...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 | 25...
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...® a practical guide for business calculations ALASTAIR L. DAY Alastair Day has worked in the finance industry for more than 25 years in treasury and marketing functions and was formerly a director of a vendor leasing company specializing in the IT and technology industries. After rapid growth, the directors sold the enterprise to a public company and he established Systematic Finance plc as a consultancy specializing in: • financial modelling – review, design, build and audit • training in financial modelling, corporate finance, leasing and credit analysis on an in-house and public basis • finance and operating lease structuring as a consultant and lessor Alastair is author of a number of books including three published by FT Prentice Hall: Mastering Financial Modelling, Mastering Risk Modelling and The Financial Director’s Guide to Purchase Leasing. Alastair has a degree in Economics and German from London University together with an MBA and is an associate lecturer of finance with the Open University Business School. Excel a practical guide for business calculations Tools enabling managers to carry out financial calculations have evolved in the last 20 years from tables through calculators to programs on PCs and personal organisers. Today, the majority of those in finance have Excel on their desks and increasingly on their laptops or pocket computers. Mastering Financial Mathematics in Microsoft ® Excel provides a comprehensive set of tools and ...
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...Australian School of Business Banking and Finance FINS3625 Applied Corporate Finance Course Outline Semester 1, 2014 Part A: Course-Specific Information Part B: Key Policies, Student Responsibilies and Support Table of Contents PART A: COURSE-‐SPECIFIC INFORMATION 1 STAFF CONTACT DETAILS 1.1 Communication with Staff 2 COURSE DETAILS 2.1 Teaching Times and Locations 2.2 Units of Credit 2.3 Summary of Course 2.4 Course Aims and Relationship to Other Courses 2.5 Student Learning Outcomes 3 LEARNING AND TEACHING ACTIVITIES 3.1 Approach to Learning and Teaching in the Course 3.2 Learning Activities and Teaching Strategies 4 ASSESSMENT 4.1 Formal Requirements 4.2 Assessment Details 4.3 Assessment Format 4.4 Assignment Submission Procedure 4.5 Late Submission 5 COURSE RESOURCES 6 COURSE EVALUATION AND DEVELOPMENT 7 COURSE SCHEDULE PART B: KEY POLICIES, STUDENT RESPONSIBILITIES AND SUPPORT 8 PROGRAM LEARNING GOALS AND OUTCOMES 9 ACADEMIC HONESTY AND PLAGIARISM 10 STUDENT RESPONSIBILITIES AND...
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...Website: http://didattica.unibocconi.eu/ts/tsn_anteprima2006.php?cod_ins=30 017&anno=2015&IdPag=5861 Course Objectives The course provides an introduction to the most important aspects of corporate finance. The objective is to acquire the essential skills necessary to actively deal with the corporate finance activities of an internationally operating firm. The course explores both investing and financing decisions, focusing on their role in the creation of shareholder value. The course covers five main parts: the value of a firm - financial instruments, valuation concepts and decision rules. Risk and return - theory, empirical evidence and applications to capital budgeting. Financing decisions and market efficiency. Payout policy, capital structure and valuation. Course Content Summary Finance and the financial manager. Valuing bonds and common stocks. NPV and investment decisions. Risk, return and the opportunity cost of capital. Capital budgeting and risk. Efficient markets and behavioural finance. Payout policy, debt policy and capital structure. Financing and valuation. Textbooks R. BREALEY, S. MYERS, F. ALLEN, Principles of Corporate Finance, McGraw Hill, 2014,11th edition. Exam textbooks & Online Articles (check availability at the Library) Detailed Description of Assessment Methods Course assessment consists of two written exams (partial and final exam, 70%) and homework assignments (group...
