Corporate Finance Summaries

In: Business and Management

Submitted By jorik
Words 61282
Pages 246
Msc Finance & Investment
Core Course I: Corporate Finance & Value Creation

Lecture 1 3
Modigliani & Miller (1958) ‘The Cost of Capital, Corporation Finance and the Theory of Investment’ 3
Modigliani & Miller 2 6
Modigliani and Miller 3 7
Modigliani & Miller – 1958 4 12
Fama & French (1998) ‘Taxes, Financing Decisions, and Firm Value’ 18
Fama & French 3 21
Fama & French – 1998 4 22
Graham (2000) ‘How Big Are the Tax Benefits of Debt?’ 25
GRAHAM (2000) 2 28
Graham 3 29
How big are the tax benefits of debt? John Graham – 2002 4 29
Lecture 2 32
Myers (1984) ‘The Capital Structure Puzzle’ 32
MYERS (1984) The Capital Structure Puzzle 2 36
Myers 3 39
The capital structure puzzle Myers – 1984 4 40
Andrade & Kaplan (1998) ‘How Costly is Financial (Not Economic) Distress? Evidence from Highly Leveraged Transactions that Became Distress’ 44
Kaplan 2 46
Andrade & Kaplan (1998) 3 51
Andrade & Kaplan – 1998 4 52
Lecture 3 56
Myers & Maljuf (1984) ‘Corporate Financing and Investment Decisions when Firms have Information that Investors Do Not Have’ 56
Myers and Majluf 2 61
Myers & Mailuf (1984) 3 66
Myers & Majluf – 1984 4 68
Frank & Goyal (2007) ‘Trade-off and Pecking Order Theories of Debt 74
Frank, Murray and Goyal, Vidhan 2 75
Frank & Goyal (2007) 3 83
Trade-off and pecking order theories of debt Frank & Goyal – 2007 4 85
Lecture 4 92
Ross (1977) ‘The Determination of Financial Structure: the Incentive-Signaling Approach’ 92
ROSS (1977) 2 94
Ross (1977) 3 95
Ross – 1977 4 95
Riley (2001) ‘Silver Signals: Twenty-Five Years of Screening and Signaling’ 99
Riley – 2001 2 101
Harris & Raviv (1990) ‘Capital Structure and the Informational Role of Debt’ 106
Harris & Raviv (1990) 2 108
Harris & Raviv – 1990 3 109
Heinkel & Zechner (1990) ‘The Role of Debt and Preferred Stock as a Solution to Adverse Investment Incentives’…...

Similar Documents

Corporate Finance

... COLLEGE OF BUSINESS MANAGEMENT & ACCOUNTING FICB 213 CORPORATE FINANCE GROUP PROJECT ‘Emperical Analysis of Capital Structure and Cost Of capital between Public Listed Companies in Bursa Malaysia and Their Effect to Market Valuation and Firm’s performance’ SEM I 2012/2013 PREPARED BY : (SECTION 3BM) CHRISCILLA MOJINOL BF088334 NUR SYAZWANIE BT RAMLI BF088446 NANTINI D/O SUNDARAM AC088601 PREPARED FOR: MISS NOR RAZUANA BT AMRAM DATE OF SUBMISSION: JULY 16TH 2012 TABLE OF CONTENT EXECUTIVE SUMMARY This assignment focus is to compare and contrast the capital structure and cost of capital of two public listed companies within the same industry in BMSB. The aim of the assignment is to show whether higher gearing level and higher cost of capital will affect the firm’s value and performance. The two companies we have chosen are Dutch Lady Berhad (DUTCH LADY) and Guinness Anchor Berhad (GAB), In this assignment we have analyse five years performance (2007-2011) of both company. We analysed the composition of the capital structure in detail to estimate their cost of capital, and how their gearing level and cost of capital affect the firm’s value and profitability. We did ratio analysis (debt to asset and debt to equity) to find out the companies capital structure and calculated WACC value to determine the companies cost of capital. We calculated market value ratio (comprises of price to earning ratio, dividend......

