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1 Capital Markets and Corporate Finance (Streams 10/11): FINC5001 Dr. Reuben Segara Finance Discipline School of Business University of Sydney
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Page 1: Lecture1_Introduction and Preliminary Concepts_USYD Students

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Capital Markets and Corporate Finance (Streams 10/11):

FINC5001

Dr. Reuben SegaraFinance DisciplineSchool of BusinessUniversity of Sydney

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Introduction &

Prelminary Concepts

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What is Corporate Finance About?

– What are your expectations of this unit?– What do you expect to learn?

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What do you expect to learn?1. How to get wealthier?2. How to pick stocks to invest in?3. How companies make decisions?4. Something else.

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Please note: Lecture notes will be available on blackboard before each lecture (including today’s notes)

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This LecturePART I: INTRODUCTION• Teaching staff• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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Teaching Staff

• Name: Dr. Reuben Segara

• Located: Room 447, Economics & Business Building

• E-mail: [email protected]

• Consultation time: Monday 3pm-4pm

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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Objectives of the Course• Know the theories underlying the operation of financial

markets and relevant asset pricing models.

• Understand the theory and practice of making investment, financing and dividend decisions

• Learn how to process information into a format that you will be able to analyse and interpret to make financial decisions.

• Learn to discover methods of data-sourcing and research to apply generalised findings to your own unique situation.

• Be able to work in a small team, noting that communication and interpersonal skills are essential for a professional career.

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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Potential jobs to target• ‘Analyst/Associate’ with investment bank or management

consulting firm Goal: Equity Analyst, Debt analyst, President or Director

• ‘Company analyst’ in Brokerage and Funds Management, Goal: ‘Manager’ or ‘Head Trader’

• ‘Financial planner’ with retail and institutional banking bank or management, Goal: Head of Financial Planning Services

• ‘Treasurer/Controller’ positions in multinational companies. treasury functions Goal: ‘Credit manager, Cash manager, Head of treasury, CFO, CEO’

• ‘Sales/Trader’ with broker-dealer / investment bank’s trading desk / bank; learning to trade equities / debt / currencies / derivatives. Goal: ‘Head Trader’

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Job Requirements

Job Requirements:

Technical:•Accounting: calculate financial and accounting ratios. •Modelling: Use and adapt Merger and DCF Models, ability to build tailor-made models, ability to use and understand non-standard models. •Valuation: Demonstrate a thorough understanding and application of the different methods of Valuation techniques. E.g., DCF methodology (incl. WACC calculation), Multiples- trading and transaction •Research: Utilise databases such as Bloomberg, Reuters, Datastream, Investec etc. Utilise Internet effectively •Legal & Regulatory Knowledge and Principles: demonstrate knowledge of the legal and regulatory issues in a wide range of IB transactions, ability to assist in the preparation of public documentation •Procedures: demonstrate a clear understanding of the Compliance and Procedures Manuals, be aware of the range of standard documents and aware of the policy in using them. Be responsible for maintaining transaction files •Systems: Demonstrate Advanced Excel skills and effective use of PowerPoint

We currently have a number of opportunities for analysts to join our Corporate Finance & Origination Department.

EmployeePosition Type:

£CompetitiveRemuneration:

UK-LondonLocation:

Dresdner Kleinwort WassersteinCompany:

Analysts – Corporate Finance

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Job RequirementsJob RequirementsJob Requirements

Transaction and Marketing: • Assist in the preparation of discrete elements of presentations • Self review and critical evaluation of all work before submission to others • Manage and prioritise a number of simultaneous tasks to meet deadlines whilst reporting to more than one person • Manage and monitor printing and binding and ensure completion within agreed time-scale • Develop broad understanding of sector/regional and relevant competitive landscape • Attend client and internal meetings where appropriate

Teamwork/Leadership: • Demonstrate a high degree of reliability, motivation and enthusiasm • Use judgement to seek clarification from superiors

Communication: • Demonstrate clear, confident oral communication • Define issues, explain complex concepts succinctly • Demonstrate clear and concise drafting skills through input to discrete areas of presentations and other written

communication• Additional European languages are highly desirable

Motivation: • Demonstrate drive and commitment to results • Proactive in seeking learning opportunities

Analysts – Corporate Finance

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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PRESCRIBED TEXTBOOK

Introduction to Corporate FinanceBy:

Alex FrinoZhian ChenAmelia HillCarole Comerton-FordeSimone Kelly

FINC5001 Capital Markets and Corporate FinanceUNIT OF STUDY OUTLINE

Available from your Campus Bookshop

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UNIT OF STUDY OUTLINEADDITIONAL RECOMMENDED TEXTBOOKS

• Corporate Finance, 5th Edition, by Bishop, S.R, R.W. Faff, B. Oliver and G.J. Twite, Pearson Education, 2004.

