The Principles of Corporate Finance - 1202 Words

THE PRINCIPLES OF CORPORATE FINANCE CHAPTER 1: The time value of money We are going to link the present and the future by using the notion of interest rate that could be called discount rate, required rate of return or cost of capital. Finance is all about cash flows but more precisely about the exact date of the realization of the cash flow. I) PRESENT VALUE Example 1: What is the value today of $110 to be received in one year? - suppose the interest rate , r =10% - if you had the money today you could : o put in the bank at 19% o wait one year o receive PV * (1,10) = $110 - PV = $110/(1,10) = $100 We can’t compare cash flows of different maturities†¦show more content†¦Unsecured: Senior bonds are paid before junior bonds). However unsecured paid higher rate of return. ââ€" ª Fixed rate and floating rate ââ€" ª Call options ââ€" ª Put options ââ€" ª Convertible ( options that you have to exchange) and with warrants (similar to a bond it is a stock option give the right to purchase the underline number of chairs , bonds†¦) Valuing Bonds ââ€" ª Determine the Cash flow for each date ââ€" ª Determine the appropriate discount rate for each cash flow ââ€" ª Determine each cash flow for the appropriate number of periods ââ€" ª Take the sum If the required rate of return goes up the price goes down. Characteristics of common stock ââ€" ª Ownership of the firm ââ€" ª Voting rights ââ€" ª Dividend rights ââ€" ª Dividend are risky The value of the share comes from the price of the dividend Valuing common stock ââ€" ª Payoff comes in two forms: dividends and capital gains or losses ââ€" ª Expected return = (D1+P1-P0)/P0 ââ€" ª Capital gain = P1-P0 ââ€" ª P0 = (D1+P1)/(1+r) Example: D= 5 P1= 110 P0= 100 R= (5+110-100)/100=15% 100=(5+110)/(1.15) Summary ââ€" ª Determine the stock required rate of return ââ€" ª Estimate the dividend and the price for next period ââ€" ª Discount expected dividend and future price at the RRR Constant growth of dividend ââ€" ª PO = D1/(r-g) ââ€" ª r= D1/P0+g ââ€" ª g = retained earnings ratio * ReturnShow MoreRelatedprinciple of corporate finance solution Essay1401 Words   |  6 Pagesï » ¿CHAPTER 2 How to Calculate Present Values Answers to Problem Sets 1. If the discount factor is .507, then .507*1.126 = $1 2. 125/139 = .899 3. PV = 374/(1.09)9 = 172.20 4. PV = 432/1.15 + 137/(1.152) + 797/(1.153) = 376 + 104 + 524 = $1,003 5. FV = 100*1.158 = $305.90 6. NPV = -1,548 + 138/.09 = -14.67 (cost today plus the present value of the perpetuity) 7. PV = 4/(.14-.04) = $40 8. a. PV = 1/.10 = $10 b. Since the perpetuityRead MoreCorporate Finance Core Principles and Applications Chapter 817715 Words   |  71 Pagesentirely with equity, another project could be financed with debt, and the firm’s overall capital structure would remain unchanged, financing costs are not relevant in the analysis of a project’s incremental cash flows according to the stand-alone principle. 7. The EAC approach is appropriate when comparing mutually exclusive projects with different lives that will be replaced when they wear out. This type of analysis is necessary so that the projects have a common life span over which they can beRead MoreCorporate Performance Evaluation : Carlos Strong. Bus401 Principles Of Finance2373 Words   |  10 Pages Corporate Performance Evaluation Carlos Strong BUS401 Principles of Finance Dr. Lester Reid March 10, 2016 Company finance is one of the critical processes of any company for success. Finance is used to ensure funds are allocated correctly to ensure positive revenue, proper tax filing, and budgeting for payrolls and projects. Also finance is used for investing, reviewing risk and returns, ratio analysis, and confidence needed for investors to invest their money into the company. ThisRead MoreCorporate Finance 9th Edition Mini Case Solutions Essay1598 Words   |  7 PagesDownload Ebook Corporate Finance 9th Edition Mini Case Solutions PDF at Online Ebook Library CORPORATE FINANCE 9TH EDITION MINI CASE SOLUTIONS PDF Download: CORPORATE FINANCE 9TH EDITION MINI CASE SOLUTIONS PDF Are you seeking Ebook CORPORATE FINANCE 9TH EDITION MINI CASE SOLUTIONS PDF?. Acquiring Ebook Corporate Finance 9th Edition Mini Case Solutions PDF is easy as well as easy. Mostly you have to spend much time to browse on search engine and also does not get Ebook Corporate Finance 9th EditionRead MoreCorporate Finance Programs1540 Words   |  6 PagesCorporate Finance Programs Introduction In a companys operational activities, it is essential induce financial management in its organizational structure. All business operations center on the use of finances to incur profits that benefit the company employees, shareholders and their nations economic society. This context digs into the conduction of both managerial and corporate finance. The executive finance deals with managerial implication on financial techniques used alongside pecuniary decisionsRead MoreHome Depot Corporate Governance Essay892 Words   |  4 Pagescompensation other than directors’ fees from Home Depot. 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Two, improved infrastructure and new businesses created jobs, creating an influx of workersRead MoreRole Of Internal Audit On The Organization Outside The Finance Department1121 Words   |  5 PagesMEMO To: Non-accounting specialists From: Miriam Lombe, Junior Accountant Cc: Finance Director Date: 15/12/2014 Subject: Role of Internal Audit It has come to my attention that the role of internal audit is not clear to some members of the organization outside the finance department. Therefore, it was decided that a memo is written to explain clearly the role of internal audit. Internal auditing is an independent, objective assurance and consulting function intended to add value and improveRead MoreCustomer Relationship Management ( Crm ) Practices805 Words   |  4 Pagesdown policies, procedures and processes. 3. Integrate principles of sustainability into business strategy. 4. Pursue asset growth with quality assets. 5. Undertake strong initiatives to recover classified and written off loans. 6. Optimize funding mix to reduce cost of fund. 7. Integrate green banking into banking activities. Elephant road branch of Janata Bank maintains code of conduct to deal with customer in accordance with the ethical principles the code of conduct of JBL employees shall: ï  ¶ ActRead MoreFinance: Net Present Value and Options Principle Objective1009 Words   |  5 Pagesyour student guide as study references for the Final Examination. Week One: Foundations of Finance Objective: Discuss 12 principles of foundational corporate finance. 1. __________ occurs when inaccurate information exists. a. 0 The principle of valuable ideas b. 0 Free-rider problem c. 0 Moral hazard d. 0 Adverse selection Objective: Discuss 12 principles of foundational corporate finance. 2. __________ refers to situations wherein the agent can take unseen actions for personal