FNCE90060 Financial Management
The Complete Exam Bible · S2 2026FNCE90060 Overview
- University of Melbourne
- Semester 2 2026
- Graduate coursework
- Finance
Financial Management is a University of Melbourne graduate coursework subject that introduces corporate finance and investments. Its stated aim is to develop foundational tools of financial analysis, critical thinking and the ability to apply those tools to practical problems.
- Assessed by Five official Handbook categories led by the final examination
- Core method Date cash flows, match rates, value, then decide
- Exam facts Two hours plus fifteen minutes reading time
- Evidence boundary Later scheduled topics need the current LMS materials
How FNCE90060 is assessed
| Component | Weight | Format |
|---|---|---|
| Group Homework Assignments | 10% | Normally groups of three to four; online via the LMS; 750 words equivalent |
| Weekly In-Class Test | 5% | Ten minutes each, from Week 2 to Week 12 |
| In-Class Participation | 5% | Ten minutes each, throughout the semester |
| Mid-Semester Test | 20% | Individual, one hour, from Week 5 to Week 10 |
| Final Examination | 60% | Individual, examination period, two hours; the subject guide also states fifteen minutes reading time |
The authoritative 2026 Handbook rows sum to 100%. The Semester 2 subject guide splits the 10% group-homework category into two 5% assignments and labels the two weekly 5% categories as in-class and workshop video quizzes. Captured records also conflict on assignment dates and group size, so use the current LMS task page for operational instructions.
What FNCE90060 covers
Six grounded chapters follow the fully captured teaching sequence from present value through stock valuation.
Present Value and Arbitrage
Week 1: cash-flow timing, present value, net present value, replication and the Law of One Price.Week 1 establishes the common language used throughout Financial Management: cash flows have amounts, dates, signs and risk. Present value converts a later certain payment into an equivalent amount today, while future value moves cash forward.
- Cash flows and the valuation date
- Present value and future value
- Net present value as cash today
- Replication and the Law of One Price
- Risk-free arbitrage conditions
- Limits created by risk and trading frictions
Time Value and Interest Rates
Week 2: compounding, annuities, perpetuities, rate quotations and effective annual returns.Week 2 extends single-payment discounting to repeated cash flows and quoted interest rates. A perpetuity is an infinite fixed stream, a growing perpetuity increases at a constant rate forever, and an annuity is a finite fixed stream.
- Compounding and discounting over several periods
- Fixed perpetuities
- Growing perpetuities and the r greater than g boundary
- Finite annuities
- APR and periodic rates
- Effective annual rates and opportunity cost
Investment Decision Rules
Week 3: NPV, IRR, payback, project ranking and the conditions that make alternative rules fail.Week 3 asks how a firm turns discounted project cash flows into a decision. Net present value measures dollar value created at the project cost of capital.
- NPV for stand-alone projects
- Ranking mutually exclusive projects
- IRR definition and accept rule
- Conventional cash-flow conditions
- Multiple and nonexistent IRRs
- Payback limitations and liquidity information
Capital Budgeting
Week 4: incremental earnings, free cash flow, working capital, tax effects and project NPV.Week 4 builds the project cash flows that decision rules require. The model includes only incremental effects caused by undertaking the project.
- Incremental earnings and side effects
- Sunk costs and opportunity costs
- Depreciation and the tax shield
- Capital expenditure
- Net working capital changes
- Terminal cash flow and project NPV
Valuing Bonds
Week 5: coupon cash flows, yield to maturity, spot rates, price sensitivity and holding returns.Week 5 values a bond from its promised payments. A zero-coupon bond pays face value once at maturity. A coupon bond pays regular coupons and returns face value with the last coupon.
- Zero-coupon bonds
- Coupon frequency and payment amount
- Yield to maturity
- Spot rates and the Law of One Price
- Premium and discount bonds
- Duration, convexity and holding returns
Valuing Stocks and Growth
Week 6: dividend discount models, total return, payout, retention and profitable growth.Week 6 values equity from the cash flows shareholders expect to receive. A one-year investor receives the next dividend and the sale price, both discounted at the equity cost of capital.
- One-year stock valuation
- Dividend yield and capital gains
- Multi-year dividend discount model
- Constant dividend growth
- Payout and retention
- Profitable growth and market efficiency
The corporate-finance side covers project evaluation, debt and equity financing, financing mix and dividend policy, while the investments side includes portfolio theory, asset pricing and information in markets. The free chapters here focus on the fully captured teaching sequence from Weeks 1 to 6.
The sequence is cumulative.