Words: 7985 - Pages: 32

Corporate Finance

...Acquisitions Corporate Governance Risk Management International Corporate Finance 1 4 16 26 50 69 89 106 123 134 148 166 175 184 193 202 216 225 244 253 263 274 300 306 310 317 324 331 337 340 352 ©2011 Pearson Education, Inc. Publishing as Prentice Hall Chapter 1 The Corporation 1-1. 1-2. What is the most important difference between a corporation and all other organization forms? A corporation is a legal entity separate from its owners. What does the phrase limited liability mean in a corporate context? Owners’ liability is limited to the amount they invested in the firm. Stockholders are not responsible for any encumbrances of the firm; in particular, they cannot be required to pay back any debts incurred by the firm. Which organization forms give their owners limited liability? Corporations and limited liability companies give owners limited liability. Limited partnerships provide limited liability for the limited partners, but not for the general partners. What are the main advantages and disadvantages of organizing a firm as a corporation? Advantages: Limited liability, liquidity, infinite life Disadvantages: Double taxation, separation of ownership and control Explain the difference between an S corporation and a C corporation. C corporations much pay corporate income taxes; S corporations do not pay corporate taxes but must pass through the income to shareholders to whom it is taxable. S corporations are also limited to 75 shareholders and cannot have......

Words: 121426 - Pages: 486

Corporate Finance

...MYERS ALLEN Principlesf of p of Corporate Finance TENTH EDITION Principles of Corporate Finance ● ● ● ● ● THE MCGRAW-HILL/IRWIN SERIES IN FINANCE, INSURANCE, AND REAL ESTATE Stephen A. Ross, Franco Modigliani Professor of Finance and Economics, Sloan School of Management, Massachusetts Institute of Technology, Consulting Editor Financial Management Adair Excel Applications for Corporate Finance First Edition Block, Hirt, and Danielsen Foundations of Financial Management Thirteenth Edition Brealey, Myers, and Allen Principles of Corporate Finance Tenth Edition Brealey, Myers, and Allen Principles of Corporate Finance, Concise Second Edition Brealey, Myers, and Marcus Fundamentals of Corporate Finance Sixth Edition Brooks FinGame Online 5.0 Bruner Case Studies in Finance: Managing for Corporate Value Creation Sixth Edition Chew The New Corporate Finance: Where Theory Meets Practice Third Edition Cornett, Adair, and Nofsinger Finance: Applications and Theory First Edition DeMello Cases in Finance Second Edition Grinblatt (editor) Stephen A. Ross, Mentor: Influence through Generations Grinblatt and Titman Financial Markets and Corporate Strategy Second Edition Higgins Analysis for Financial Management Ninth Edition Kellison Theory of Interest Third Edition Kester, Ruback, and Tufano Case Problems in Finance Twelfth Edition Ross, Westerfield, and Jaffe Corporate Finance Ninth Edition Ross, Westerfield, Jaffe, and Jordan Corporate Finance: Core Principles and Applications......

Words: 345254 - Pages: 1382

Corporate Finance

...Corporate Finance, 9/e Stephen A. Ross, Massachussetts Institute of Technology Randolph W. Westerfield, University of Southern California Jeffrey F. Jaffe, University of Pennsylvania ISBN: 0073382337 Copyright year: 2010 Table of Contents PART I: Overview 1 Introduction to Corporate Finance 1 1.1 | What Is Corporate Finance? | 1 | | The Balance Sheet Model of the Firm | 1 | | The Financial Manager | 3 | 1.2 | The Corporate Firm | 4 | | The Sole Proprietorship | 4 | | The Partnership | 4 | | The Corporation | 5 | | A Corporation by Another Name . . . | 7 | 1.3 | The Importance of Cash Flows | 7 | 1.4 | The Goal of Financial Management | 10 | | Possible Goals | 11 | | The Goal of Financial Management | 11 | | A More General Goal | 12 | 1.5 | The Agency Problem and Control of the Corporation | 13 | | Agency Relationships | 13 | | Management Goals | 14 | | Do Managers Act in the Stockholders' Interests? | 14 | | Stakeholders | 15 | 1.6 | Regulation | 16 | | The Securities Act of 1933 and the Securities Exchange Act of 1934 | 16 | | Sarbanes-Oxley | 17 | | Summary and Conclusions | 18 | | Concept Questions | 18 | | S&P Problems | 19 | 2 Financial Statements and Cash Flow 20 2.1 | The Balance Sheet | 20 | | Liquidity | 21 | | Debt versus Equity | 22 | | Value versus Cost | 22 | 2.2 | The Income Statement | 23 | | Generally Accepted Accounting Principles | 24 | | Noncash Items |......

