BFF2140 Business Finance
The Complete Exam Bible · S2 2026BFF2140 Overview
- Monash University
- S2 2026
- 9 chapters
- Finance
BFF2140 Business Finance develops the financial reasoning used to value securities, choose investments and understand how firms fund and distribute value. The unit begins with the time value of money, because every later method depends on putting cash flows at a common date.
- Cash-flow timing Put every cash flow on a timeline before selecting a valuation relation.
- Project choice Use NPV as the primary project value rule and state the decision explicitly.
- Risk pricing Diversification removes specific risk, while beta prices systematic exposure.
- Financing cost Use market-value financing weights and match the discount rate to project risk.
What you get in the full BFF2140 Exam Bible
- 9 chapters, 43 pages — every examinable topic, week by week
- 27 original practice questions, most with model answers in the Comprehensive Final Examination format
- 9 worked examples, solved the way BFF2140 marks
- 9 computed figures, redrawn from the course’s own numbers
- Exam-morning plan for the Comprehensive Final Examination (50%) — what to revise last, where marks are lost
Free on this page: assessment table, chapter map, one worked example, key terms, FAQ. The rest is in the full exam bible.
How BFF2140 is assessed
| Component | Weight | Format |
|---|---|---|
| Post-class Online Exercises | 25% | Individual exercises completed during the teaching period, with the current schedule listing the submission weeks and dates. |
| Mid-semester Test | 25% | Individual in-semester test. The formal test guidance places it in Week 6 and the current FAQ gives the scheduled date. |
| Comprehensive Final Examination | 50% | Individual on-campus, closed-book and fully invigilated examination covering Weeks 1 to 12, with emphasis on Weeks 5 to 12. Total duration is two hours and ten minutes including reading time. A platform formula sheet is supplied. |
What other students are asking about BFF2140
- Where can I find lecture notes or study guides for BFF2140 at Monash?
- The BFF2140 study guide in AskSia Library covers Business Finance in 9 chapters, with the assessment table, a chapter-by-chapter topic map, key terms and a worked example, free to read on this page.
- Is there a final exam in BFF2140, and how much is it worth?
- Yes. In the offering this AskSia Library guide is built from, Comprehensive Final Examination carries 50% of the BFF2140 mark; the full split is Post-class Online Exercises 25%, Mid-semester Test 25%, Comprehensive Final Examination 50%.
- What does BFF2140 cover on bond and equity valuation?
- In AskSia Library's BFF2140 guide, the Bond and Equity Valuation chapter explains week 2. Bond cash flows, yield and price, ordinary shares, dividend growth and valuation assumptions.
- What does BFF2140 cover on capital budgeting methods?
- In AskSia Library's BFF2140 guide, the Capital Budgeting Methods chapter explains week 3. NPV, IRR, payback, profitability index, project ranking and capital rationing.
- What does BFF2140 cover on project cash flows and replacement?
- In AskSia Library's BFF2140 guide, the Project Cash Flows and Replacement chapter explains weeks 4 and 5. Incremental free cash flow, tax, working capital, replacement and project comparison.
Current BFF2140 dates
| Date | Item | Control |
|---|---|---|
| Week 6 | Mid-semester Test | The test contributes 25% of the unit result. |
| 2 to 20 November 2026 | Monash examination period | The exact final examination date is not stated in the course materials; use the personalised timetable. |
Dates are as published in the Semester 2, 2026 course schedule and final examination FAQ. Confirm exact deadlines and submission settings in the live LMS.
What BFF2140 covers
Nine connected chapters take you from cash-flow timing and security valuation to project choice, risk, financing and payout policy, with every method tied to a decision.
Time Value of Money
Weeks 1 and 2. Cash-flow timelines, compounding, discounting, annuities, perpetuities and effective annual rates.Time Value of Money turns cash flows at different dates into comparable values.
