Corporate Finance Professor Jaime F. Zender

Slides:



Advertisements
Similar presentations
The Statement of Cash Flow & Valuation Cash Flow
Advertisements

1 Corporate Finance: Forecasting Professor Scott Hoover Business Administration 221.
Financial Statements Forecasting
Introduction Corporate Finance Professor Jaime F. Zender.
Aswath Damodaran1 Introduction to Corporate Finance Aswath Damodaran Stern School of Business.
McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved CHAPTER15CHAPTER15 CHAPTER15CHAPTER15 Financing Corporate Real Estate.
Course Introduction Corporate Finance: MBAC 6060 Spring 2003 Professor Jaime Zender.
VALUATION OF FIRMS IN MERGERS AND ACQUISITIONS OKAN BAYRAK.
Course Introduction Corporate Finance Professor Jaime F. Zender.
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 9-1 Chapter (1) An Overview Of Financial Management.
Course Introduction Corporate Finance. Corporate Finance Decisions Financial analysis and planning. Assess the strengths and weaknesses of the firm via.
Hospitality Financial Management By Robert E. Chatfield and Michael C. Dalbor ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ.
Steve Paulone Facilitator Financial Management Decisions The financial manager is concerned with three primary categories of financial decisions:  1.Capital.
SOURCES OF FUNDS: 1- retained earnings used from the company to the shareholders as dividends or for reinvestment 2- Borrowing, this tool has tax advantages.
An Introduction to Basic Finance
10/20/20151 HFT 4464 Chapter 7 Common Stock. 7-2 Chapter 7 Introduction  This chapter introduces common stocks including unique features that differentiate.
Describe various organizational forms and business decision makers. 1-1.
1-1 CHAPTER 1 An Overview of Financial Management Career Opportunities Issues of the New Millennium Forms of Businesses Goals of the Corporation Agency.
ANALYZING START-UP RESOURCES
Chapter 7 Cash Flow Statements.
ANALYZING START-UP RESOURCES
ANALYZING START-UP RESOURCES
CHAPTER 1 An Overview of Financial Management
Understanding a Firm’s Financial Statements
Corporate Financing and Market Efficiency
Key Concepts and Skills
A Complete Corporate Valuation for a Simple Company
Fund Analysis, Cash-Flow Analysis, and Financial Planning
6.00 Understand Financial Analysis
USERS OF FINANCIAL INFORMATION
Understanding the role of finance in business.
Corporate Finance Lecture 1
Introduction to Corporate Finance
Business Finance Chapter 28.
* * Financial Management Chapter Eighteen McGraw-Hill/Irwin
Understanding the role of finance in business.
ANALYZING START-UP RESOURCES
Analysis of Financing Activities
Strategic Financial Management
Understanding Financial Analysis.
Financial Statement Analysis
Chapter 3 Financial Statements
Corporate Finance Professor Jaime F. Zender
Course Introduction Corporate Finance.
VALUATION OF FIRMS IN MERGERS AND ACQUISITIONS
Long-Term Financial Planning and Growth
Course Introduction Corporate Finance.
Financial Statements, Taxes, and Cash Flows
Course Introduction Corporate Finance.
8 FEASIBILITY STUDY Financial Projections
CHAPTER 1 An Overview of Financial Management
Course Introduction Corporate Finance.
Lecture 7 Valuation (part 1).
Concepts and Objectives of Cost Accounting
Valuation: The value of control
Corporate Finance Professor Jaime F. Zender
6.00 Understand Financial Analysis
CHAPTER 1 An Overview of Financial Management
CHAPTER 1 An Overview of Financial Management
Financial Management F OR A S MALL B USINESS 1 Updated:
Introduction to Corporate Finance
Of Financial Management Traditional View Modern View Objective of Financial Management Scope of Financial Management Relationship of Finance with other.
Informal Risk Capital, Venture Capital,
Course Introduction Corporate Finance.
Fund Analysis, Cash-Flow Analysis, and Financial Planning
The Statement of Cash Flow & Valuation Cash Flow
Introduction & Terminology
“Accounting is the Language of Business”
Presentation transcript:

Corporate Finance Professor Jaime F. Zender Course Introduction Corporate Finance Professor Jaime F. Zender

Course Overview: Purpose and Focus Review of the syllabus. Course objectives and learning goals. Course materials, schedule, and assignments. See “MyLeeds.” Homework on myfinancelab.com. Course policies. Grading guidelines.

Corporate Finance Decisions Financial analysis and planning. Assess the strengths and weaknesses of the firm via the Financial Statements, ratio analysis, and common sized financial statements. Pro forma financial statements. Cash flow for valuation.

Corporate Finance Decisions Capital budgeting. Decisions that involve what fixed assets the firm should acquire. “Investment” or “Left-hand side” decisions. The value of any asset is a function of: The size of the future cash flows. The timing of the future cash flows. The risk of the future cash flows. How do we make an investment decision?

Corporate Finance Decisions Capital structure. Decisions that determine how to raise $ to buy assets. Financing or “Right-hand side” decisions. The capital structure: blend of debt and equity to finance firm’s portfolio of assets used to operate the business. (Goal: minimize total financing cost. The financial claims of a firm are contingent claims, their value derives solely from the “left-hand side” of the firm. The dividend decision is a part of this discussion!?

Corporate Finance Decisions Risk versus return. Not exactly a corporate finance decision but so integral to these decisions that it deserves separate mention. An important and difficult question is exactly how we should measure risk. Once we have a handle on measuring risk we need to explain how measured risk relates to required or expected returns. This leads us to a study of asset pricing models. This will affect our capital budgeting decisions but also our capital structure decisions.

Corporate Finance Decisions Working capital management. A subset of the investment and financing decisions of the firm. Both sides of the balance sheet are affected. Concentrates on current assets and liabilities. Intimately tied with FAP. Net working capital is an asset that must be financed from some source of funds. It is an easy and dangerous thing to lose control of.

Typical Question Three years ago your cousin Ralph opened an upscale pizza restaurant in downtown Boulder. While it has been operating fairly successfully its survival depends upon some expansion in its kitchen and upgrades to its décor. Ralph has come to you as a potential equity investor. The renovation requires $200,000 and the two of you are discussing the ownership stake this would imply for you.

Ralph’s Position Ralph argues that three years ago he invested $60,000 of his own capital. He also argues that for three years he has been working at a less than competitive wage (in order to reinvest the generated cash). He estimates this amounts to $80,000 in “sweat equity” for each of the three years. Ralph suggests these facts imply your $200,000 will purchase 40% of the equity. How did Ralph come up with this figure and is this argument valid?

Valuation Basics – Where We Are Headed Assets currently have value due to the future “value” they provide for those who buy them. What does past investment have to do with this? The price you are (should be) willing to pay for an asset depends upon the value you will receive from owning that asset. We will see that we cannot examine most assets in isolation. Another piece of the puzzle is that timing matters – a concept we call the “time value of money.”

Valuation An important goal for us will be to value different assets. It is often helpful to see where we are headed: Discounted cash flow valuation: We can actually see some of where we are going from this seeming gibberish. Use this to remind yourself why we are doing things.