1. 52-252-02 Financial Management and Value Creation Instructor:Prof. Joshua Slive Office:4.253 Office hours:After class or by appointment E-mail:joshua.slive @hec.ca Web site: http://www.hec.ca/sites/cours/52-252-02/

2. Plan for Today 1.Introduction –Administrative Information –Course Outline 2.Course in a nutshell 3.Reminder: a little math 4.Case: Warren E. Buffett 1995 5.Using NPV 6.Case: Tartempion 7.Conclusion and preparation for next week

3. Course in a Nutshell Stockholders Bondholders Financial Manager Projects Investments Cash flow Interest Dividends The Firm Capital Budgeting The Market Capital Structure Equity Debt Government Corporate Taxes Personal Taxes

4. What do we know now? We study the long-term decisions of a financial manager: –How to use funds: What projects to undertake to maximize firm value How much dividends to pay –Where to get funds: equity and debt Key concepts in financial decision making: –Time value of money –Risk and return Use NPV to value investments: –Use cash flows, not accounting numbers –Focus on incremental cash flows

5. Next Week Case: Fonderio Di Torino S.P.A. To hand in at beginning of class: 1.What is the NPV of the project? 2.What are the most important risk factors? 3.Do you recommend the investment? Assumptions to use: –The appropriate discount rate is 9.9% –The old machines will last 8 years –Straight-line depreciation with no half-year rule