Week 1 gives every cash flow an amount, sign and date, then uses present value, net present value, replication and the Law of One Price to test a valuation. Week 2 expands that engine to annuities, perpetuities, APR and effective annual rates. Week 3 compares NPV, IRR and payback, including cases in which a percentage return gives the wrong ranking.
Week 4 builds incremental free cash flow from revenue, costs, tax, capital expenditure and working capital. Weeks 5 and 6 transfer the same dated-cash-flow logic to bonds and stocks.
The published schedule continues with risk, asset pricing, capital structure, debt and taxes, and payout policy.
The Semester 2 subject guide assigns 5% to in-class quizzes, 5% to workshop video quizzes, 20% to the mid-semester exam, 5% to each of two group assignments and 60% to the final exam. Weekly lecture and workshop activities demand steady preparation rather than a single revision burst.
The two group tasks require coordination as well as analysis. The Week 1 material states that Microsoft Excel is needed for the assignments and that the second task uses LSEG Refinitiv data.
The one-hour mid-semester exam is scheduled in Week 8, after the opening valuation, interest-rate, decision-rule and capital-budgeting sequence.
The final is the major individual task: it carries 60%, lasts two hours and has fifteen minutes reading time. The available files do not publish its question count or section structure.
Preparation should therefore target method selection and defensible setup: align cash-flow dates with rate periods, value alternatives at one date, show how a decision follows from NPV, and distinguish a quoted yield from the return generated by actual cash flows.
Assignment dates and some operating instructions conflict across captured records, so students should use the current LMS task page for the live deadline and submission details.
Worked example · free
Compare two dated receipts at one valuation date
- 1Discount the first receipt for one period: $600 divided by 1.05 equals $571.43.
- 1Discount the second receipt for two periods: $900 divided by 1.05 squared equals $816.33.
- 1Add only after both cash flows are expressed today: $571.43 plus $816.33 equals $1,387.76.
- 1Check direction: positive discounting makes present value lower than the undiscounted $1,500 total.
Key terms
- Present Value
- The value today of a future cash flow after discounting at a rate matched to timing and risk.
- Arbitrage
- A long-short strategy with no net investment, no loss state and at least one positive payoff.
- Annuity
- A finite stream of equal payments made at regular intervals.
- Net Present Value
- The present value of all project inflows and outflows, used to measure value created.
- Free Cash Flow
- Project operating cash flow after tax, capital expenditure and changes in net working capital.
- Yield To Maturity
- The rate that equates a bond price with the present value of its promised payments.
- Dividend Yield
- The next expected dividend divided by the current share price.
- Opportunity Cost
- The opportunity cost is the value of the best alternative sacrificed by using a resource in the chosen action.
- Law Of One Price
- The Law of One Price states that equivalent traded payoffs should have the same current price when an arbitrage can enforce the comparison.
- Internal Rate Of Return
- The internal rate of return is the discount rate that makes a project's net present value equal to zero.
- Annual Percentage Rate
- An annual percentage rate is a quoted annual rate obtained by multiplying the periodic rate by the number of compounding periods per year.
- Effective Annual Rate
- The effective annual rate measures the actual one-year growth produced after all within-year compounding is included.
- Net Working Capital
- Net working capital records operating current assets less operating current liabilities and enters project cash flow through its changes.
- Dividend Discount Model
- The dividend discount model values a share as the present value of the future dividends expected by its owner.
FNCE90060 FAQ
How difficult is this subject?
The published facts point to breadth and calculation discipline: a 60% final exam, a 20% mid-semester exam and weekly assessment sit beside project and security valuation. Weeks 1 to 6 move from present value through rate conversion and project decisions to bonds and stocks.
The difficulty is keeping dates, rate units, cash-flow signs and decision rules consistent across that sequence, rather than recalling formulas without their assumptions.
How is the subject assessed?
The subject guide lists in-class quizzes at 5%, workshop video quizzes at 5%, a mid-semester exam at 20%, two group assignments at 5% each and a final exam at 60%. Those rows sum to 100%. The mid-semester task lasts one hour in Week 8, while the final lasts two hours plus fifteen minutes reading time. Use the live LMS for current venues and submission instructions.
What is published about the final exam?
The subject guide states that the final is individual, worth 60%, held during the examination period and lasts two hours plus fifteen minutes reading time. The available files do not establish a question count, section structure, mark allocation or open-book status. Revise the published course methods, but use current official examination instructions for any detail not stated in the guide.
Which calculator is permitted in exams?