• Principles of Corporate Finance, by Brealey, R.A., S.C. Myers, G Partington and D Robinson, McGraw Hill, Inc., 2001.

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Perdisco e-workbook

An online study resource has been developed for this unit to help you:

learn the complex content covered this semester make the most of your limited study time

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Containsinteresting (and often humorous)practice questions

to help you learn difficult

concepts

It’s designedto give you the

chance to practice, revise and focus on each topic until you

completely understand it

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You also receive anacademic discussionexplaining how to getthe answer correct

next time

E-workbook feedback provides

step-by-stepsolutionsto help you

find out where youwent wrong

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The e-workbook has brought up my grades from a Pass to a

Distinction… with this e-workbookI have a greater ability to excel

in my studies.

Adam, ACU

I really appreciated the prompt feedback.

It’s like having a tutor there to explain things to you,

whereas you can’t always make use

of consultation hours.

Angela, University of Sydney

What do other students think

of their e-workbook?

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How to register

1. Go to www.perdisco.com/students2. Click ‘Create a new account’3. Follow the instructions on screen4. Student companion website

http://wps.pearsoned.com.au/au_be_frino_intcorpfin_3/

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TOPICS COVERED IN UNIT

Capital Structure Policy11Dividend Policy10The Pricing Efficiency of Capital Markets9Australian Equities Markets8Company Cost of Capital7Capital Asset Pricing Model (CAPM)6Risk and Return5Capital Budgeting4

Valuation of Stocks and Bonds3Review of Financial Mathematics2Introduction1Topics Covered#

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Where does this fit in a finance major?

• Introduces you to basic corporate finance concepts

• Later units will build on this knowledge.• Specific course in Derivatives, Broking &

Market Making, Mergers & Acquisitions, International Businss Finance

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– Requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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Study Time• How much time do you expect to spend

studying for this unit outside of class?1. 0-3 hours per week2. 3-6 hours per week3. 6-9 hours per week4. More than 9 hours per week

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Study Techniques• The best way to study for this unit will be:

1. Attending lectures and reading the text book.2. Preparing for the tutorials and answering

practice questions3. Working in groups with other people on various

problems4. Applying what we are learning to the real world5. All of the above.

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Some Helpful Hints• INTEREST IN TOPIC

– HELPS EFFECTIVE LEARNING• Apply what you learn to the real world• Read the Australian Financial Review• Come prepared to classes• Buy some shares! (and/or derivatives)

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Useful Websites• Australian Stock Exchange

– www.asx.com.au

• Australian Financial Review– www.afr.com.au

• Sydney Morning Herald Trading Room– www.tradingroom.com.au

• Egoli– www.egoli.com.au

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– Requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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Learning Outcomes• The learning goals are under five category

headings (P.R.I.C.E) – Personal and Intellectual Autonomy– Research and Inquiry– Information Literacy– Communication– Ethical, Social and Professional Understanding

UNIT OF STUDY OUTLINE

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• Personal and Intellectual Autonomy1. Demonstrate a commitment to lifelong learning by

reflecting on the application of unit of study material to current events.

LEARNING OUTCOMES

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• Research and Inquiry:2. Demonstrate understanding of financial

mathematics and accurately value stocks and bonds.

3. Critically evaluate and effectively implement alternative capital budgeting techniques.

4. Accurately estimate the weighted average cost of capital.

LEARNING OUTCOMES

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• Research and Inquiry:5. Analyse the relationship between risk and return

and accurately estimate the Capital Asset Pricing Model

6. Succinctly describe the process of trading equity in Australia and assess the efficiency of this process.

7. Develop coherent arguments on and numerically demonstrate the impact of dividend policy and capital structure policy on company valuations.

LEARNING OUTCOMES

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• Information Literacy:8. Manage, analyse, evaluate and use information to

make corporate finance decisions.

• Communication:9. Confidently, coherently and concisely communicate

orally and in writing, to a professional standard.

LEARNING OUTCOMES

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• Ethical, Social and Professional Understanding:

10. Demonstrate an appreciation of the importance of the importance of being able to collaborate with and learn from others.