- Cash-flow timelines and time 0
- Future value and compounding
- Present value and discounting
- Ordinary annuities and annuities due
- Perpetuities and growing cash flows
- Nominal and effective annual rates
Bond and Equity Valuation
Week 2. Bond cash flows, yield and price, ordinary shares, dividend growth and valuation assumptions.Bond and Equity Valuation applies discounted cash flow to financial securities. A bond combines coupon payments with face value, while an ordinary share represents uncertain residual cash flows.
- Bond coupon and face value
- Yield to maturity
- Premium and discount pricing
- Zero-coupon bonds
- Dividend discount valuation
- Constant dividend growth
Capital Budgeting Methods
Week 3. NPV, IRR, payback, profitability index, project ranking and capital rationing.Capital Budgeting Methods compare long-lived investments using NPV, IRR, payback and profitability index. NPV remains the primary value rule because it uses all incremental cash flows, recognises their timing and applies an opportunity cost of capital.
- Net present value
- Internal rate of return
- Payback period
- Profitability index
- Mutually exclusive projects
- Capital rationing
Project Cash Flows and Replacement
Weeks 4 and 5. Incremental free cash flow, tax, working capital, replacement and project comparison.Project Cash Flows and Replacement converts accounting forecasts into incremental after-tax cash flows. Revenue, cash costs, depreciation tax effects, capital expenditure, working capital and terminal proceeds must be placed at their correct dates.
- Incremental cash flow
- Sunk and opportunity costs
- Depreciation tax shield
- Working-capital investment
- Terminal cash flow
- Replacement analysis
International Finance and Working Capital
Week 7. Exchange rates, forward hedging, foreign projects, operating cycles and short-term financing.International Finance and Working Capital links foreign-currency exposure to the firm's short-term cash cycle.
- Spot exchange rates
- Direct and indirect quotations
- Forward contracts
- Foreign project valuation
- Operating and cash cycles
- Short-term financing
Risk, Diversification and CAPM
Weeks 8 and 9. Expected return, variance, covariance, portfolio risk, beta, the SML and CAPM.Risk, Diversification and CAPM separates an asset's standalone volatility from its contribution to a portfolio. Expected return is weighted linearly, but portfolio variance also depends on covariance and correlation.
- Expected return
- Variance and standard deviation
- Covariance and correlation
- Portfolio diversification
- Beta and systematic risk
- CAPM and the SML
Cost of Capital and WACC
Week 10. Market-value weights, after-tax debt cost, equity cost and project discount rates.Cost of Capital and WACC combines investor required returns into a firm-level opportunity cost. Debt, preference shares and ordinary equity are estimated separately, then weighted by current market values.
- Cost of debt
- Cost of preference shares
- Cost of ordinary equity
- Market-value weights
- After-tax WACC
- Project-specific discount rates
Capital Structure and Financial Distress
Week 11. MM propositions, tax shields, distress, agency conflicts and financing order.Capital Structure and Financial Distress asks when financing choices change firm value. MM begins with irrelevance in perfect capital markets, then corporate tax adds the value of interest tax shields.
- MM Proposition I
- MM Proposition II
- Interest tax shields
- Financial distress costs
- Agency conflicts
- Pecking-order reasoning
Market Efficiency and Payout Policy
Week 12. Information sets, event responses, behavioural limits, dividends, repurchases and retention.Market Efficiency and Payout Policy examines how information enters prices and how firms distribute residual cash.
- Weak-form efficiency
- Semi-strong efficiency
- Strong-form efficiency
- Event-study response
- Cash dividends
- Share repurchases and retention
It then values bonds and shares, compares projects with NPV and related methods, and builds incremental project free cash flow from operating, tax, capital expenditure and working-capital effects.
The later weeks connect international cash flows and short-term finance to portfolio risk, diversification, beta, CAPM, WACC, capital structure, market efficiency and payout policy.
The assessment structure is three equal-purpose stages with different weights: post-class online exercises are 25%, the mid-semester test is 25%, and the comprehensive final examination is 50%.
The final covers Weeks 1 to 12 with emphasis on Weeks 5 to 12. Official final guidance describes a closed-book, fully invigilated, on-campus examination lasting two hours and ten minutes including reading time. It states that the paper contains three sections and that a formula sheet is supplied through the examination platform.