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...You work in the corporate finance Click Link Below To Buy: http://hwaid.com/shop/corporate-finance/ You work in the corporate finance division of The Home Depot and your boss has asked you to review the firm’s capital structure. Specifically, your boss is considering changing the firm’s debt level.Your boss remembers something from his MBA program about capital structure being irrelevant, but isn’t quite sure what that means. You know that capital structure is irrelevant under the conditions of perfect markets and will demonstrate this point for your boss by showing that the weighted average cost of capital remains constant under various levels of debt. So, for now, suppose that capital markets are perfect as you prepare responses for your boss. You would like to analyze relatively modest changes to Home Depot’s capital structure. You would like to consider two scenarios: the firm issues $1 billion in new debt to repurchase stock, and the firm issues $1 billion in new stock to repurchase debt. Use Excel to answer the following questions using Eq. 14.5 and Eq. 14.6, and assuming a cost of unlevered equity (rU) of 12 percent. Obtain the financial information you need for Home Depot. Go to www.nasdaq.com, click “Summary Quotes” on the left-hand side, and enter Home Depot’s stock symbol (HD). Click “Go.” From the Summary Quotes page, get the current stock price and number of shares outstanding. Click “Company Financials” and the annual income statement should...
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...Capital Structure puzzle: UK Evidence’ Assignment for PGBS0140 Accounting & Finance for Managers Plymouth Business School Module No.:PGBS0140 Module: Accounting & Finance for Managers Group Members and Student No.: Word count: 1492 Critical Review on ‘Revisiting the Capital Structure puzzle: UK Evidence’ Al-Najjar, B. and Hussainey, K. (2011). Revisiting the capital structure puzzle: UK evidence. The Journal of Risk Finance, 12 (4), 329- 338. This essay will summarise and critically review the report of Al-Najjar and Hussainey (2011) in which the effects of potential drivers of corporate capital structure are differing for three different definitions of capital structure. The article of Al-Najjar and Hussainey is a meaning but problematic piece of research. This essay aims to critically analyse the strengths and weaknesses of authors’ arguments and mainly focuses on the introduction, theoretical background, hypothesis, empirical tests, and result. Summary Al-Najjar and Hussainey found a capital structure puzzle which is involved with different definition of capital structure and determinants of corporate capital structure. They collected a sample data of 379 non-financial firms in the UK from 1991 to 2002, and investigated firms’ corporate characteristics (including firm growth rate, risk level, firm size, asset tangibility, and firm’s profitability) and corporate governance elements (including non-executive directors and board size) which are the...
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...Corporate Finance 1 Group assignment (Version 1) Group assignment instructions The objective of the group assignment is to promote deep thinking on a selected range of topics and to develop your practical quantitative modelling skills. The assessment is a group assignment and should be performed in your allocated groups (usually between 4 and 6 people). Seeking assistance from anyone outside your group or providing assistance to any other group constitutes academic misconduct and will be taken seriously by the university (however, you are allowed to provide assistance to the other members of your own group). If there is any significant similarity between the reports submitted by two or more groups for a particular question, then those group leaders will score zero for that question in the assignment. The mark for the rest of the group will be unaffected. Further action may be taken by the university against any specific group members who have obtained or provided assistance The assignment includes 6 questions (each with sub-parts). Your group must attempt one question for each person in the group (minimum 4 and maximum 6). Four of the questions are compulsory and must be attempted by all groups. The remaining two questions are optional and will be attempted by groups with more than 4 people (or individuals in a group of 4 who would like to lead 2 questions). Each member of your group should take the role of leader for 1 or 2 questions. It is expected that the leader...
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...challenges the basic premise built into corporate finance theory, teaching and practice. Corporate finance theory, teaching and the typically recommended practice are all built on the premise that the primary goal of a corporation should be shareholder wealth value maximization. Extant theoretical and empirical research in financial economics also generally accept shareholder wealth maximization as the normative and ideal goal on which all business decisions should be based. This paradigm assumes that there are no externalities and all the participants engaged in transactions with the firm are voluntary players competing in free, fair and competitive markets. A very different view is offered by what is loosely called stakeholder theory. The stakeholder theory posits that the focus on shareholders and firm value is misplaced and managers should be concerned with all stakeholders of the firm. The paper attempts to address what is felt as a lack of dialogue between the two camps. INTRODUCTION Corporate finance theory, teaching and the typically recommended practice at least in the US are all built on the premise that the primary goal of a corporation should be the maximization of shareholder value. Extant theoretical and empirical research in financial economics also generally accepts shareholder wealth maximization as the normative and ideal goal on which all business decisions should be based. A quick survey of several corporate finance textbooks reveals this approach...