LEARNING OUTCOMES

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– Requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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UNIT OF STUDY OUTLINE

ASSESSMENT• Attendance and activity Compulsory• Tutorial questions Compulsory• Mid-semester exam 20%• Major assignment 25%• Final exam 55%

STANDARDS and WAYS TO PERFORM

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UNIT OF STUDY OUTLINESTANDARD BASED ASSESSMENT

• 50% PASS – Demonstrated knowledge in assessments fulfilling the set standards: 90-100% of class

• 65% CREDIT – Demonstrated knowledge fulfilling standards and better than average performance in assessments. Less than 40% of class.

• 75% DISTINCTION – Demonstrated knowledge in excess of set standards and demonstrated ability to apply this knowledge to new situations. Less than 20% of class.

• 85% HIGH DISTINCTION – Demonstrated exceptional knowledge of the subject and exceptional skills at applying the knowledge to a varying set of scenarios. Outstanding performance in all parts of the assessment. 5% of class.

• In a typical class normally distributed, but some years the average outcome is higher or lower than the set standards.

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UNIT OF STUDY OUTLINE

ASSESSMENT COMPONENTS IN DETAIL…

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Tutorial Questions• Workshop questions for each topic are placed in the

course outline. Additional questions on the current topic may be placed onto Blackboard.

• The answers to set workshop questions will be discussed by the class during lectures in the following week.

• Workshop participation is strongly emphasised for a better learning outcome.

• Solving the questions before each workshop is compulsory and will help you to take part in the discussion and actively learn and retain knowledge of the course material

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Mid Semester Exam(20% of final grade)

• Held on Saturday 28 March, 2009• Multiple choice exam based on all lecture /

readings / workshop material from weeks 1 to 3.• This is a closed book examination.• Purpose of this assessment is to give you an

early indication of your understanding of the unit of study material.

• Further details of the mid-semester exam will be posted onto Blackboard the week prior to the examination.

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Major Assignment(25% of final grade)

• Topic of the assignment including instructions will be distributed on Blackboard by Week 4 (i.e. commencing 23 March)

Description Date Location

Group Formation and Agreement Form

Week 5 (i.e. commencing 30 March) In lectures

Draft report By 4pm Friday 1 May Digital Drop-off Box

Final Report By 4 pm Friday 15 May Assignment box Level 1, Economics & Business Building (H69) & Digital Drop-off Box

Group assignment self-reflective journal

By 4 pm Friday 15 May Assignment box Level 1, Economics & Business Building (H69)

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Final Exam(55% of final grade)

• Closed book exam during June(commencing 15/06/09)

• Set of shorter exact questions and longer questions based on ALL material presented during the course (the format of the final examination will be provided in the review lecture)

• Student expected to apply the ideas of the course to practical and research settings

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– Requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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• Overall goal is to maximise the value of the firm.

• To maximise shareholder and debt holder wealth.– Market value = current traded share price– Firms maximising their investment, financing and

asset management decisions will maximise the value of the firm also

Corporate Objective of the Firm

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• Why maximise owner wealth?– Regulator (i.e. ASIC)– Remuneration incentive schemes– Market for corporate control– Shareholder votes– Management ownership– BUT, there are ‘agency’ problems

Corporate Objective of the Firm

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Measuring company value

TOTAL

21.901893NWSLVClass B

22.721045NWSClass A

MARKET CAP.($b)

LAST SALE PRICE

NO. ISSUED

(m)

ASX STOCK CODE

SECURITY (Common stock)

Major Newscorp securities traded on the ASX(as at 27 January 2005)

Example:

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• Managers maximise firm value through their decisions

1. Investment decisions2. Financing decisions3. Dividend decisions

Corporate Finance Decisions

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• What ‘real’ assets should the firm invest in to operate its business and generate cash flows?

• Two important considerations involved:– The type of assets the firm should use– How many assets it needs to run its business

• Development of a process to evaluate the desirability of asset purchases– Capital budgeting evaluation (Chapter 4)

The Investment Decision

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• Acquisition of ‘real’ assets normally the most important consideration– This refers to physical assets such as buildings or

machinery used to manufacture a product for sale or to provide a particular service

• Often need to select the best real asset from a range of alternatives

• Investment decision is also concerned with the purchase of more intangible assets such as patents or shares in another company

The Investment Decision (Cont’d)

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• How should the firm raises funds to purchase these assets?

• How does the firm choose its gearing ratio?

• What are the costs of each different source of finance?

• Should the firm issue short-term or long-term securities?

The Financing Decision

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• What is the optimal mix of equity and debt to employ? (Chapter 11)– Introduces the importance of capital structure

choice– Consideration of risk and cash flows

associated with different finance sources [i.e. Cost of those finance sources]

– CAN INFLUENCE THE FIRM’S INVESTMENT DECISION.

