BFC2140 · Corporate Finance
The Complete Exam Bible · S2 2026Corporate Finance
BFC2140 Corporate Finance is Monash University's second-year core unit in the Department of Banking and Finance, building the toolkit a financial manager uses to value assets and make investment, financing and payout decisions. It opens with two weeks of financial mathematics (time value of money, annuities, EAR and continuous compounding), applies it to bond and share valuation, then works through capital budgeting in three stages — decision rules (NPV/IRR/payback), incremental cash-flow analysis, and risk analysis with decision trees. The second half covers working-capital management, risk and return with the CAPM, the cost of capital and WACC, capital structure under Modigliani-Miller, and finishes with market efficiency and payout policy (including the Australian imputation/franking system).
It is assessed by Pearson MyLab post-class exercises (25%), a mid-semester test of 20 MCQ on Weeks 1-5 (25%), and a closed-book, fully invigilated on-campus final e-Exam worth 50% (2 hours 10 minutes, 50 marks, Sections A/B/C, formula sheet provided) covering all twelve weeks with extra emphasis on Weeks 5-12. No single-component hurdle is stated in the unit materials (confirm in your unit outline), but the 50% final is the dominant stake — and it is applied, rewarding students who pick the right valuation or capital-budgeting model under pressure rather than just plugging numbers into a formula.
What BFC2140 covers
The whole unit → one exam-ready map. Each topic links to its free chapter guide.
How BFC2140 is assessed
| Component | Weight | Format |
|---|---|---|
| Post-class Online Exercises (Pearson MyLab) | 25% | Five individual online exercises (max 5% each) in MyLab Finance, due Fri 11:55pm of teaching weeks 3, 4, 7, 10 and 12; a 2-day automatic grace period applies; covers LO 1-5 |
| Mid-Semester Test (MST) | 25% | Individual invigilated e-Assessment, 20 MCQ in two parts — Part A 10 x 0.5 mark (=5) and Part B 10 x 2 marks (=20), total 25 marks; tentatively Week 6; covers Weeks 1-5 (LO 1 & 2) |
| Comprehensive Final Exam (e-Exam) | 50% | Closed-book, fully invigilated, on-campus download/upload e-Exam, 2h10m, 50 marks; Section A 5 MCQ x2, Section B 5 numerical-answer x2, Section C 5 written-response =30; formula sheet provided in the platform; covers Weeks 1-12 (LO 1-5), more emphasis on Weeks 5-12 |
Constant-growth dividend-discount model (Section B numerical style)
- 1 markIdentify the model. Dividends grow at a single constant rate forever and rₑ > g (11% > 4%), so the constant-growth (Gordon) model applies: P₀ = D₁ / (rₑ − g).
- 1 markFind next year's dividend D₁ by growing the most recent dividend one period: D₁ = D₀(1 + g) = 2.00 × 1.04 = $2.08.
- 1 markSubstitute into the Gordon formula: P₀ = 2.08 / (0.11 − 0.04) = 2.08 / 0.07.
- 1 markCompute and round to two decimal places: P₀ = $29.71.
Key terms
- Time value of money (TVM)
- The principle that a dollar today is worth more than a dollar later because it can be invested to earn a return. Everything in BFC2140 — bond, share and project valuation — is an application of discounting future cash flows back to a present value at a risk-appropriate rate.
- Effective annual rate (EAR)
- The true annual return once intra-year compounding is included: EAR = (1 + r/m)^m − 1, where r is the nominal/APR rate and m the number of compounding periods per year. As m rises EAR approaches the continuous-compounding limit e^r − 1, so EAR (not APR) is the rate you compare deposits on.
- Net present value (NPV)
- The sum of a project's incremental cash flows each discounted to today at the required return, minus the initial outlay. The decision rule is accept if NPV > 0; NPV is the value-maximising criterion and is preferred to IRR whenever the two conflict.
