Corporate Finance and Treasury Management
Corporate Finance and Treasury Management tests financing, valuation, risk and liquidity decisions: WACC, CAPM, capital structure, dividend policy, valuation, FX and interest-rate hedging, and treasury controls.
Core rules
- WACC = E/V × ke + D/V × kd × (1 − t), using market values and after-tax cost of debt.
- CAPM: ke = rf + β(rm − rf); use a proxy beta adjusted for gearing when the project risk differs.
- MM: in perfect markets capital structure is irrelevant; with tax, debt adds a shield but financial distress costs offset it.
- Valuation: DCF (FCFF/FCFE), dividend growth, multiples; match cash flow to discount rate.
- FX: transaction, translation and economic exposure; forwards, futures, options, money-market hedge.
- Treasury: cash forecasting, pooling, controls, counterparty limits, segregation of duties.
Worked example: Equity market value ₦600m, debt ₦400m, ke 15%, kd 10%, tax 30%. WACC = 0.6×15% + 0.4×10%×0.7 = 9% + 2.8% = 11.8%. If the project is in a different industry, using the entity's WACC is wrong; relever a proxy beta to the project's gearing. For a receivable in USD, compare a forward hedge with a money-market hedge using interest rate parity.
Traps: using book weights; forgetting the tax shield; using pre-tax kd; applying WACC to a different-risk project; ignoring transaction costs; hedging speculation rather than exposure.