BMCF 5103 CORPORATE FINANCE Dr. Nguyen Thi Hoang Anh Lecture 1: An Introduction to Corporate Finance Contents What is finance? What is corporate finance? The balance-sheet model of the firm Capital budgeting Capitalstructure The firm and thefinancial markets Forms of business organisation The goals of a corporation Agency relationships: stockholders versusmanagers‚ stockholders versus creditors Managers’ actions to maximise stockholder wealth Financial management
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OVERVIEW OF CORPORATION Lesson 1 Chapter 1 : Outline 1.1 What is Corporate Finance ? Some important questions that are answered using finance • What long-term investments should the firm take on? • Where will we get the long-term financing to pay for the investment? • How will we manage the everyday financial activities of the firm? Financial Manager Financial managers try to answer some or all of these questions The top financial manager within a firm is usually the Chief
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Aim of the report The aim of the report is to use different valuation techniques to see if the current share price of Tesco plc is fair‚ undervalued or overvalued. Some of the findings will be compared with other firms in the same industries and share holders will be informed on whether they should buy‚ hold or sell. Background information on Tesco Tesco is the largest supermarket retail chain in the United Kingdom with Sainsbury being their closest rival. It is also the third largest retail
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decision making process. |group consensus. | | |liability for the firm’s debts and |Profits are only taxed once. |The owner’s entire wealth is | | |other legal obligations. Income flows | |exposed to risk. | | |through to the proprietor (owner) who | |The business may cease to exist | | |pays taxes on it
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valuation of real assets and financial assets. Discounted cash flow analysis(DCF) is a tool that derived from finance theory which has been widely used. However finance theory also has little effect on strategic planning and there are three differences between financial theory and strategic planning: 1. Traditional financial theory and strategic planning might have some differences in language and culture. 2. Discounted cash flow analysis might be used in an incorrect way of strategy
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on them. From these four different “hurdles” will be used to evaluate if the capital expenditure proposal for Merseyside Works should go ahead. These being: * Impact on earnings per share * Payback Period * NPV of the project (Discounted Cash Flow method) * Internal Rate of Return Background Victoria Chemicals is a major competitor in the world wide chemical industry and a leader in producing polypropylene. Victoria Chemicals was under pressure from investors to improve
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and the company tax rate was 30%. The WACC should be rounded to four decimal places. After-tax WACC = rD (1-Tc) D/V + rE E/V rE = rf + βequity(rm – rf) rE = 0.0421 + 0.81(0.06) rE = 0.0907 E = number of outstanding shares x current share price E = 60 million x $3.43 E = $205.8 million D = $44 million bank loans + $1.2 million short-term hire purchase commitments D = $45.2 million V = $205.8 million + $45.2 million V = $251 million After-tax WACC = (1-0.3)(0.0348 x 44/251 + 0
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FAMILY NAME: ______________________________________ OTHER NAME(S): ______________________________________ STUDENT ID: ______________________________________ SIGNATURE: ______________________________________ PAPER ID: 00615 THE UNIVERSITY OF NEW SOUTH WALES AUSTRALIAN SCHOOL OF BUSINESS SCHOOL OF BANKING AND FINANCE FINS1613: BUSINESS FINANCE SEMESTER 1 2012 FINAL EXAM 1. TIME ALLOWED – 3 hours 2. THIS EXAMINATION PAPER HAS 19 PAGES 3. TOTAL NUMBER OF QUESTIONS – 45 Multiple Choice
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Course Syllabus Modern Finance I and II Modern Finance I Professor Adel Turki‚ Cornerstone E-mail: turki@cornerstone.com Modern Finance II Professor Gordon M. Phillips‚ University of Southern California E-mail: gordon.phillips@marshall.usc.edu Web: http://www.marshall.usc.edu/faculty/directory/gordonphillips Biography: Adel Turki is a senior vice president of Cornerstone Research in Washington D.C. He received his Ph.D. from Stanford University. Dr. Turki heads the firm’s securities practice and
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Preinreich‚ Gabriel (1937): Valuation and Amortization. In: The Accounting Review‚ Vol. 12‚ pp Reichelstein‚ Stefan (1997): Investment Decisions and Managerial Performance Evaluation. Reichelstein‚ Stefan (2000): Providing Managerial Incentives: Cash Flows versus Accrual Accounting. In: Journal of Accounting Research‚ Vol. 38‚ pp. 243-269. Richter‚ Frank/Honold‚ Dirk (2000): Das Schöne‚ das Unattraktive und das Hässliche an EVA & Co Stewart‚ G. Bennett (1991): Quest for Value: The EVATM Management Guide
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