, R, Martin, P, Burrow, M, Keown, A, Scott, dF & m S, Thompson,S, Christensen, M, Westerfield, R& Jordan, B Fundamentals of corporate finance, 2nd edition, McGraw-Hill, Sydney STUDENT WORKLOAD REQUIREMENTS ACTIVITY HOURS Assessment Private stud ASSESSMENT DETAILS Description Marks Out of Wtg(%)Required Due Date ASSIGNMENT 1 200.00 1000 02Sep2003 ASSIGNMENT 2 14Oct2003 EXAMPARTA(MULTI-CHOICE)30.00 END S2 (see note 3) EXAM PART B(QUESTIONS) 50.00 END S2 NOTES: The examination is scheduled to be held in the end-of-semester examination period. Students will be advised of the official examination date for Exam(Parts A and after the timetable has been finalised. The total working time for Exam(Parts A and b)is 3 hours IMPORTANT ASSESSMENT INFORMATION 1 Attendance requirements If you are an International student in Australia it is a requirement of your student visa that you attend all classes at your campus. For all other students, there are no attendance requirements for this course. However, it is the students'responsibility to study all material provided to them or required to be accessed by them to maximise their chance of meeting the objectives of the course and to be informed of course-related activities and administration 2 Requirements for students to complete each assessment item satisfactorily To complete each of the assignments satisfactorily, students must attempt all assignment questions. To complete the examination satisfactorily, students must obtain a passing grade
Frino, A, Cusack, A & Wilson, K 2001, Introduction to corporate finance, Pearson Education Australia, French's Forest, New South Wales. Peirson, G, Brown, R, Easton, S & Howard, P 2002, Business finance, 8th edition, McGraw-Hill, Sydney. Petty, JW, Peacock, R, Martin, P, Burrow, M, Keown, AJ, Scott, DF & Martin, JD 2003, Financial management, 3rd edition, Pearson Education Australia, Sydney. Ross, S, Thompson, S, Christensen, M, Westerfield, R & Jordan, B Fundamentals of corporate finance, 2nd edition, McGraw-Hill, Sydney. STUDENT WORKLOAD REQUIREMENTS ACTIVITY HOURS Assessment 20 Directed Study 48 Private Study 93 ASSESSMENT DETAILS Description Marks Out of Wtg(%) Required Due Date ASSIGNMENT 1 200.00 10.00 Y 02 Sep 2003 ASSIGNMENT 2 200.00 10.00 Y 14 Oct 2003 EXAM PART A (MULTI-CHOICE) 30.00 30.00 Y END S2 (see note 3) EXAM PART B (QUESTIONS) 50.00 50.00 Y END S2 NOTES: 3. The examination is scheduled to be held in the end-of-semester examination period. Students will be advised of the official examination date for Exam (Parts A and B) after the timetable has been finalised. The total working time for Exam (Parts A and B) is 3 hours. IMPORTANT ASSESSMENT INFORMATION 1 Attendance requirements: If you are an International student in Australia it is a requirement of your student visa that you attend all classes at your campus. For all other students, there are no attendance requirements for this course. However, it is the students' responsibility to study all material provided to them or required to be accessed by them to maximise their chance of meeting the objectives of the course and to be informed of course-related activities and administration. 2 Requirements for students to complete each assessment item satisfactorily: To complete each of the assignments satisfactorily, students must attempt all assignment questions. To complete the examination satisfactorily, students must obtain a passing grade. Page - 3
3 Penalties for late submission of required work: f a student submits an assignment after the due date without the prior approval of the Examiner, a penalty of 20% of the total marks gained by the student for the assignment will apply for each working day late 4 Requirements for student to be awarded a passing grade in the course To be assured of receiving a passing grade a student must submit all of the summative assessment items. achieve at least 50% in the examination and at least 50% of the available weighted marks for the summative assessment items 5 Method used to combine assessment results to attain final grade The final grades for students will be assigned on the basis of the weighted aggregate of the marks(or grades )obtained for each of the summative assessment items in 6 Examination information: This is a restricted examination Candidates are allowed access to specific materials during the examination. The only materials that candidates may use in the restricted examination for this course are: writing materials(non-electronic and free from material which could give the student an unfair advantage in the examination) calculators which cannot hold textual information(students must indicate on their examination paper the make and model of any calculator()they use during the examination). It is essential that students attempting this course have a quiet battery-operated non-programmable calculator, such as the Casio Ex-82TL scientific calculator, or an equivalent. Students are not permitted to take mobile telephones, pagers or other electronic means of communication into the examination room 7 Examination period when Deferred/Supplementary examinations will be held Any Deferred or Supplementary examinations for this course will be held during the next examination period. Students should read USQ Regulations 5. 1 Definitions, 5.6 Assessment, and 5.10 Academic Misconduct for further information and to avoid actions which might contravene University Regulations. These regulations can be found at the URL http://www.usq.edu.au/secariat/calEndaR/pArt5/Orintheprintedversionofthe current USQ Handbook. Students should also read The Guide to Policies and Procedures of the Faculty which can be found at the URL http://www.usq.edu.aw/handbook/2003/title663.htmlorintheprintedversionof the current USQ Handbook ASSESSMENT NOTES I Assignments: (i The due date for an assignment is the date by which a studen must despatch the assignment to the USQ. The onus is on the student to provide proof of the despatch date, if requested by the Examiner. (ii) Students must retain a copy of each item submitted for assessment. This must be produced within five days if required by the Examiner. (iii In accordance with the University's Assignment Extension Policy(Regulation 5.6.1), the Examiner of a course may grant an extension of the due date of an assignment in extenuating circumstances All applications for assignment extensions must be accompanied by appropriate supporting documentation. Under no circumstances will assignments submitted
