Corporate Finance Exam Notes
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1) Exam structure and how marks are earned
Duration: 2h 15m. Answer all questions.
Section A: 30 marks (News analysis) · Section B: 70 marks (Mini-case)
Section A
- 1–2 page article, 3 questions.
- Be concise: ~4 sentences per question; may be a sentence limit.
- Topics: corporate governance, capital structure, payout, raising capital.
- Do not write essays. Use course concepts, not paraphrase.
Section B
- Covers cash management, financing, valuation (cost of capital, capital budgeting, M&A).
- Show all steps to earn partial credit (formula → numbers → compute).
- If needed, make a reasonable assumption and state it.
- Interpretation can be ~40–50% of marks.
2) Section A: what to study and how to answer
The exam tests whether you can map the article to the right theory and evidence.
Prepare a compact toolkit for each area:
- Corporate governance: agency problems, governance mechanisms, what evidence suggests.
- Capital structure: MM, trade-off, pecking order, market timing/entrenchment.
- Payout policy: dividend smoothing (Lintner), signaling, dividends vs buybacks.
- Raising capital: IPO methods, underpricing, performance patterns, PE/VC incentives.
Section A answer template (4 sentences):
- Issue in the article.
- Relevant theory (defined in context).
- Apply to the facts.
- Implication (market reaction / incentives / CFO risk).
3) Section B: what to study (mini-case syllabus)
Cash management
- Ratios, working capital, sources & uses, pro formas, cash budget.
- Main risk: interpreting what numbers imply operationally.
Financing
- Debt vs equity trade-offs, maturity matching, numeric mechanics (pricing/dilution/cost).
Valuation
- FCF build (include opportunity costs/externalities; exclude sunk costs/irrelevant overhead).
- Terminal value logic; discounting with WACC.
- EV to equity bridge and share price step (common last-step miss).
- M&A basics: comps vs precedent transactions, merger premium, performance measures.
4) What to do during the exam
Time allocation: ~40 min Section A, ~95 min Section B.
Maximise partial credit:
- formula → substitution → calculation → interpretation
- If stuck, assume reasonably and continue.
You will have a printed formula sheet; focus on application, not memorisation.
5) Last-mile checklist
Section A: issue → theory → apply → implication (in 4 sentences).
Section B: FCF + ΔNWC + CAPEX + terminal value, discount with WACC, then interpret results.