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Summary

Summary Managerial Finance - two study books

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  • Course
  • Managerial Finance
  • Institution
  • Business University Nyenrode
  • Book
  • Value

This summary incudes both the required course content from: (i) Brealey, Myers & Allen (2013). Principles of Corporate Finance.(11th ed.) and (ii) Koller, Dobbs, & Huyett (2012). Value: the Four Cornerstones of Corporate Finance.

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Document information

  • Yes
  • March 25, 2015
  • 72
  • 2015/2016
  • Summary

Subjects

  • corporate finance
  • value
  • value creation
  • value drivers
  • capital budgeting
  • project design
  • sensitivity analysis
  • cost of capital
  • stock market
  • cost of equity
  • investor relati
  • cornerstones of corporate finance

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Written for

  • Business University Nyenrode
  • Managerial Finance
All documents for this subject (2)

1  review

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By: Milan1381 • 6 year ago

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By: aaantjes • 6 year ago

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Thank you for your review, Milan - hope that a lot of the summary has been in your preparations!

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Content preview

THE MATH OF VALUE




(IR = Investment Rate)




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,2 | Pagina
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,CLASS 1 – BAM Ch1 – INTRODUCTION


Corporate finance  financial decision making
1. What investment should the corporation make? (spending)
2. How should it pay for those investments? (raising)




Goal of Financial Management  to create VALUE,
That is when the Corporation can earn a higher return that shareholders can earn
for themselves.
Where outside investment opportunities set the standard for internal investments,
the opportunity cost, e.g. the cost of capital.




Five key themes:
1. Corporate Finance is all about maximizing VALUE
2. Where the opportunity cost of capital sets the standard for investment
decisions
3. A safe dollar is worth more than a risky dollar
4. Smart investment decisions create more value than smart financing
decisions
3 | Pagina
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, 5. Good governance matters (due to e.g. the principal-agent problem)


Real assets vs. Financial assets and Securities
(securities are a type of fin. assets which can be traded, incl. bonds and stocks)
Investment decision = purchase of real assets Capital Budgeting or
Expenditure (CAPEX)
Financing decision = sale of financial assets




Capital structure = choice between debt and equity financing


Financing equity:
1. Issuing shares
2. Retaining cash flows


A Corporation is a legal entity where shareholders have limited liability.
 Upside: separation of Ownership vs. Control, as it gives
‘permanence’
 Downside: principle-agent problems, differences in interests
 Downside: Tax drawback, as corporations pay tax and shareholders are
taxed again




4 | Pagina
264680683

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