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      WELCOME_OBA3105_INTRODUCTION TO FINANCE_BBAIB_ODL

      This is Introduction to Finance OBA 3105, a core subject in Bachelor of Business Administration in International Business (BBAIB)_ODL

      DESCRIPTION OF THE COURSE

      This module is designed to provide students with a strong foundation in finance that allows them to understand and apply the concepts in the world of finance as well as to focus their attention to certain issues they can further explore. which applicable for both in personal and managerial finance. At the end of the course, students can recognize relationship between finance and other business disciplines, as well as to be able to use synergy of those disciplines in decision making.

      AIM OF THE COURSE

      The overall aim of the module is to give students an exposure to the basic business finance theory both quantitative and qualitative with some simple applications.

      • Specific topics covered will include time value of money, the role of the financial markets in company financing, the nature and role of financial instruments, sources of financial information, evaluation of proposed capital expenditure, and cost of capital and the returns to providers of finance.
      • This is an introduction to the fundamental concepts of business finance. The students will be exposed to the time value of money concept, the assets evaluation, the capital budgeting, the capital structure, and the cost of capital, and working capital management.

      COURSE LEARNING OUTCOME

      At the end of the course the students will be able to:

      • Discuss the principles of finance and the roles of financial market that underline the finance discipline.(C2, PLO1)
      • Demonstrate the concept of time value of money and various decision making techniques in financial planning. (C3,PLO8)
      • Calculate the value of bonds and stock in a market place (C3,PLO8)

      SUPPORT AND CONTACT DETAILS

      • Name: Mimi Suriaty Binti Haji Abdul Rani
      • Email : msuriaty@nilai.edu.my
      • Consultation Hours: Wednesday (08:00 am – 10:00 am) and Thursday (08:00 am – 10:00 am


      Lecturer Image
◄Chapter 4 – Time Value of Money_Part 2Chapter 6 – Risk and Return_Part 1►

Chapter 5 – Capital Budgeting

  • Chapter 5 – Capital Budgeting

    CHAPTER 5: CAPITAL BUDGETING

    WEEK 7 (Lecture) and (Tutorial)

    SYNOPSIS / OVERVIEW

    Lesson 5 introduces the student on how a financial manager makes capital investment decisions using financial tools. It is especially the case that this lesson addresses the concept of capital budgeting and how to evaluate investment projects using the net present value calculations, internal rate of return criteria, profitability index, and the payback period method. This topic also will teach the student on how to determine which cash flows are relevant (should be considered) when making an investment decision.

    Here are the main topics to be covered in Chapter 5 (Week 7):

    • Net Present Value
    • The Payback Rule
    • The Average Accounting Return
    • The Internal Rate of Return
    • The Profitability Index
    • The Practice of Capital Budgeting

    LEARNING OUTCOMES

    By the end of this lesson, student should be able to:

    • Calculate the payback rule and its shortcomings.
    • Identify Accounting rates of return and their problems.
    • Calculate internal rate of return and its strengths and weaknesses.
    • Calculate net present value rule and why it is the best decision criteria.
    • Identify modified internal rate of return.
    • Calculate the profitability index and its relation to NPV.

    Capital Budgeting Analysis | Capital Planning & Budgeting

    REQUIRED READINGS

    Chapter 7: Investment Appraisal

    Titman, Keown, A. J. and Martin, J.D. (2018). Financial Management, (13th ed). Principles and Applications, Pearson Education.

    • SELF CHECK 5.1 : Online Discussion Forum
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      Tutorial (5) _Capital Budgeting calculations.

      ▪ Details: 2 questions

      ▪ Duration of submission: 1 week

       Question 1:

       ABX Company has the following mutually exclusive projects.

      Year

      Project A Cash Flow (RM)

      Project B Cash Flow (RM)

      0

      650

                     -700

      1

      100

      300

      2

      250

      -200

      3

      250

      550

      4

      200

      200

      5

      100

      80

        

      a.       Calculate the payback of Project A.                                                                                                            

      b.       Calculate the discounted payback of Project A at required return of 8 percent.                                   

      c.       Calculate the IRR of Project A.                                                                                                                      

      d.       Calculate the MIRR of project B. 

      e.       Using the NPV method and assuming a cost of capital of 8 percent, which of these projects should

                 be accepted.                   

      Question 2:

      A company is considering three possible capital investment projects, which have the following estimated cash flows (in $000):

       

      a.       Rank these projects in order of acceptability using:

                                            i.          Payback period.

                                           ii.          Net present value using a discount rate of 20%.

      b.       Assuming the projects are independent and indivisible and that the company has up to $1 million to

                invest:

                                  i.          Explain which projects should be accepted.

                                 ii.          Find the total net present value for the company’s total investment.

      c.       Calculate profitability indices for all the projects, and show which projects should be accepted, and

                what the total net present value will be, if the projects are independent and divisible, and the

                company has up to $1 million to invest.

      d.       Explain the advantages and disadvantages of the appraisal methods used in (a) above.

       



◄Chapter 4 – Time Value of Money_Part 2Chapter 6 – Risk and Return_Part 1►