HKICPA QP Module 7 Financial Management study plan

Derive NPV, IRR, payback and discounted payback for five multi-year project scenarios without notes, and state which method ignores the time value of money and why that matters for ranking mutually exclusive projects

Distinguish relevant from irrelevant cash flows in three vignettes, correctly excluding sunk costs and allocated fixed overhead while including opportunity costs and incremental working capital

Compute the tax shield on capital allowances and the after-tax salvage value for an asset sold above and below its tax written-down value

Explain in writing how inflation must be treated consistently: nominal cash flows discounted at a nominal rate versus real cash flows discounted at a real rate, and identify the common mismatch error

Handle capital rationing by ranking divisible projects using the profitability index and indivisible projects using trial combinations of feasible project sets

Adjust appraisal for risk by applying certainty equivalents and risk-adjusted discount rates to the same project and explain why the two can give different accept/reject decisions

Evaluate a replacement decision by comparing equivalent annual annuity or equivalent annual cost of the old and new asset

Analyse a lease-versus-buy decision using the after-tax borrowing rate as the discount rate and justify that rate choice

Critique the limitations of NPV when real options exist, and describe how the option to delay, expand or abandon changes the decision

Compute the cost of equity using both the dividend growth model and the CAPM, and reconcile any difference between the two estimates

Calculate the after-tax cost of debt for irredeemable and redeemable debt, including the approximation and IRR-based approaches

Derive a weighted average cost of capital using both book value and market value weights, and argue which is appropriate for investment appraisal

Adjust an asset beta to a project-specific equity beta using the Modigliani-Miller regearing formula with and without tax

Explain the traditional and Modigliani-Miller views of capital structure, with and without tax, including the effect of financial distress and agency costs

Assess how pecking order theory and signalling explain observed financing behaviour that static trade-off theory does not

Evaluate gearing implications for the cost of capital and discuss why an optimal capital structure is difficult to identify empirically

Apply adjusted present value to a project financed partly with debt and compare the result with the WACC-based NPV

State the primary financial objective of shareholder wealth maximisation and evaluate competing objectives including profit maximisation, earnings per share growth and stakeholder balance

Analyse agency problems between shareholders, managers and lenders, and match each with a specific monitoring or incentive mechanism

Explain the efficient market hypothesis in weak, semi-strong and strong forms and identify what each implies for a manager reacting to an announcement

Distinguish systematic from unsystematic risk and explain why diversification does not eliminate the former

Compute the operating cycle and cash conversion cycle from a set of financial data, then quantify the cash released by tightening receivables and inventory days

Evaluate the cost and benefit of offering a settlement discount, including the effective annual cost of forgoing it from the customer's perspective

Apply the Baumol and Miller-Orr models to determine optimal cash balances and state the assumptions that break down in practice

Compare short-term financing sources including overdraft, invoice discounting, factoring and trade credit on cost, flexibility and security

Distinguish transaction, translation and economic foreign exchange exposure and select an appropriate hedge for each

Compute the outcome of a forward hedge, a money market hedge and a currency option for the same receivable, and identify when each is preferred

Apply interest rate risk hedging using forward rate agreements, interest rate futures and swaps, and calculate the effective rate achieved

Explain the mechanics and risks of a swap, including counterparty and basis risk, and why a company might swap fixed for floating

Complete two full-length timed mock exams under exam conditions and mark them against the published marking guide

Rank your error types by frequency across all mocks and rewrite the five most costly mistakes as corrected rules

Rehearse concise written explanations for the discursive elements of each domain, since calculation marks alone will not secure a pass

Build a final one-page revision sheet covering only the formulas and definitions you got wrong at least twice