The Financing Decision

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• How should the firm pass on the returns to shareholders?(i.e. capital gains/dividends)

• This is Dividend Policy (Chapter 10)

• Can the dividend decision affect the value of the firm? (i.e. Is the market efficient)

The Dividend Decision

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• Which of the following is not a corporate finance decision?

1. Increasing the company’s dividend2. Investing in a new factory3. Hiring a new CFO4. Issuing new shares

QUESTION

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– Requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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Real assets

&

Financial assets

Assets that can be put to productive use to

generate a return – e.g. machinery and equipment

Assets that represent a claim to a series of cash flows against an economic unit

“Assets” can be divided into:

Nature of Assets (Real Vs Financial)

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• Identify two financial assets and two real assets that exist in BHP Biliton

QUESTION

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– Requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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Firm Valuation (Revisited) • The market value of the firm can be

determined in two ways:1. Sum the market values of its real assets2. Sum the market values of the financial claims

against those real assets

• Common to use the second method, as there is an active secondary market for financial assets, but not necessarily for real assets

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Capital markets

• Medium for issuing and exchanging financial assets.

• For example:– The Australian Securities Exchange (ASX)– The Australian government bond market

• Provides a means of exchanging current for future consumption.

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The flow of funds

Investors

Capital market Corporations

Real assets

Consumption investment

decision

Financial asset

valuation

Capital structure decision

Investment decision

Dividend decision

+ve Cash flows

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– Requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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Valuation of Financial Claims• There are three important factors to consider

when valuing the financial claims on a firm:– Cash flows– Time– Risk

• Valuation involves discounting the claims to a firm’s cash flows over the time of its life at an appropriate rate of return for the risk associated with those cash flows

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Valuation of Financial Claims• For an asset with a one-year maturity, the

relationship between its value (price), cash flow and risk is given as follows:

• where:– F1 = cash flow from asset in year 1– r = rate of return required on asset

)1()( 1

0 rFPValue+

=

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• Value (P0) represents the asset’s equilibrium or intrinsic price– The price of the asset in a perfect capital

market– Based on the certainty of cash flows and

no imperfections within the capital market– No opportunity to make arbitrage profits by

trading on asset mis-pricing

Valuation of Financial Claims

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How much would you be prepared to pay for this financial asset?

Example:

BHP is currently offering an annual rate of return of 10%

0 1 year

$110value?

Valuation of Financial Claims

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• Example (Cont’d)– You have the opportunity to invest in an asset

providing a one-year cash flow of $110 and your required rate of return is 10%.

• You would be prepared to pay $100 now to receive the certain $110 cash flow a year from now

Valuation of Financial Claims

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• Would you pay more than $100 for that financial asset? NO/YES

• Would you pay less for that $100 for that financial asset? NO /YES

Valuation of Financial Claims

QUESTION

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• Money has a time value

• Money has a time value due to the existence of positive rates of interest

• Would always prefer to receive $1 today to $1 a year from today (or any future time)

Time Value of Money

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Assumption of Certainty• Future cash flows are risky (ie. uncertain)• Commonly investors are characterised as

risk averse• Risk aversion implies that increases in risk

require increases in return known as a risk premium.

• Appropriate discount rate for future cash flows must incorporate risk premium and time value of money.

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Perfect Capital Market

• Properties defined by Fama and Miller (1972):

1. No transactions costs2. Equal and costless access to information3. Market participants are price-takers4. Individuals and firms borrow and lend at same rate5. No taxes on interest rates or dividends

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Arbitrage• The equilibrium price of a security

should equal its value• Also, assets of equal risk should have

equal prices.• In the absence of this condition, arbitrage

profits arise.• Arbitrage profit is earned by taking no risk

and through the use of borrowed funds.

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Rates of return• Definition

• For a share:

1

1

PricePrice-Price

Returnt-

tt-tt

dividend+=

Capital Investedasset fromgain Net Return =t

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– Requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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Rate of return on securities

Rate of return on National Australia Bank shares and the S&P/ASX 200 index (7 March, 2005)

Example:

NAB opened on 4 March 2005 at $29.46 and opened on 7 March 2005 at $29.73.