3 Penalties for late submission of required work: If a student submits an assignment after the due date without the prior approval of the Examiner, a penalty of 20% of the total marks gained by the student for the assignment will apply for each working day late. 4 Requirements for student to be awarded a passing grade in the course: To be assured of receiving a passing grade a student must submit all of the summative assessment items, achieve at least 50% in the examination and at least 50% of the available weighted marks for the summative assessment items. 5 Method used to combine assessment results to attain final grade: The final grades for students will be assigned on the basis of the weighted aggregate of the marks (or grades) obtained for each of the summative assessment items in the course. 6 Examination information: This is a restricted examination. Candidates are allowed access to specific materials during the examination. The only materials that candidates may use in the restricted examination for this course are: writing materials (non-electronic and free from material which could give the student an unfair advantage in the examination); calculators which cannot hold textual information (students must indicate on their examination paper the make and model of any calculator(s) they use during the examination). It is essential that students attempting this course have a quiet battery-operated non-programmable calculator, such as the Casio fx-82TL scientific calculator, or an equivalent. Students are not permitted to take mobile telephones, pagers or other electronic means of communication into the examination room. 7 Examination period when Deferred/Supplementary examinations will be held: Any Deferred or Supplementary examinations for this course will be held during the next examination period. 8 University Regulations: Students should read USQ Regulations 5.1 Definitions, 5.6 Assessment, and 5.10 Academic Misconduct for further information and to avoid actions which might contravene University Regulations. These regulations can be found at the URL: http://www.usq.edu.au/SECARIAT/calendar/Part5/ or in the printed version of the current USQ Handbook. Students should also read The Guide to Policies and Procedures of the Faculty which can be found at the URL: http://www.usq.edu.au/handbook/2003/title663.html or in the printed version of the current USQ Handbook. ASSESSMENT NOTES 1 Assignments: (i) The due date for an assignment is the date by which a student must despatch the assignment to the USQ. The onus is on the student to provide proof of the despatch date, if requested by the Examiner. (ii) Students must retain a copy of each item submitted for assessment. This must be produced within five days if required by the Examiner. (iii) In accordance with the University's Assignment Extension Policy (Regulation 5.6.1), the Examiner of a course may grant an extension of the due date of an assignment in extenuating circumstances. All applications for assignment extensions must be accompanied by appropriate supporting documentation. Under no circumstances will assignments submitted Page - 4
more than two calendar weeks after the due date be accepted. (iv)Assignments are to be submitted in the appropriate assignment folders. (v) The Examiner will not by fac 2 Course Weightings: Weightings of topics should not be interpreted as applying to the number of marks allocated to questions testing those topics in an examination paper. The examination may test material already tested in assignments 3 Dishonest Actions: (1) Any student who is alleged to have performed a dishonest action relating to any assessment in the course will have a course of action taken against him/her as outlined in the Academic Regulations. (ii) Pieces of assessment should be the work of individual students. Joint pieces of assessment are not permitted unless written approval has been obtained from the Examiner. (iii) Dishonest action in relation to assessment includes: copying or attempting to copy the work of others, use of or attempting to use information prohibited from use in that form of assessment; submitting the work of another as your own; consciously committing acts of plagiarism, ie taking and using anothers thoughts or writings as ones own with intent to deceive, which occurs when paragraphs, sentences, a single sentence or significant parts of a sentence which are copied directly, are not enclosed in quotation marks and appropriately footnoted or referenced in the text; direct quotations are not used, but text is paraphrased or summarised, and the source of the material is not acknowledged by footnoting or other reference in the text 4 Deferred Examinations: (i) Deferred examinations will be granted based on non-attendance for medical reasons, family/personal reasons, or employment-related reasons. Deferred examinations must be recommended by the Faculty Assessment Coordinator and approved by the Examiner or Moderator or Dean,s Nominee. If a deferred examination is granted, students shall sit the deferred examination in the next semester examination period. If, for whatever reason, this deferred examination is not taken then the student will be graded'F. (ii) To be eligible for consideration for a deferred examination, students must have submitted a genuine attempt at all mandatory assessment items. (iii) Deferral of an examination CanNOT be granted on an existing deferral in that course. (iv) Requests must be in writing to the Faculty Assessment Coordinator clearly stating student name, student number, current address, course alpha-numeric identifier and name for the examination not attended (v)Requests MUST BE supported by original or suitably authenticated documentation. (vi) Requests and documentation must be submitted to the Faculty Assessment Coordinator within ten(10) calendar days of the missed examination date.(vii) Requests based on medical reasons must be supported by medical evidence on the appropriate University of Southern Queensland medical certificate or doctors certificate. a medical certificate must be dated with the same date as the period of illness for which the absence from examination is being sought and clearly indicate the student s name and, if possible, student number(retrospective medical certificates will not be accepted for either assignment work or A student s medical condition must be stated clearly (IN ENGLISH). ( Certificate stating a student has a' medical condition' may not be sufficient grounds for deferment of examination). Medical evidence must cover the student for the day(s) of the missed examination(s). (viii) Requests based on family/personal reasons must be supported by a clear statement(IN ENGLISH)from a medical practitioner
