THE COPPERBELT UNIVERSITY
DIRECTORATE OF DISTANCE AND OPEN LEARNING
BEC 442
CORPORATE FINANCE AND INVESTMENTS
MR. CHONGO ALBERT.
© 2016
BEC 442: Corporate Finance & Investment
,Copyright Notice-CBU
,Acknowledgements
I am really grateful for the assistance in typing as well as putting the work together by Miss
Grace Mambwe. I would also sincerely thank my fellow lecturers in the Economics
departments for their valuable insights in this work.
, TABLE OF CONTENTS
Course Outline i
Copyright Notice iii
Acknowledgement iv
Module Overview v
Module Objectives vi
Unit 1. Corporate finance and value creation 1
Unit 2 Forms of business Organisations 5
TIME VALUE OF MONEY
Unit 3: Future Value 11
Unit 4: Future Value Vs Compounding 16
UNIT 5: Present Value and Discounting 22
Unit 6: Perpetuities 27
Unit 7: Annuities 30
Unit 8: Special Application for the Time Value of Money 36
Unit 9: Financing Decisions 43
Unit 10: Valuation of Common Stock 51
Unit 11: Earnings 60
Unit 12: Appraising Investment Opportunities 63
Unit 13: Risk and Return 72
Unit 14: Covariance, Correlation and Mean-Variance 76
Unit 15: Risk Free investment and Risky Investment 82
Unit 16: Efficient Frontier and CAPM 87
UNIT 17: Capital Structure and Pay-out Policy 92
Unit 18 Capital Structure and the Value of a firm 124
Unit 19 Pecking Order Theory 102
Unit 20: Pay out Policy and the Value of a firm 105
Unit 21 Clientele Theory 109
Unit 22: Efficient Market Hypothesis (EMH) 111
Unit 23: Equity Financing 120
Unit 24: Debt Financing 128
Unit 25: Leasing 139
UNIT 26: Options and Calls in Corporate Finance 145
DIRECTORATE OF DISTANCE AND OPEN LEARNING
BEC 442
CORPORATE FINANCE AND INVESTMENTS
MR. CHONGO ALBERT.
© 2016
BEC 442: Corporate Finance & Investment
,Copyright Notice-CBU
,Acknowledgements
I am really grateful for the assistance in typing as well as putting the work together by Miss
Grace Mambwe. I would also sincerely thank my fellow lecturers in the Economics
departments for their valuable insights in this work.
, TABLE OF CONTENTS
Course Outline i
Copyright Notice iii
Acknowledgement iv
Module Overview v
Module Objectives vi
Unit 1. Corporate finance and value creation 1
Unit 2 Forms of business Organisations 5
TIME VALUE OF MONEY
Unit 3: Future Value 11
Unit 4: Future Value Vs Compounding 16
UNIT 5: Present Value and Discounting 22
Unit 6: Perpetuities 27
Unit 7: Annuities 30
Unit 8: Special Application for the Time Value of Money 36
Unit 9: Financing Decisions 43
Unit 10: Valuation of Common Stock 51
Unit 11: Earnings 60
Unit 12: Appraising Investment Opportunities 63
Unit 13: Risk and Return 72
Unit 14: Covariance, Correlation and Mean-Variance 76
Unit 15: Risk Free investment and Risky Investment 82
Unit 16: Efficient Frontier and CAPM 87
UNIT 17: Capital Structure and Pay-out Policy 92
Unit 18 Capital Structure and the Value of a firm 124
Unit 19 Pecking Order Theory 102
Unit 20: Pay out Policy and the Value of a firm 105
Unit 21 Clientele Theory 109
Unit 22: Efficient Market Hypothesis (EMH) 111
Unit 23: Equity Financing 120
Unit 24: Debt Financing 128
Unit 25: Leasing 139
UNIT 26: Options and Calls in Corporate Finance 145
