McGraw.Hill - Brealey & Myers - Principles of Corporate Finance, 6th Edition Slides

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Nội dung Text: McGraw.Hill - Brealey & Myers - Principles of Corporate Finance, 6th Edition Slides

Principles of Corporate Finance Brealey and Myers Sixth Edition u Finance and the Financial Manager Chapter 1
2 Topics Covered w What Is A Corporation? w The Role of The Financial Manager w Who Is The Financial Manager? w Separation of Ownership and Management w Financial Markets
3 Corporate Structure Sole Proprietorships Unlimited Liability Personal tax on profits Partnerships Limited Liability Corporations Corporate tax on profits + Personal tax on dividends
4 Role of The Financial Manager (2) (1) Firm's Financial Financial (4a) operations manager markets (3) (4b) (1) Cash raised from investors (2) Cash invested in firm (3) Cash generated by operations (4a) Cash reinvested (4b) Cash returned to investors
5 Who is The Financial Manager? Chief Financial Officer Treasurer Comptroller
6 Ownership vs. Management Difference in Information Different Objectives w Stock prices and w Managers vs. returns stockholders w Issues of shares and w Top mgmt vs. other securities operating mgmt w Dividends w Stockholders vs. banks w Financing and lenders
7 Financial Markets Money Primary OTC Markets Markets Secondary Markets
8 Financial Institutions Company Obligations Funds Intermediaries Banks Insurance Cos. Brokerage Firms
9 Financial Institutions Intermediaries Obligations Funds Investors Depositors Policyholders Investors
Principles of Corporate Finance Brealey and Myers Sixth Edition u Present Value and The Opportunity Cost of Capital Chapter 2
11 Topics Covered w Present Value w Net Present Value w NPV Rule w ROR Rule w Opportunity Cost of Capital w Managers and the Interests of Shareholders
12 Present Value Present Value Discount Factor Value today of Present value of a future cash a $1 future flow. payment. Discount Rate Interest rate used to compute present values of future cash flows.
13 Present Value Present Value = PV PV = discount factor × C1
14 Present Value Discount Factor = DF = PV of $1 DF = 1 (1+ r ) t Discount Factors can be used to compute the present value of any cash flow.
15 Valuing an Office Building Step 1: Forecast cash flows Cost of building = C0 = 350 Sale price in Year 1 = C1 = 400 Step 2: Estimate opportunity cost of capital If equally risky investments in the capital market offer a return of 7%, then Cost of capital = r = 7%
16 Valuing an Office Building Step 3: Discount future cash flows PV = C1 (1+r) = 400 (1+.07) = 374 Step 4: Go ahead if PV of payoff exceeds investment NPV = −350+ 374= 24
17 Net Present Value NPV = PV - required investment C1 NPV = C0 + 1+ r
18 Risk and Present Value w Higher risk projects require a higher rate of return. w Higher required rates of return cause lower PVs. PV of C1 = $400 at 7% 400 PV = = 374 1 + .07
19 Risk and Present Value PV of C1 = $400 at 12% 400 PV = = 357 1 + .12 PV of C1 = $400 at 7% 400 PV = = 374 1 + .07
20 Rate of Return Rule w Accept investments that offer rates of return in excess of their opportunity cost of capital. Example In the project listed below, the foregone investment opportunity is 12%. Should we do the project? profit 400,000 − 350,000 Return = = = .14 or 14% investment 350,000