The subject guide approves the Casio FX82 with any suffix and states that equivalent models, including the Casio FX8200, are not permitted in examinations. Students must provide their own working calculator and ensure that its batteries are fresh. This is a model-specific rule, so check the calculator label itself instead of assuming that a similar product number is acceptable.
Are complete past papers available in the captured materials?
No complete dated final paper appears in the available materials. Six workshop decks contain isolated quick checks labelled as past-exam questions, one for each captured topic from present value through stocks. The LMS page also links a mid-semester practice quiz, but its question content was not captured locally. Those items show limited question types, not a complete final format or reliable section blueprint.
Which formulas deserve first priority?
Start with present value and future value, then annuity and perpetuity factors, NPV, project free cash flow, coupon-bond pricing and the dividend discount model. Add APR-to-periodic-rate and APR-to-effective-annual-rate conversions because a quoted APR is not itself the rate for every cash-flow interval. Learn the payment date, rate period and decision condition beside each expression, then test the direction of the result.
What is the best study order?
Work chronologically through the captured weeks. Present value supports cash-flow streams, decision rules use those values, capital budgeting constructs the cash flows, and the bond and stock topics apply the same engine to securities. After each topic, complete its workshop problem before reading the solution and record one setup error.
This order also prepares the opening four topics before the one-hour mid-semester exam in Week 8.
What do the two group assignments demand?
The subject guide assigns 5% to each group task and describes groups of four. Week 1 states that Microsoft Excel is needed for the assignments and that the second task uses LSEG Refinitiv data. Other captured records disagree on group size and some dates, so organise the analytical work early but take the current membership, deadline and submission instructions from the live LMS task.
Questions students ask in each FNCE90060 chapter
- Why must cash flows share one date before they are added?
- Money available at different dates can earn different amounts before the chosen comparison point. Discounting or compounding first makes each cash flow economically comparable, so the total represents one coherent value rather than a sum of unlike amounts. Chapter 01 · Present Value and Arbitrage
- How do I decide which stream formula applies?
- Read the payment rule before the numbers. A finite equal stream is an annuity, an infinite equal stream is a perpetuity, and an infinite stream with constant growth is a growing perpetuity. Then confirm when the first payment occurs. Chapter 02 · Time Value and Interest Rates
- Why does NPV control when decision rules conflict?
- NPV measures the dollar value created after discounting at the relevant opportunity cost. IRR is a percentage and payback is a timing screen, so either can ignore project scale, later cash flows or unusual sign patterns. Chapter 03 · Investment Decision Rules
- Why is interest usually excluded from project cash flow?
- Financing is reflected in the discount rate used to value unlevered project cash flow. Subtracting interest in the cash flow and then using a financing-sensitive rate would count the financing effect twice. Chapter 04 · Capital Budgeting
- Why does a bond price fall when yield rises?
- The bond’s promised payments do not change, but a higher required return discounts each payment more heavily. Their total present value therefore falls until it offers the market yield. Chapter 05 · Valuing Bonds
- Why is the future sale price part of a one-year valuation?
- The investor expects to receive both the dividend and proceeds from selling the share. Both amounts occur at year end and must be discounted at the equity cost of capital. Chapter 06 · Valuing Stocks and Growth
How to study for the exam
In Week 1, build one timeline for every problem and name the valuation date before touching the calculator. Practise moving cash flows forward and backward, then write the buy-sell positions for any arbitrage claim. In Week 2, place the quotation, compounding frequency, periodic rate and number of cash-flow periods on separate lines.
Complete the lecture and workshop questions while the material is current because the two weekly assessment categories contribute 5% each. During Weeks 3 and 4, make a decision-rule table that states what NPV, IRR and payback measure and when their rankings can conflict. For capital budgeting, classify each input as incremental, sunk, an opportunity cost or a side effect before constructing free cash flow.
The mid-semester exam is worth 20%, lasts one hour and occurs in Week 8, so rehearse the opening four topics in a timed sixty-minute set. Mark setup choices as well as arithmetic, especially signs, valuation dates and rate units. Start each 5% group assignment early enough to check spreadsheet formulas independently. The Week 1 material says Excel is required and the second assignment uses LSEG Refinitiv data.
Keep an assumptions tab, label data sources and reconcile group outputs before submission. Because captured records conflict on some dates and group details, use the live LMS task as the operating authority. For Weeks 5 and 6, separate bond coupons from face value, match semiannual cash flows to a half-year rate, and distinguish promised YTM from an expected holding return.
In stock questions, label Div0 and Div1 before choosing a dividend model. The 60% final lasts two hours plus fifteen minutes reading time. Prepare by mixing topics: identify the method first, calculate second, then finish with a direction check and a finance decision sentence.
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