FINS1613 Lecture Notes - Lecture 1: Comparative Advantage, Liquidating Distribution, Real Options Valuation

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orchidpig108

25 Jul 2018

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Week 1 introduction and basic concepts 4. Effective annual rate and annual percentage rate 8. Week 3 the valuation of a firm"s securities 9. Week 4 capital budgeting: an introduction 14. Week 5 capital budgeting: applications i 17. Week 6 capital budgeting: applications ii 19. The trade off between risk and return 25. The security market line (risk/return trade off) 26. The weighted average cost of capital 27. Week 10 capital structure: theory and evidence 32. M&m proposition i: capital structure irrelevance 32. M&m proposition ii: capital structure irrelevance 33. M&m with taxes and costs of financial distress 34. Week 11 dividend policy: theory and evidence 35. W e e k 1 i n t ro d u c t i o n a n d b a s i c c o n c e p t s. A business organisation owned and operated by a single individual.

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Your assignment for this week is to solve the following problems and be ready to discuss the solutions and their implications relative to the financial management of a company: Chapter 2, problems 2-1, 2-2, 2-5 and 2-6. Chapter 3, problems 3-1 3-4 and 3-5. In your submission of assigned problems also respond to the following question: What is "free cash flow" and why is it the most important measure of cash flow?

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4.The IPO was a success, and you have a robust number of shareholders. With board support, you determine it is time to hire a financial manager to help your firm achieve current goals and set new ones appropriate to the firmâs growth strategy. What professional strengths and skills will an individual seeking this position need to possess?

5.Another consideration you feel you need to address at this point, now that your firmâs stock is publicly traded, is how to sustain the high ethical standards youâve fostered thus far as you move into the firmâs future. What strategies can your management team implement to conduct your business with both personal and professional integrity? What steps can you take to ensure that ethical considerations for financial and other management decisions are embedded into the firmâs culture?

6.Congratulations - you are now at Year One, and everything is moving along faster than you anticipated. While this is great, you are at the point where you need to raise additional capital from outside lenders. With this decision, what type of agency costs might the company incur? How might a lender mitigate any agency costs?

Since shareholder wealth is the present value of the expected future returns to the owners of the business. The primary normative goal of the firm is to make the most efficient use of the firmâs scarce financial and physical resources and thereby to maximize shareholder value. Thus, realization of the shareholder wealth maximization goal is constrained by social responsibility concerns and problems arising out of agency relationships. Since the class comprises of students spanning different majors we should know that managers can take a variety of actions to influence the magnitude, timing, and risk of the firmâs free cash flows. These actions are often classified in the context of operating, investment, financing, and dividend decisions. Would you agree?

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FINS1613 Lecture Notes - Lecture 1: Comparative Advantage, Liquidating Distribution, Real Options Valuation

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