Words: 4966 - Pages: 20

Corporate Finance

... CORPORATE FINANCE T H IRD E DIT ION JONATHAN BERK STANFORD UNIVERSITY PETER D E MARZO STANFORD UNIVERSITY Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo To Rebecca, Natasha, and Hannah, for the love and for being there —J. B. To Kaui, Pono, Koa, and Kai, for all the love and laughter —P. D. Editor in Chief: Donna Battista Acquisitions Editor: Katie Rowland Executive Development Editor: Rebecca Ferris-Caruso Editorial Project Manager: Emily Biberger Managing Editor: Jeff Holcomb Senior Production Project Manager: Nancy Freihofer Senior Manufacturing Buyer: Carol Melville Cover Designer: Jonathan Boylan Cover Photo: Nikreates/Alamy Media Director: Susan Schoenberg Content Lead, MyFinanceLab: Miguel Leonarte Executive Media Producer: Melissa Honig Project Management and Text Design: Gillian Hall, The Aardvark Group Composition and Artwork: Laserwords Printer/Binder: R.R. Donnelley/Jefferson City Cover Printer: Lehigh Phoenix Text Font: Adobe Garamond Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text and on this copyright page. Credits: Cover: Sculpture in photo: Detail of Flamingo (1973), Alexander Calder. Installed in Federal Plaza, Chicago. Sheet metal and paint, 1615.4 x 1828.8 x......

Words: 129205 - Pages: 517

Corporate Finance

...MSc Corporate Finance Dr. Kirak Kim Before we start Main branches of finance Corporate Finance How do we value projects and (optimally) finance them? Asset Pricing How do we price securities more precisely? What’s the difference? Is it a Corporate Finance question or an Asset Pricing question? □ You are the manager of Intel Corp. You are reviewing the proposal for the new plant to be built in China. The new plant requires a large onetime investment but will provide significant capacity addition as well as cost savings over the next 10 years. Should you approve the proposal for the new plant? □ “HSBC FTSE 100” is a index fund that replicates FTSE 100 index. The fund offers investors a convenient diversification at a low price. Would you be interested in investing in the fund (or somewhere else)? » What if it was TESCO that was considering HSBC FTSE 100 as an investment vehicle?  □ In 2004, Sergey Brin and Larry Page, the founders of Google Inc., were talking to investment bankers from Morgan Stanley. They hope to finance a number of potential opportunities through IPO (initial public offering). One of the most important concerns is of course what the offering price should be. Part 1 Project Valuation Dr. Kirak Kim MSc Corporate Finance EFiMM0017 Project Valuation  Investment decision  Revisit: Valuing unlevered cash flows  Revisit: Uncertainty and the notion of risk  Weighted average cost of capital  Adjusted present value Two......

Words: 8376 - Pages: 34

Corporate Finance

...Corporate Finance Arguably, the role of a corporation's management is to increase the value of the firm to its shareholders while observing applicable laws and responsibilities. Corporate finance deals with the strategic financial issues associated with achieving this goal, such as how the corporation should raise and manage its capital, what investments the firm should make, what portion of profits should be returned to shareholders in the form of dividends, and whether it makes sense to merge with or acquire another firm. Balance Sheet Approach to Valuation If the role of management is to increase the shareholder value, then managers can make better decisions if they can predict the impact of those decisions on the firm's value. By observing the difference in the firm's equity value at different points in time, one can better evaluate the effectiveness of financial decisions. A rudimentary way of valuing the equity of a company is simply to take its balance sheet and subtract liabilities from assets to arrive at the equity value. However, this book value has little resemblance to the real value of the company. First, the assets are recorded at historical costs, which may be much greater than or much less their present market values. Second, assets such as patents, trademarks, loyal customers, and talented managers do not appear on the balance sheet but may have a significant impact on the firm's ability to generate future profits. So while the balance sheet method is......

Words: 15975 - Pages: 64

Corporate Finance

...FINC 620 Corporate Finance Final Project FIN 620 Table of Contents I.                   An overview of the corporation II.                The latest financial statement III.             A summary of each financial statement IV.             Ratio calculation V.             Is the corporation’s stock a good buy or sell? VI.          Other information pertinent to the corporation that could affect its future performance and stock price VII.       Recommendation regarding the future of the corporation   I. Overview of Corporation For our final project I chose to study the automotive company Ford Motor company and to analyze their financials from 2006-2010 which was right before the massive economic recession. Ford was able to stay afloat during these rough years however this economic downturned caused one of largest competitors General Motors to receive billions of dollars in bailout money from the United States government. I chose to study Ford because I actually had started investing in their company in my own starting in 2006 and I wanted to study how Ford’s finances were positioned when I began investing and see if it was a great buy or I should have instead invested at the time in Toyota a large multi-national competitor that is based in Asia and also operate in the United States which I had thought about investing the money in back in 2006 however I choose Ford instead. “Mulally who was named president and CEO of Ford, in 2006, the famous American......

