CFA Corporate Finance Level 2

Corporate Finance CFA Level 2: Master Capital Budgeting, Capital Structure & Dividends

Unlock your potential in corporate finance with this comprehensive CFA Level 2 course. This course delves into the Corporate Finance Paper, providing in-depth knowledge and practical skills for success.

Course Coverage:

• Capital Budgeting: Master capital budgeting techniques including calculating yearly cash flows for expansion and replacement projects. Understand the impact of depreciation methods on cash flow analysis. Learn to evaluate projects with unequal lives using the least common multiple of lives and equivalent annual annuity approaches. Explore capital rationing scenarios.
• Capital Structure: Gain a thorough understanding of capital structure principles. Learn to analyze the effects of leverage, taxes, financial distress, agency costs, and asymmetric information on a company's cost of equity and cost of capital. Explore target capital structure and factors influencing its fluctuation.
• Dividends and Share Purchases: Analyze dividend policy theories and their impact on share value. Understand the signals conveyed by dividend initiations, increases, decreases, and omissions. Learn about clientele effects and agency issues affecting payout policy. Calculate and interpret dividend coverage ratios using net income and free cash flow.

Learning Approach:

This course utilizes a self-paced learning style, allowing you to learn at your own speed. For optimal learning, we recommend:

• Taking screenshots of case studies for future reference.
• Actively engaging with the material using a notebook, pen, or MS Excel.
• Solving problems alongside the instructor to enhance understanding.

Key Learning Outcomes:

Upon completion of this course, you will be able to:

• Calculate and interpret yearly cash flows for capital projects and assess the impact of depreciation methods.
• Explain the influence of inflation on capital budgeting analysis.
• Evaluate capital projects in mutually exclusive scenarios with unequal lives using various methods.
• Apply techniques for capital rationing.
• Assess the stand-alone risk of capital projects using sensitivity analysis, scenario analysis, and Monte Carlo simulation.
• Calculate and interpret the discount rate using market risk methods.
• Describe and evaluate real options in capital budgeting.
• Identify and avoid common capital budgeting pitfalls.
• Distinguish between accounting income and economic income in capital budgeting.
• Evaluate capital projects using economic profit, residual income, and claims valuation models.
• Explain Modigliani-Miller propositions related to capital structure.
• Describe the role of debt ratings in capital structure policy.
• Analyze the impact of capital structure policy on valuation.
• Understand international differences in financial leverage and their implications.
• Compare and contrast theories of dividend policy.
• Analyze the signals conveyed by dividend actions.
• Understand clientele effects and agency issues in dividend policy.
• Calculate and interpret the effective tax rate under various tax systems.
• Compare different dividend payout policies (stable, constant ratio, residual).
• Evaluate the choice between cash dividends and share repurchases.
• Identify characteristics of companies vulnerable to unsustainable dividends.

Teaching Background:

The course incorporates the Indian scenario through relevant case studies to enhance understanding.

We wish you the best in your CFA journey!