- Weighted average cost of capital (WACC)
- The blended after-tax required return on a firm's capital: WACC = wₑ·rₑ + w_p·r_p + w_D·r_D(1 − T), using market-value weights. It is the discount rate for projects of average risk and the same financing mix as the firm.
- Modigliani-Miller (MM) propositions
- In a perfect market with no taxes, capital structure is irrelevant: firm value is unchanged (Proposition I) while the cost of equity rises linearly with leverage (Proposition II) so WACC stays constant. Adding corporate tax makes debt valuable through the interest tax shield: V_L = V_U + T·D.
BFC2140 FAQ
Is BFC2140 hard?
It is demanding but very learnable, because the whole unit is built on one idea — discount future cash flows to a present value — applied to bonds, shares, projects and the firm itself. The difficulty is breadth (twelve weeks from time value of money to capital structure) and the closed-book, applied final, which expects you to choose the right model under exam pressure rather than just plug numbers in. Students who keep up with the weekly MyLab exercises and drill worked problems in the Section A/B/C style consistently find it manageable.
Is there a hurdle requirement in BFC2140?
No single-component hurdle is stated in the available course materials, so on the available information you pass on the weighted total of the three components. The official FAQ does have a 'Is there a hurdle requirement?' entry whose answer was not captured here, so treat this as subject to confirmation — check your current unit outline or Moodle FAQ. Either way the 50% final is the dominant stake, so plan around it.
What is on the final exam and can I use a formula sheet?
The final is closed-book, fully invigilated and on-campus, runs 2 hours 10 minutes for 50 marks, and has three sections — Section A is 5 multiple-choice (2 marks each), Section B is 5 numerical-answer questions (2 marks each, pure numeric to two decimal places) and Section C is 5 written-response questions worth 30 marks, some requiring an Excel download/upload. A formula sheet is provided within the platform, so marks come from correct setup and the right model choice, not memorised formulas. It covers Weeks 1-12 with more emphasis on Weeks 5-12.
Can I use a calculator or AI in the assessments?
Yes to a calculator: a non-programmable physical financial calculator (HP 10bII+ or Casio FX) and/or an approved virtual financial calculator is permitted in the final. Generative AI tools cannot be used for any assessment in this unit — that prohibition is stated explicitly and repeatedly. In the final you also get up to five blank working sheets and a blank (unmarked) Excel.
What does the mid-semester test cover versus the final?
The MST (25%, tentatively Week 6) is 20 MCQ in two parts and covers Weeks 1-5 — financial mathematics, bond and share valuation, and capital budgeting decision rules and cash-flow analysis (LO 1 & 2). The final covers all twelve weeks but emphasises Weeks 5-12, so risk and return, cost of capital, capital structure and payout policy carry most of the new weight on the final paper.
How to study for the exam
Treat BFC2140 as one big discounting engine applied to different assets, not as a list of disconnected formulas. (1) Keep up with the weekly MyLab post-class exercises — they rehearse exactly the skill the MST and final reward, and they are 25% of your mark for steady effort. (2) Build a 'name-the-model' reflex: for every question first classify what you are valuing (a single cash flow, an annuity/perpetuity, a bond, a share, a project, or the whole firm) and which decision is being made, then reach for the matching formula — the final is explicitly applied, so model choice earns the marks. (3) Drill the two-decimal Section B discipline: pure numeric answers, no $/%/commas, two decimal places unless told otherwise. (4) Practise the Section C ritual — state the method, write the formula in symbols, substitute the numbers, compute, then interpret in one sentence — because every line of correct working earns marks. (5) Master the recurring computational set: bond pricing and YTM, the DDM (constant and multi-stage), NPV/IRR ranking conflicts, the incremental FCF table, decision-tree roll-back, the full multi-component WACC build, and dividend tax under imputation/franking. (6) The MST is your dress rehearsal for Weeks 1-5 — review it carefully, because time value of money and valuation underpin everything in the Weeks 5-12-heavy final.