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Rate of return on securities

Rate of return on National Australia Bank shares and the S&P/ASX 200 index (7 March, 2005)

Example:

S&P/ASX 200 Index closed on 4 March 2005 at 4220.4 and opened on 7 March 2005 at 4238.3

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This LecturePART I: INTRODUCTION• Teaching competence• Objectives • Potential careers targeted with this unit • Unit of study outline:

– contents– Requirements– learning outcomes– assessment

PART 2: PRELIMINARY CONCEPTS• Corporate objective of the firm & Corporate finance decisions• Nature of Assets (Real Vs. Financial)• Firm Valuation, Capital Markets & the Flow of Funds• Valuation of Financial Claims• Rates of Return on Securities• The “Market” Section & Financial Press

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‘Markets’ Section• You should be able to identify the

following: – Price at which stock last traded– Number of shares traded– Best unexecuted buying & selling prices– Bid-ask spread– Highest & lowest price over last year– Value of S&P/ASX 200

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‘Markets’ Section

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The financial press

Jupiters LtdJUP4.7804.94.255.9Jumbomail.comJUM0.00000.0180.036

COMPANY NAMEDAY’S HIGH

LOW52-WEEK HIGH

LOWASX

CODE

Extract from the Australian Financial Review markets section (25 October 2002)

Example:

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The financial press

Jupiters LtdJUP4.7804.94.255.9Jumbomail.comJUM0.00000.0180.036

COMPANY NAMEDAY’S HIGH

LOW52-WEEK HIGH

LOWASX

CODE

Extract from the Australian Financial Review markets section (25 October 2002)

Example:

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The financial press

Jupiters LtdJUP4.7804.94.255.9Jumbomail.comJUM0.00000.0180.036

COMPANY NAMEDAY’S HIGH

LOW52-WEEK HIGH

LOWASX

CODE

Extract from the Australian Financial Review markets section (25 October 2002)

Example:

Page 83: Lecture1_Introduction and Preliminary Concepts_USYD Students

83

The financial press

BUY SELLVOL 100s+/-

LAST SALECOMPANY NAME

ASX CODE

4.820.03

4.810.02

QUOTE

6860---

+14.820.023

Jupiters LtdJUPJumbomail.comJUM

Extract from the Australian Financial Review markets section (25 October 2002)

Example:

Page 84: Lecture1_Introduction and Preliminary Concepts_USYD Students

84

The financial press

BUY SELLVOL 100s+/-

LAST SALECOMPANY NAME

ASX CODE

4.820.03

4.810.02

QUOTE

6860---

+14.820.023

Jupiters LtdJUPJumbomail.comJUM

Extract from the Australian Financial Review markets section (25 October 2002)

Example:

Page 85: Lecture1_Introduction and Preliminary Concepts_USYD Students

85

The financial press

BUY SELLVOL 100s+/-

LAST SALECOMPANY NAME

ASX CODE

4.820.03

4.810.02

QUOTE

6860---

+14.820.023

Jupiters LtdJUPJumbomail.comJUM

Extract from the Australian Financial Review markets section (25 October 2002)

Example:

Page 86: Lecture1_Introduction and Preliminary Concepts_USYD Students

86

The financial press

BUY SELLVOL 100s+/-

LAST SALECOMPANY NAME

ASX CODE

4.820.03

4.810.02

QUOTE

6860---

+14.820.023

Jupiters LtdJUPJumbomail.comJUM

Extract from the Australian Financial Review markets section (25 October 2002)

Example:

Page 87: Lecture1_Introduction and Preliminary Concepts_USYD Students

87

The financial press

BUY SELLVOL 100s+/-

LAST SALECOMPANY NAME

ASX CODE

4.820.03

4.810.02

QUOTE

6860---

+14.820.023

Jupiters LtdJUPJumbomail.comJUM

Extract from the Australian Financial Review markets section (25 October 2002)

Example:

Page 88: Lecture1_Introduction and Preliminary Concepts_USYD Students

88

The financial press• Information can also be obtained

regarding the performance of different groupings of stocks

• Standard & Poors, on behalf of the ASX, calculates a range of indices that are designed to show the performance of particular sectors, particular types of stocks or the market overall

Page 89: Lecture1_Introduction and Preliminary Concepts_USYD Students

89

The financial press

SHARE PRICE INDICESOct-24Oct-23INDEX

-8.4-8.3

Var

2978.83023.6

2987.23031.9

All OrdinariesSP/ASX 200

Extract from the Australian Financial Review markets section (25 October 2002)

Example:

The closing value for each index for the previous two days indicates how much it has increased or decreased the previous day

Page 90: Lecture1_Introduction and Preliminary Concepts_USYD Students

90

What’s next?• Week 1 Tutorial problems to be discussed in

Lecture 2.• Building on these basic concepts:

– How to value an asset if there are multiple cashflowsin multiple periods – Chapter 2

– How to apply valuation to stocks & bonds – Chapter 3– Apply valuation to real assets to appraise investment

projects – Chapter 4– An overview of capital markets – Chapter 8 & 9