FNCE20005 · Corporate Financial Decision Making
The Complete Exam Bible · S1 2026Corporate Financial Decision Making
Corporate Financial Decision Making is UniMelb's core second-year corporate-finance subject — the Australian-flavoured sequel to Principles of Finance. It drills the method behind every examinable model: discount a cash flow, value a project with NPV and IRR, price risk with the CAPM, find the WACC under Australia's dividend-imputation system, weigh how much debt to carry, set payout policy, and value real options and takeovers. Both the final and the mid-semester test provide a formula sheet, so memorising formulae earns nothing — marks come from knowing which formula a question wants, plugging the right inputs (market not book values, after-tax not pre-tax), and finishing the arithmetic. 85% of your grade sits on these two timed papers.
What FNCE20005 covers
Seven exam topics → one exam-ready map. Each links to its free chapter guide.
How FNCE20005 is assessed
| Component | Weight | Format |
|---|---|---|
| Final exam | 60% | End of semester · cumulative · formula sheet provided |
| Mid-semester test | 25% | Week 6 · 1 hr · covers Lectures 1–5 · formula sheet provided |
| Tutorial participation & assignments | 10% | Across the semester · pass/fail on serious attempt, lowest dropped |
| Individual homework (Canvas) | 5% | Online MCQs — confirm the exact split in your subject guide |
Capital budgeting — the NPV decision, mark by mark
- +1Lay out the cash flows on a timeline: −$100,000 at t=0, then +$40,000 at t=1, 2 and 3.
- +2Discount each inflow: 40,000/1.10 = 36,364; 40,000/1.10² = 33,058; 40,000/1.10³ = 30,053.
- +1Sum the present values of the inflows: 36,364 + 33,058 + 30,053 = $99,475.
- +1NPV = PV(inflows) − outlay = 99,475 − 100,000 = −$525.
- +1Decide: NPV < 0, so reject — the project does not cover its 10% cost of capital.
Key terms
- Net present value (NPV)
- The value a project adds today: the present value of its free cash flows discounted at the required return, minus the initial outlay. Accept if NPV > 0, reject if NPV < 0.
- Weighted average cost of capital (WACC)
- The blended after-tax return a firm must earn to satisfy both debt and equity holders — the hurdle rate used to discount a project of average firm risk. Inputs are market weights, the after-tax cost of debt, and the cost of equity.
- CAPM
- The capital asset pricing model: required return = risk-free rate + beta × the market risk premium. It prices the cost of equity off a single risk measure, beta, read along the security market line (SML).
- Dividend imputation
- The Australian tax system that attaches franking credits to dividends so company tax already paid is credited to resident shareholders — it lowers the effective tax rate on equity and reshapes WACC, payout and capital-structure decisions.
- Capital structure
- The mix of debt and equity a firm uses to finance itself. Modigliani-Miller shows the mix is irrelevant in a frictionless world; adding tax, distress and information makes it matter.
FNCE20005 FAQ
Is FNCE20005 hard?
It is procedural rather than conceptually deep: a small set of calculation chains — discount a cash flow, value a project, find the WACC, weigh the capital structure — applied to fresh numbers. The difficulty is precision under time pressure, since 85% of the grade sits on two timed papers and a wrong input (book instead of market values, pre- instead of after-tax) costs the marks even when the method is right.
How is FNCE20005 assessed?
The final exam is 60% and the mid-semester test (Week 6, covering Lectures 1–5) is 25% — 85% on two timed papers, both with a formula sheet provided. The rest is tutorial participation and assignments (about 10%, marked pass/fail on serious attempt) and individual Canvas homework (about 5%); confirm this year's exact split in your subject guide.
What is on the FNCE20005 exam?
Time value of money, capital budgeting (NPV, IRR, free cash flow), risk and the CAPM, the cost of capital and WACC under dividend imputation, capital structure (MM, trade-off, pecking order), payout policy, and real-options and takeover valuation. The recurring spine is one chain: estimate after-tax free cash flow, pick the right discount rate, discount, decide.
Do I get a formula sheet in FNCE20005?
Yes — both the mid-semester test and the final exam provide a formula sheet (rights-issue drop-off, imputation grossing-up, WACC, CAPM, Gordon growth, levered beta and the MM-with-tax relations). This is why memorising formulae earns nothing: the marks are in choosing the right formula, using the right inputs, and finishing the arithmetic.
Is using AskSia for FNCE20005 cheating?
No. AskSia is a study reference written in our own words — we host none of your lecturer's files, and Sia teaches you the method to earn the marks; it does not complete or sit your assessments.
How to study for the exam
Treat the subject as a small set of calculation chains applied to new numbers, and drill the chains — not the prose. The recurring spine is: estimate after-tax free cash flow → pick the discount rate that matches the risk → discount → decide. The single most-repeated warning in the subject is to match the discount rate to the risk of the cash flow (don't use the firm WACC for a project of different risk, or the project return to discount a lease). The mid-semester test (Lectures 1–5) lives on imputation grossing-up, rights issues, WACC and capital structure; the final adds capital budgeting, real options, takeover valuation and distress. Because the formula sheet is provided, practise recognising which formula a question wants and plugging the right inputs (market not book values, D1 not D0, after-tax not pre-tax) under exam time.
