Corporate Finance Intro

LECTURE I What is finance? Two argonas Asset price/ upper-case letter mart: how fiscal commercializes determine asset expenses incorporate pay: how corporate make financial decisions. 1.Investment decisions i.e. NPV of the a intention 2. pecuniary decision i.e. capital structures. 3.Other decision i.e. pension, layoff, risk management, hedgerow The subroutine of financial merchandises Helps allocates resources: transfer resources across time and distinct states of the parsimony using financial claims. Communicating information: market prices debate available information. Implication of market expertness perpetrate Market prices i.e. if market is efficient, market prices represents the fair note time respect of the assets and therefore NPV is zero. Read into prices i.e. if market is efficient, we can read into prices and displume useful information. There are no financial illusions i.e. its not easy to guile the market Lessons of market eff iciency The stock price immediately and fully incorporates rising information. If the understand is announced before the new equity is exhaustd, past the sinless value created by the project goes to venerable bundleholders.

If beginning retire equity, then announce the project, both new and old shareholders share the same capital gain in price transmute but the change will no be big than first announce then equity issue. Objectives of financial managers To maximize authentic market value of the firm live market value incorporates present value of all current and future cash flows adjusted for timing and risk. Market value is independe! nt of shareholders preferences since maximum market value does not instance shareholders rewarded capital gains. Maximizing current market value is the and plausible financial objective. Valuing cash flows Most investment decisions frig almost trade-offs over time 1.within a project investing at once and receiving payoff later 2.across projects different payoff streams To...If you want to pass away a full essay, order it on our website: BestEssayCheap.com

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