BMAN23000 Foundation of Finance (BMAN23000)

Here are summary notes for the second semester of the module Foundations of Finance (bman23000). It includes specific hints for the exams, such as percentages to remember, and longer explanations for potential questions. This is all you need for your final exam! The topics included are: Capital Budgeting, Options, Equity and Debt, Capital Structure, Payout policies, currency risk, m&a and interest rate risk, real options.

Covers types of mergers (horizontal, vertical, conglomerate), reasons for M&A (synergies, diversification, tax benefits), valuation techniques, takeover defenses (poison pills, staggered boards, golden parachutes), hostile vs friendly takeovers, and leveraged buyouts. Also includes a detailed section on interest rate risk management, interest rate swaps, and hedging strategies for corporate finance.

Crisp notes on currency risk management, interest rate parity, purchasing power parity, Fisher effects, international Fisher effect, forward rates vs spot rates, and exchange rate determinants.

Breakdown of private & public equity financing, IPO mechanics, underpricing, SEO, debt financing types, bonds, debt covenants, callable/puttable bonds, and capital raising strategies.

Focus on real options in project evaluation — timing, abandonment, expansion options, APV method, profitability index, and the link between real options and financial options like calls & puts.

Comprehensive notes on payout policies — dividends vs share repurchases, dividend smoothing, M&M dividend irrelevance theory, conservative & radical approaches, and market reactions to payout decisions.

Detailed look at agency problems in corporate finance — asset substitution, underinvestment, debt overhang, free cash flow issues, and solutions through debt restructuring or tangible asset usage.

Covers bankruptcy costs (direct & indirect), financial distress, trade-off theory for optimal capital structure, asymmetric information, and the pecking order theory for financing decisions.