One internal wording conflict calls Section B short answer in the overview but numerical answers in the detailed description, so preparation should cover both concise explanation and accurate calculation.
The practical thread is disciplined cash-flow thinking.
Draw dates before entering calculator inputs, keep rates consistent with cash-flow frequency, use market values in WACC and separate diversifiable risk from systematic risk. Each numerical answer should finish with an economic conclusion: accept or reject, premium or discount, sufficient or insufficient return, value gained or value transferred.
This guide therefore treats formulas as decision tools rather than isolated identities.
Worked example · free
Select a project with NPV and explain the decision
- 1Place the initial cost at time 0 as a negative cash flow and the four inflows at the ends of years 1 to 4. The marks shown in this model are an original practice allocation, not a published university marking scheme.
- 2Discount each inflow at 10%: 52,000/1.10 + 65,000/1.10^2 + 72,000/1.10^3 + 68,000/1.10^4.
- 2The present value of the inflows is $201,531.32, so NPV is $201,531.32 less $180,000, or $21,531.32. This practice weighting is not an official assessment scheme.
- 1Accept the project because positive NPV means expected value exceeds the required return, subject to the estimates being credible.
- 1Payback is incomplete because it ignores the time value of money and cash flows after the cutoff date.
Key terms
- Present value
- The value today of a future cash flow after discounting at the required return.
- Effective annual rate
- The annual rate that includes the effect of compounding within the year.
- Yield to maturity
- The discount rate that equates a bond's promised cash flows with its current price.
- Net present value
- The present value of incremental benefits less the present value of incremental costs.
- Free cash flow
- After-tax operating cash flow after capital expenditure and changes in working capital.
- Operating cycle
- The time from acquiring inventory until cash is collected from the resulting sale.
- Diversification
- Combining imperfectly correlated assets to reduce portfolio-specific risk.
- Systematic risk
- Market-related risk that remains in a well-diversified portfolio and is measured by beta.
- Capital asset pricing
- A model linking required return to the risk-free rate, beta and the market risk premium.
- Weighted average cost
- The market-value weighted required return on debt and equity financing after the debt tax adjustment.
- Tax shield
- The reduction in tax created by a deductible financing or operating expense.
- Market efficiency
- The speed and lack of predictable bias with which prices incorporate a defined information set.
- Payout policy
- The choice between retaining cash and distributing it through dividends or share repurchases.
BFF2140 FAQ
How difficult is this unit?
The evidence points to breadth and timing pressure rather than a published difficulty rating. Half of the unit result comes from a closed-book final lasting two hours and ten minutes, and that paper covers Weeks 1 to 12 with extra emphasis on Weeks 5 to 12. Success depends on recognising the correct method quickly, keeping cash-flow timing consistent and explaining the decision after calculating.
What is the assessment structure?
Post-class online exercises contribute 25%, the mid-semester test contributes 25%, and the comprehensive final examination contributes 50%. The official handbook records all three as non-hurdle tasks, and the final-exam FAQ explicitly says the final itself is not a hurdle. The exact personal examination date must be checked in the Monash timetable.
What is the final exam format?
The final is an on-campus, closed-book and fully invigilated examination lasting two hours and ten minutes including reading time. It covers Weeks 1 to 12, with emphasis on Weeks 5 to 12, and contains three sections. The FAQ conflicts on whether Section B is short answer or numerical answer, so prepare for both forms and follow the live paper instructions.
Is a formula sheet provided in the final?
Yes. The final-exam FAQ says the formula sheet is provided through the examination platform. That does not remove the need to know when each relation applies. Revision should focus on cash-flow timing, rate consistency, sign conventions and interpreting the result, because choosing the wrong model cannot be repaired by having the formula visible.
Are past final papers available here?
The available materials contain a 2026 mid-semester test with answers and feedback, a mock mid-semester test, final practice questions with solutions, and tutorial solutions. They do not contain a past final examination paper. The practice in this guide is therefore original and follows the demonstrated question types without copying or lightly rewriting proprietary stems.
How should I use a financial calculator?