more than two calendar weeks after the due date be accepted. (iv) Assignments are to be submitted in the appropriate assignment folders. (v) The Examiner will not accept submission of assignments by facsimile. 2 Course Weightings: Weightings of topics should not be interpreted as applying to the number of marks allocated to questions testing those topics in an examination paper. The examination may test material already tested in assignments. 3 Dishonest Actions: (i) Any student who is alleged to have performed a dishonest action relating to any assessment in the course will have a course of action taken against him/her as outlined in the Academic Regulations. (ii) Pieces of assessment should be the work of individual students. Joint pieces of assessment are not permitted unless written approval has been obtained from the Examiner. (iii) Dishonest action in relation to assessment includes: copying or attempting to copy the work of others; use of or attempting to use information prohibited from use in that form of assessment; submitting the work of another as your own; consciously committing acts of plagiarism, ie taking and using another's thoughts or writings as one's own with intent to deceive, which occurs when paragraphs, sentences, a single sentence or significant parts of a sentence which are copied directly, are not enclosed in quotation marks and appropriately footnoted or referenced in the text; direct quotations are not used, but text is paraphrased or summarised, and the source of the material is not acknowledged by footnoting or other reference in the text. 4 Deferred Examinations: (i) Deferred examinations will be granted based on non-attendance for medical reasons, family/personal reasons, or employment-related reasons. Deferred examinations must be recommended by the Faculty Assessment Coordinator and approved by the Examiner or Moderator or Dean's Nominee. If a deferred examination is granted, students shall sit the deferred examination in the next semester examination period. If, for whatever reason, this deferred examination is not taken then the student will be graded 'F'. (ii) To be eligible for consideration for a deferred examination, students must have submitted a genuine attempt at all mandatory assessment items. (iii) Deferral of an examination CANNOT be granted on an existing deferral in that course. (iv) Requests must be in writing to the Faculty Assessment Coordinator clearly stating student name, student number, current address, course alpha-numeric identifier and name for the examination not attended. (v) Requests MUST BE supported by original or suitably authenticated documentation. (vi) Requests and documentation must be submitted to the Faculty Assessment Coordinator within ten (10) calendar days of the missed examination date. (vii) Requests based on medical reasons must be supported by medical evidence on the appropriate University of Southern Queensland medical certificate or doctor's certificate. A medical certificate must be dated with the same date as the period of illness for which the absence from examination is being sought and clearly indicate the student's name and, if possible, student number (retrospective medical certificates will not be accepted for either assignment work or examinations). Only original or authenticated medical certificates will be accepted. A student's medical condition must be stated clearly (IN ENGLISH). (Certificates stating a student has a 'medical condition' may not be sufficient grounds for deferment of examination). Medical evidence must cover the student for the day(s) of the missed examination(s). (viii) Requests based on family/personal reasons must be supported by a clear statement (IN ENGLISH) from a medical practitioner, Page - 5
counsellor or independent member of the community. (ix) Requests based on employment-related reasons must be supported by a clear statement(IN ENGLISH from the student,'s employer.(x)Students who have a medical condition or genuine compassionate or employment-related problems on the day of the examination are advised to obtain the relevant documentary evidence and NOT attempt the examination. If a student makes an attempt at the examination, the assessment item will be marked and a grade awarded. In these cases, a student cannot, after receiving a grade, request a deferred examination or special consideration. (xi) Students who have been granted deferred examinations will not be granted a waiver of prerequisites, without the permission of the Head of Department, in subsequent semesters(if they do not have a passing grade)
counsellor or independent member of the community. (ix) Requests based on employment-related reasons must be supported by a clear statement (IN ENGLISH) from the student's employer. (x) Students who have a medical condition or genuine compassionate or employment-related problems on the day of the examination are advised to obtain the relevant documentary evidence and NOT attempt the examination. If a student makes an attempt at the examination, the assessment item will be marked and a grade awarded. In these cases, a student cannot, after receiving a 'fail' grade, request a deferred examination or special consideration. (xi) Students who have been granted deferred examinations will not be granted a waiver of prerequisites, without the permission of the Head of Department, in subsequent semesters (if they do not have a passing grade). Page - 6