Words: 2667 - Pages: 11

Corporate Finance

...Brealey−Meyers: Principles of Corporate Finance, Seventh Edition Front Matter © The McGraw−Hill Companies, 2003 Preface PREFACE This book describes the theory and practice of corpo- Once understood, good theory is common sense. rate finance. We hardly need to explain why financial Therefore we have tried to present it at a common- managers should master the practical aspects of their sense level, and we have avoided proofs and heavy job, but we should spell out why down-to-earth, red- mathematics. There are no ironclad prerequisites for blooded managers need to bother with theory. reading this book except algebra and the English language. An elementary knowledge of accounting, sta- Managers learn from experience how to cope tistics, and microeconomics is helpful, however. with routine problems. But the best managers are also able to respond to change. To do this you need more than time-honored rules of thumb; you must CHANGES IN THE SEVENTH EDITION understand why companies and financial markets This book is written for students of financial man- behave the way they do. In other words, you need a agement. For many readers, it is their first look at the theory of finance. world of finance. Therefore in each edition we strive Does that sound intimidating? It shouldn’t. to make the book simpler, clearer, and more fun to Good theory helps you grasp what is going on in read. But the book is also......

Words: 316669 - Pages: 1267

Corporate Finance

...BREALEY MYERS ALLEN The World of Finance in the Palm of Your Hand Principlesf of plles o pe s of Principles of Corporate Finance is the worldwide leading text that describes the theory and practice of corporate finance. Throughout the book, the authors show how managers use financial theory to solve practical problems and to manage change by showing not just how but why companies and management act as they do. Additions and updates to the Tenth Edition include: Useful Spreadsheet Functions boxes have been added to select chapters to highlight the most helpful Excel functions and spreadsheets when applying financial concepts. Numbered and Titled Examples are now called out and featured within chapters to further illustrate concepts. A new 4-color design, more real world examples, and increased international coverage make the book even more appealing and relevant to today’s students. CourseSmart is a new way to find and buy eTextbooks. At CourseSmart you can save up to 50% of the cost of your print textbook, reduce your impact on the environment, and gain access to powerful web tools for learning. You can search, highlight, take notes and share with friends, as well as print the pages you need. Try a free chapter to see if it’s right for you. Visit and search by title, author, or ISBN. Visit the Online Learning Center at for more information on Connect Plus Finance and for additional student and instructor......

Words: 559994 - Pages: 2240

Corporate Finance

...Corporate Finance The role of the corporate finance team is to manage a companies money, and maximizing the companies value while minimizing the risk states Wetfeet website (n.a., 2012). A corporate finance department may have a treasurer, a controller or comptroller, risk manager, and internal auditors with assistants and analysts all working under the chief financial manager (Ring, 2004). Corporate finance positions can be found in all companies from small to large (Kochanek, 2008). Entry-level positions are usually in investing, cash management, payroll, accounts receivables, accounts payables, bookkeeping clerks and other paper processing (Ring, 2004; Wiley, 2015). One job commonly found in corporate finance is that of a financial analyst. According to, common duties of an entry level financial analyst may include; analyzing financial data, recommending specific investments, evaluating and assessing both current data and historical information, studying financial trends on a consistent basis, ducting regular evaluations of financial statements, preparing complex financial reports, meeting privately with investors, and explaining recommendations in details to companies and individuals. The website Wetfeet (n.a.,2012) says, financial analysts pore over spreadsheets that detail cash flow, profitability, and expenses. They look for ways to free up capital, increase profitability, and decrease expenses. If any......

Words: 575 - Pages: 3

Corporate Finance

...    BBA  -­‐  Corporate  Finance  II         EXERCISE  Financial  Planning       A  company  submits  the  following  Balance  Sheet  and  Profit  and  Loss  Account  for  the   base  year  (year  0):     Year  Zero  Balance  Sheet   Cash  and  Marketable  Securities   Accounts  Receivable    600.00      4,850.00     Stocks    550.00     Property  Plant  and  Equiptment    5,000.00     Accumulated  depreciation    1,000.00     Total  Assets    10,000.00     Short  Term  Debt    4,000.00     Accounts  Payable    1,000.00     Long-­‐term  debt    1,500.00     Initial  Net  Worth    3,000.00     Yearly  Retained  Earnings    500.00     Net  Worth    3,500.00     Liabilities  +  Net  Worth   C.  Ansotegui    10,000.00       Spring  16                                                         BBA  -­‐  Corporate  Finance  II     Profit  and  Loss  Account   ...