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...Table of Contents I. Article Summary 3 1.1. Article Title: 3 1.2. Authors: 3 1.3. Publication: 3 1.4. Reviewer: 3 1.5. Purpose of the Article 3 II. Analysis and Synthesis 4 2.1. Most important conclusion 4 2.2. Special issue about the study subject 6 2.3. Relating issues raised in the article with the business environment and financial system in Ethiopia 7 2.4. Points we Agree or Disagree with 7 2.5. One part of the article that helped to understand finance 8 III. Hypothesis Comparison. 8 IV. How the information in the article affect the business manager in us 9 4.1. Becoming a better financial manager 9 4.2. Becoming a better professional 9 4.3. Practicing suggestions in the article 9 4.4. Issues listed by the authors 10 References 13 I. Article Summary 1.1. Article Title: The theory and practice of corporate finance: Evidence from the field 1.2. Authors: John R. Graham and Campbell R. Harvey 1.3. Publication: the article is published in the Journal of Financial Economics, Volume 60, Issue 2, Pages 187-243, dated 31/05/2001. The publisher is North-Holland. 1.4. Reviewer: Group 8 members 1. 1.5. Purpose of the Article The article reports the result of a comprehensive survey on the practice of corporate finance conducted in 1999 G.C by the above mentioned two authors in the USA. Unlike previous similar studies in theory and practice of corporate finance, the article address a broader scope in the field of corporate finance including capital budgeting...
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...The Boeing 777 Darden Case Study UVA-F-1017 Case Study Assignment Subject: Cost of capital − cost of equity and cost of debt; beta risk; estimation; capital structure. The task for students is to evaluate the 777 against a financial standard, the investors’ required rate of return. The general objective of this case is to exercise students’ skills in estimating corporate (divisional/project) costs of capital – cost of equity and WACC. Case Questions, Analysis, and Directions: Read and analyze the case, and prepare an “Executive Summary” of this case. Write it as if you were writing it to the members of Boeing’s Board of Directors, who may not know much about the project or finance. Your Executive Summary will include: (1) A brief description of the firm and the 777 project – in your own words (about two-three paragraphs). (2) Which equity beta(s) did you use? Why? (3) When you used the capital-asset-pricing-model (CAPM), what equity-market risk-premium and risk-free rate did you use? Why? (4) Are the betas of other (industry similar) firms important? Why? Can they be used and how? If yes, what adjustments are needed? (5) List and briefly discuss various sources of capital used by Boeing. Evaluate the costs of these individual capital components for Boeing 777 project : (i) What is the cost-of-equity (R0), assuming all-equity financing? (ii) What is the cost-of-equity, considering the Boeing’s target leverage ratio? (iii) What is the cost-of-debt? (iv) What is the appropriate...
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...directors, Frank Bosworth, vice president of finance, is scheduled to present his recommendations for next year's overall financial plan. He has asked Donna Botello, manager of financial planning, to gather the necessary information and perform the calculations for the financial plan. The company’s divisional staffs, together with corporate finance department personnel, have analyzed several proposed capital expenditure projects. The following is a summary schedule of acceptable projects (defined by the company as projects having internal rates of return greater than 8 percent): Project Investment Amount Internal Rate of Return (in Millions of Dollars) A $10.0 25% B $20.0 21% C $30.0 18% D $35.0 15% E $40.0 12.4% F $40.0 11.3% G $40.0 10% H $20.0 9% All projects are expected to have one year of negative cash flow followed by positive cash flows over the remaining years. In additions, next year’s projects involve modifications and expansion of the company’s existing facilities and products. As a result, these projects are considered to have approximately the same degree of risk as the company’s existing assets. Botello feels that this summary schedule and detailed supporting documents provide her with the necessary information concerning the possible capital expenditure projects for next year. She can now direct her attention to obtaining the data necessary to determine the cost of the capital required to finance next year’s proposed projects. The company’s...
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...engaged managers since the birth of the modern commercial corporation. Surprisingly then dividend policy remains one of the most contested issues in finance. Dividend policy is concerned with financial policies regarding paying cash dividend in the present or paying an increased dividend at a later stage. Whether to issue dividends and what amount, is determined mainly on the basis of the company's unappropriated profit (excess cash) and influenced by the company's long-term earning power. When cash surplus exists and is not needed by the firm, then management is expected to Payout some or all of those surplus earnings in the form of cash dividends or to repurchase the company's stock through a share buyback program. Management must also choose the form of the dividend distribution, generally as cash dividends or via a share buyback. Various factors may be taken into consideration: where shareholders must pay tax on dividends, firms may elect to retain earnings or to perform a stock buyback, in both cases increasing the value of shares outstanding. Alternatively, some companies will pay "dividends" from stock rather than in cash. Our group have selected 3 journals related to the dividend policy in our quest to understand the factors/determinant of the latter and its relationship with investment opportunities and corporate finance. Further the chosen journals concentrated on the research dividend policy affecting firm’s in the emerging market. The following are the reviews...
