PLEASE COLLECT THE

MATERIALS ON THE CHAIR

BESIDE THE DOOR
 SPECIAL ANNOUNCEMENT
TUTORIAL ON FEB. 15TH(THURSDAY) WILL BE CANCELLED DUE TO LUNAR
NEW YEAR
STUDENTS ON THAT DAT CAN GET MARK OF ATTENDANCE
MAKE-UP TUTORIAL IS OPTIONAL AND SUBMIT THE APPLICATION FORM
TO ME AFTER CLASS OR TO BOX OF BRIAN ON KKL 9TH FLOOR
FINA1310HIJ-CORPORATE
FINANCE
TUTORIAL ONE
BRIAN AND RAY
Contents
1. Rules for attendance and participation
2. Core ideas review
3. Go with financial calculator
4. Quiz with bonus
RULES FOR ATTENDANCE AND
PARTICIPATION
If you want to change your tutorial timeslot due to special reasons (e.g.
sick, interview…etc), please write an email to Brian (briantcw@hku.hk)
IN ADVANCE. If you go to another tutorial timeslot without his
approval, your attendance will NOT be taken. In the email, please
provide with your name, UID, originally timeslot and several
preferred timeslots.

If you were sick and could provide us with medical certificate, then
you can still get the point for attendance without attending another
tutorial.
Attendance
Call the roll before all 10 tutorials
0.5% grade will be subtracted when you are absent
in one tutorial

Participation
Every tutorial includes quiz with bonus
The first one who answer the question correctly will get a bonus of 0.5%
grade, which is effective when you are absent in one tutorial

Conclusion
One tutorial absence can be compensated by one correct
answer(need to be first)
The maximum grades are 5%
CORE IDEAS REVIEW
Chapter 1: Introduction to Corporate Finance
Three Forms of Business Organization
Sole Proprietorship
Partnership
Corporation
The Agency Problem
Financial Markets
Primary Markets vs. Secondary Markets
Chapter 5: The Time Value of Money
Drawing Timeline
Present Value and Future Value
FV = PV ×(1+r)t

Present Value (Discount) Factor

1 / (1+r)t

PV of Multiple Cash Flows

C1 C2 Cn
PV    ...
(1  r )1 (1  r ) 2 (1  r ) n
Conclusion: identify the 4 elements

PV (Time 0 as of now)
FV (Time T in the future)
r (Rate of Return in %)
N (Number of periods)
GO WITH FINANCIAL
CALCULATOR
The keyboard
ON|OFF = open/off the calculator
FV = Future Value
PV = Present Value
I/Y = Period Interest Rate（no need to input %）
N = Number of Periods
CPT = Compute
→ = Delete one number
CE|C = Clear all numbers
2ND = Use the second function
+|- = the sign of number

Calculation
Input the variables we already know regardless of the sequence
When inputting the variables, first number, then sign ,finally function（5 +|- PV）
Press CPT and function to get the answer (CPT FV)
Must Press 2nd CLR TVM for removing memory after solving each problem
At least one of the cash flow parameters must be negative
QUIZ WITH BONUS
Question 1 (Chapter 5: Future Values)
You have just made your first 5,000 contribution to your retirement account.
Assuming you earn an 8% rate of return and make no additional contributions,
what will your account be worth when you retire in 45 years? What if you wait 5
years before contributing?

Mathematical computation
FV = PV ×(1+r)t
5000 × (1 + 0.08)45 = 159602.25.
5000 × (1 + 8%)40 = 108622.61

How to use calculator

Press 2nd CLR TVM
Press CE|C
Press -5000 PV
Press 8 I/Y
Press 45 N
Press CPT FV >> 159,602.25
Question 2 (Chapter 5: Rate of Return)
Although appealing to more refined tastes, art as a collectible has not always
performed so profitably. During 2003, Sotheby’s sold the Edgar Degas bronze
sculpture Petite Damseuse de Quatorze Ans at auction for a price of
$10,311,500. Unfortunately for the previous owner, he had purchased it in 1999
at a price of $12,877,500. What was his annual rate of return on this sculpture?

Mathematical computation
FV = PV ×(1+r)t
12877500 × (1 + 𝑟)4 = 10311500
Solving, r = -5.4%

How to use calculator

Press 2nd CLR TVM
Press CE|C
Press -12877500 PV
Press 10311500 FV
Press 4 N
Press CPT I/Y >> -5.4
Question 3 (Chapter 5: PV and Number of periods)
You’re trying to save to buy a new €160,000 Porsche. You have €40,000 today that can
be invested at your bank. The bank pays 3 percent annual interest on its accounts.

a. How long will it be before you have enough to buy the car?
b. Suppose you are still committed to owning this €160,000 new Porsche. If you believe
your mutual fund can achieve an 14 percent annual rate of return and you want to buy
the car in 10 years on the day you turn 30, how much must you invest today?

Mathematical computation
FV = PV ×(1+r)t
a. 40000 × (1 + 0.03)𝑁 = 160000
Solving, N = 46.9 years.

b.P𝑉 × (1 + 0.14)10 = 160000

we can solve that PV = €43159.01

How to use calculator

Press 2nd CLR TVM
Press CE|C
Press -40000 PV
Press 160000 FV
Press 3 I/Y
Press CPT N >> 46.9
Question 4 (Chapter 5: PV of Multiple Cash Flow)
You have two choices in paying 3-years insurance saving plan in Prudential.
Given your discount rate is 7%, which payment method would you prefer?

a. Pay $16,500 for the insurance premium now, or

b. Make three payments: $8000 now and $4,500 at the end of the following
two years.
Mathematical computation
In this question we have to compare the present values of the two payment
options. The PV of first payment equals $16500, obviously. For the second
payment, the present value is shown in the following formula:
4500 4500
PV = 8000 + 1+0.07 + (1+0.07)2 = 16136.08
How to use calculator
Press 2nd CLR TVM
Press CE|C
Press 4500 FV
Press 7 I/Y
Press 1 N
Press CPT PV >> -4205.61
PLEASE COLLECT THE QUIZ
MATERIALS IN THE FRONT
THANK YOU