16655 Lecture Notes - Lecture 2: Market Depth, Liquidity Risk, Legal Risk

• School: UTS
• Department: Design, Architecture and Building
• Course: 16655
• Professor: Song Shi

Document Summary

An investment project with a positive npv will add to the value of existing business, thus will increase the wealth of corporate owners. If the calculated npv>=0, accept the project, and; if the calculated npv<0, reject the project. I(cid:374) the (cid:396)eal (cid:449)o(cid:396)ld, fe(cid:449) eit(cid:859)s (cid:449)ould atte(cid:373)pt to dete(cid:396)(cid:373)i(cid:374)e thei(cid:396) ideal capital structure by using the capm. Capital structures: gearing significantly reduced following the gfc as many reits raised equity to reduce their gearing and meet refinancing needs. Cost of debt swap rate: the swap rate is the benchmark rate used to settle all swap, forward rate agreement (fra), interest rate. Options for all inter-bank transactions and many corporate transactions. It is the interest rate that banks charge each other on inter bank loans. Cost of debt margins and fees: product margin: it is the cost margin for the bank to borrows those bbsw rates from the financial market. T(cid:455)pi(cid:272)all(cid:455) a (cid:271)a(cid:374)k(cid:859)s t(cid:396)easu(cid:396)(cid:455) ma(cid:396)gi(cid:374) is up to 0. 50%