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...Bachelor of Finance & Banking Thesis -------------------------------------- The impact of capital structure on profitability of listed construction companies on Hanoi Stock Exchange from 2008 to 2013 FALL 2014 Instructor Mr. Tran Viet Dung Group members Nguyen Thi Thanh Tam (FB00464) Nguyen Thi Viet Chinh (FB00405) Hoang My Linh (FB00073) Dang Thi Hong Hanh (FB00253) Nguyen Thi Kieu Trang (FB00078) Hanoi, December 2014 Table of Contents List of tables 3 List of figure 4 Abstract 5 Chapter 1: Introduction and Thesis Outline 6 1. Background 6 2. Research objective 8 3. Research question 8 4. Data and methodology 8 4.1 Data 8 4.2 Methodology 9 5. Thesis outline 9 Chapter 2: Literature Review and theoretical models 10 1. Theorem review 10 1.1. Modigliani- Miller theorem review 10 1.2. Agency theory 12 1.3. Trade-off theory 14 1.4 Pecking Order Theory 19 1.5 Market-timing theory 20 2. Variable review 22 2.1. Return on Asset and Return on Equity 22 2.2. Capital structure 23 3. Empirical studies 24 3.1. Relationship between capital structure and firm performance 24 3.2. Empirical studies of relationship between determinants of capital structure and profitability 28 4. Summary of the empirical studies 30 Chapter 3: Methodology 31 1. Introduction 31 2. Data collection methods 32 2.1. Sampling techniques 32 2.2. Data collection procedure 34 3. Variables and hypotheses 34 3.1. Dependent...
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...for its operations, commonly, it comprises of stockholders’ investments, long- term loans, short-term loans and short-term liabilities as reflected on the right hand side of the Oil company balance sheet. Financial Structure is different from capital structure in the sense that it also includes current liabilities. Therefore, financial structure is the combination of two main components 1) Capital structure and 2) Current liabilities. To provide an understanding of the concept of financial structure in Oil sector specifically capital structure of Padma Oil Company Limited, the balance sheet, debt and equity, working capital, cost of capital and opportunity cost are need to be explained. The capital structure is how an Oil company finances its overall operations and growth by using different sources of funds. It is a mix of a company’s long-term debt, specific short-term debt, common equity and preferred equity. Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered part of the capital structure. Working capital is defined as the difference between current assets and current liabilities. Current assets are the most liquid of Oil company assets, meaning they are cash or can be quickly converted to cash. Current liabilities are any obligations due within one year. Working capital measures what is leftover once...
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...SUFFOLK UNIVERSITY SCHOOL OF MANAGEMENT Graduate Programs in Finance Fall Quarter, 2011 FIN MF 820 Financial Policy Thursdays: 7:15-9:55 Instructor: Dr. Shahriar Khaksari, CFA Office: S432 Phone: 573-8366 Email: skhaksari@suffolk.edu The New Corporate Finance: Where Theory Meets Practice Mcgraw-Hill Series in Advanced Topics in Finance and Accounting Course Objective This course is designed to allow students to develop a deep understanding of financial theories, techniques, and models applied to the study of corporate financial decisions. It covers aspects of corporate strategy, industry structure, and the functioning of capital markets. The course consists of three segments. In the first segment, students do a comprehensive analysis of the assigned cases and prepare a written report that includes identification of major issues, alternative approaches, analysis of each alternative, and a concluding part in which students take a clear cut position in how they would approach the problem as a decision maker and defending their position. The Case study is done by groups (three to four students per group). The text analysis should not exceed five pages. It should be typed and double-spaced. A lengthy summary of the case is unnecessary and redundant. The space constraint should discipline students to be concise at differentiating major issues from the less important ones. All the tables, graphs and related...
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