Words: 581 - Pages: 3

Corporate Finance

...Continuing and Professional Studies Fundamentals of Corporate Finance New York University School of Continuing & Professional Studies Course #X51.9140 Spring 2011 James Berman 212.388.9873 Description: In this introduction to corporate finance, emphasis is on utilizing long-term debt, preferred stock, common stock, and convertibles in the financial structure of a corporation. Learn to analyze methods of financing using internal and external funds. Topics include: financial management; corporate growth; business failures; return on investment; risk leverage; the time value of money; dividend policy; debt policy; and leasing. Instructor Biography: James Berman, the president and founder of LLC, a Registered Investment Advisory Firm, specializes in asset management for high-net-worth individuals and trusts. With over thirteen years of experience managing client portfolios, Mr. Berman is a professional analyst of financial vehicles, including equity and bond mutual funds, and is an expert in global investment, asset allocation and modern portfolio theory. As the president of JBGlobal LLC, the general partner of the JBGlobal Fund LP, Mr. Berman manages a global equities fund that invests in the United States, Europe and Asia. Mr. Berman is a faculty member in the Finance Department of the NYU School of Continuing and Professional Studies where he teaches corporate finance. He serves as sub-advisor to Eitan Ventures......

Words: 1595 - Pages: 7

Corporate Finance

...Introduction According to Ben Levisohn (2008) “ As banks and other syndicated lenders get cold feet about new deals, borrowers turn to nontraditional sources of capital—and face tougher loan terms.” Corporate financial management deals with decisions of a firm related to investment, financing, and dividend. To carry on business, a firm invests in tangible assets like plant and machinery, buildings, and intangible assets like goodwill and patents. This comprises of investment decision. These assets do not come free; one has to pay for them, so a company needs to tap various sources of funds including promoter’s contribution. The investment in assets generates revenues and cash flows for a specific period. The managers of the company can either retain cash with the company for further investment of distribute to owners of the company – the shareholders. Concepts Reinforced Profit maximization, social welfare and growth are the three principal competitors to the wealth maximization role. Profit maximization requires managers to keep all expenses low. Businessmen are supposed to be socially responsible. They did not live in an ethical vacuum. Moral standards may change as society evolves. Shareholder wealth maximization rule is based on the assumption that other investor groups in the company are unaffected by the latter’s decision. Potential conflict of interest exists between shareholders and bondholders, managers and shareholders, majority and minority shareholders.......

Words: 963 - Pages: 4

Corporate Finance

...An Overview of Corporate Finance and the Financial Environment In a beauty contest for companies, the winner is . . . General Electric. 11 Or at least General Electric is the most admired company in America, according to Fortune magazine’s annual survey. The other top ten finalists are Cisco Systems, WalMart Stores, Southwest Airlines, Microsoft, Home Depot, Berkshire Hathaway, Charles Schwab, Intel, and Dell Computer. What do these companies have that separates them from the rest of the pack? According to more than 4,000 executives, directors, and security analysts, these companies have the highest average scores across eight attributes: (1) innovativeness, (2) quality of management, (3) employee talent, (4) quality of products and services, (5) long-term investment value, (6) financial soundness, (7) social responsibility, and (8) use of corporate assets. These companies also have an incredible focus on using technology to reduce costs, to reduce inventory, and to speed up product delivery. For example, workers at Dell previously touched a computer 130 times during the assembly process but now touch it only 60 times. Using point-of-sale data, Wal-Mart is able to identify and meet surSee http://www.fortune. com for updates on the U.S. prising customer needs, such as bagels in Mexico, smoke detectors in Brazil, and house ranking. Fortune also ranks paint during the winter in Puerto Rico. Many of these companies are changing the way the Global Most Admired. business works...

Words: 351447 - Pages: 1406

wczytaj więcej torrentów | Audrey.Rose.-.Das.Maedchen.aus.dem.Jenseits.1977.GERMAN.1080p.HDTV.x264-REDX | Sword Gai: The Animation