Strategic Financial Management: Exercises

By following the same structure as the companion text, this book of exercises and solutions tests your knowledge of Strategic Financial Management. It also develops a number of theoretical concepts outlined in the companion text as a guide to further study.

All the exercises and their solutions are easy to follow. Each chapter begins with a theoretical review of the basic issues to be examined .We then move into the real world of sophisticated, financial analysis. Each chapter also contains commentaries and a summary that provide further insight into current theory and practice, applied to the corporate investment and financial policies of today’s uncertain world.

Part One: An Introduction

1. Finance – An Overview
Introduction
Exercise 1.1: Modern Finance Theory
Exercise 1.2: The Nature and Scope of Financial Strategy
Summary and Conclusions

Part Two: The Investment Decision

2. Capital Budgeting Under Conditions of Certainty
Introduction
Exercise 2.1: Liquidity, Profitability and Project PV
Exercise 2.2: IRR Inadequacies and the Case for NPV
Summary and Conclusions

3. Capital Budgeting and the Case for NPV
Introduction
Exercise 3.1: IRR and NPV Maximisation
Exercise 3.2: Relevant Cash Flows, Taxation and Purchasing Power Risk
Summary and Conclusions

4. The Treatment of Uncertainty
Introduction
Exercise 4.1: Mean-Variance Analyses
Exercise 4.2: Decision Trees and Risk Analyses
Summary and Conclusions

Part Three: The Finance Decision

5. Equity Valuation the Cost of Capital
Introduction
Exercise 5.1: Dividend Valuation and Capital Cost
Exercise 5.2: Dividend Irrelevancy and Capital Cost
Summary and Conclusions

6. Debt Valuation and the Cost of Capital
Introduction
Exercise 6.1: Tax-Deductibility of Debt and Issue Costs
Exercise 6.2: Overall Cost (WACC) as a Cut-off Rate
Summary and Conclusions

7. Debt Valuation and the Cost of Capital
Introduction
Exercise 7.1: Capital Structure, Shareholder Return and Leverage
Exercise 7.2: Capital Structure and the Law of One Price
Summary and Conclusions

Part Four: The Wealth Decision

8. Shareholder Wealth and Value Added
Introduction
Exercise 8.1: Shareholder Wealth, NPV Maximisation and Value Added
Exercise 8.2: Current Issues and Future Developments
Summary and Conclusions