Treat the calculator as the final execution step. First draw the timeline, label time 0, identify payment frequency and decide whether the rate is nominal, periodic or effective. Then enter consistent values and independently check the direction of the answer. A bond yield above the coupon should produce a discount, and discounting should never make a positive future amount larger today.
What should I revise first before the final?
Begin with incremental project cash flow, NPV and replacement decisions because the final places emphasis on Weeks 5 to 12 and later topics rely on valuation logic. Then drill portfolio risk, CAPM, WACC and capital structure. Finish with international finance, working capital, market efficiency and payout policy, while keeping short daily reviews of time value, bonds and shares.
Questions students ask in each BFF2140 chapter
- Why is a dollar today worth more?
- A dollar today can be invested to earn a return, while a promised future dollar carries timing and risk. The relevant comparison is therefore not nominal amounts alone but their values at the same date using an appropriate rate. Chapter 01 · Time Value of Money
- Why do bond price and yield move inversely?
- The promised coupons and face value are fixed. When investors require a higher yield, those same cash flows are discounted more heavily, so present value falls. A lower required yield raises present value. Chapter 02 · Bond and Equity Valuation
- Why is NPV preferred?
- NPV measures expected dollar value added using all incremental cash flows and their timing. It also applies a required return suited to risk, so its accept or reject rule aligns directly with value creation. Chapter 03 · Capital Budgeting Methods
- Why exclude sunk costs?
- A sunk cost has already occurred and is identical whether the project is accepted or rejected. Because the decision cannot change it, including it would distort the comparison of future alternatives. Chapter 04 · Project Cash Flows and Replacement
- Why does quotation direction matter?
- An exchange rate states units of one currency per unit of another. Reversing the quotation changes whether conversion requires multiplication or division, so label both currencies before calculating. Chapter 05 · International Finance and Working Capital
- Why is portfolio risk not a weighted average?
- Risk depends on how returns move together as well as each asset's volatility. The covariance term can reduce total variance when correlation is below one, which is the mathematical source of diversification. Chapter 06 · Risk, Diversification and CAPM
- Why use market values?
- Required returns apply to capital at today's opportunity cost. Market values reflect the current economic amounts supplied by investors, while historical book values can be far removed from those amounts. Chapter 07 · Cost of Capital and WACC
- Why does cheap debt not always lower WACC?
- In the no-tax MM setting, more debt makes the residual equity claim riskier. Shareholders demand a higher return, and that offset keeps the overall asset required return unchanged. Chapter 08 · Capital Structure and Financial Distress
- Does efficiency mean prices are perfect?
- No. Efficiency means that a defined information set is incorporated quickly enough that predictable abnormal profit is unavailable after risk and costs. Prices can still differ from later realised value. Chapter 09 · Market Efficiency and Payout Policy
How to study for the exam
Study BFF2140 as one connected decision system. First, build a compact timeline routine: mark time 0, cash-flow dates, compounding frequency and the requested date. Second, solve security and project questions with signs visible and finish every result with its meaning.
Third, practise converting accounting inputs into incremental free cash flow, especially tax, depreciation, opportunity costs, working capital and terminal effects. Fourth, connect portfolio variance to diversification, beta to CAPM and CAPM to the equity input in WACC.
Fifth, keep theory conditional: MM irrelevance needs perfect-market assumptions, tax shields add value only under the stated financing pattern, and efficiency claims always refer to an information set. Use the supplied 2026 mid-semester materials for early-topic timing and the final practice set for later-topic question types, but write fresh solutions from a blank page.
In the final week, alternate one timed numerical set with one explanation set each day. Review errors by cause, such as wrong date, wrong sign, mismatched rate, incorrect denominator or missing decision sentence, rather than merely recording the topic name.
Your AI Finance tutor for BFF2140
Stuck on a hard BFF2140 question? Sia is AskSia’s AI Finance tutor — ask any BFF2140 Business Finance question and get a clear, step-by-step explanation grounded in how the course is actually taught and assessed. Read this whole study guide free, then take your hardest questions to Sia.
