Fundamentals of corproate finance 3e chapter 22

... The Financial Manager?  Goals of the Corporation  Careers in Finance McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights 1- The Role of The Financial Manager  Capital ... Corporations Corporate tax on profits + Personal tax on dividends McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights 1- 11 Who is The Financial Mana...

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... The Financial Manager?  Goals of the Corporation  Careers in Finance McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights 1- The Role of The Financial Manager  Capital ... Corporations Corporate tax on profits + Personal tax on dividends McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights 1- 11 Who is The Financial Mana...

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... Covered Why Finance Matters The Flow of Savings to Corporations Functions of Financial Markets Functions of Financial Intermediaries Value Maximization and Cost of Capital McGraw- Hill/Irwin ... values McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights reserved 2- 15 Value of Alaska Air Group Data as of April, 2005 McGraw- Hill/Irwin Copyr...

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... CashFlows Flowscan canbebechanged changedby by the the useuse of debt of debt Firm Firm A pays A pays partpart of itsofprofits its profits as as debt debt interest interest Firm Firm B does B does ... cash payments over a period of time McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights 3- 13 The Statement of Cash Flows Pepsico Statement of Cash Fl...

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... at the end of Year = $133.82 McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights reserved 4- Future Values Future Value of $100 = FV FV = $100 × (1 + r ) McGraw- Hill/Irwin ... today of a future cash flow Present value of a $1 future payment Discount Rate Interest rate used to compute present values of future cash flows McGraw- Hill/Irwin Copyright...

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... (continued) What is the price of the bond if the required rate of return is 5.5 %? 55 55 1 ,055 PV = + + (1 .055 ) (1 .055 ) (1 .055 ) PV = $1,000 McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, ... the price of a 5.5 % annual coupon bond, with a $1,000 face value, which matures in years? Assume a required return of 3.5% 55 55 1 ,055 PV = + + (1.035) (1.035) (1.03...

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... Public Offering (IPO) - First offering of stock to the general public Seasoned Issue - Sale of new shares by a firm that has already been through an IPO McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill ... $ 106. 09 $103.00 Tails $100.43 $100.00 Heads Tails $97.50 Tails McGraw- Hill/Irwin $100.43 $95 .06 Copyright © 2007 by The McGraw- Hill Companies, Inc All rights reserved 6...

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... unavailability of funds in the capital market McGraw- Hill/Irwin Copyright © 2 007 by The McGraw- Hill Companies, Inc All rights 7- 34 Profitability Index McGraw- Hill/Irwin Copyright © 2 007 by The McGraw- Hill ... 2 007 by The McGraw- Hill Companies, Inc All rights 7- 19 Internal Rate of Return IRR=12.96% McGraw- Hill/Irwin Copyright © 2 007 by The McGraw- Hill Companies, Inc...

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... Depreciation = Profit before tax 2,000 3,000 -Tax @ 35 % 1,050 = Net profit + Depreciation 1,950 2,000 = CF from operations 3,950 McGraw- Hill/Irwin or $3,950,000 Copyright © 2007 by The McGraw- Hill ... of $1,500 and $500 respectively The cost of the project can be depreciated at $1,000 per year Given a 10% required return, compare the NPV using cash flow to the NPV using accounting in...

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... probabilities of different possible outcomes Break Even Analysis - Analysis of the level of sales (or other variable) at which the company breaks even McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill ... Degree of Operating Leverage (DOL) - Percentage change in profits given a percent change in sales DOL = McGraw- Hill/Irwin % change in profits % change in sales Copyright ©...

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... proportional to the number of shares in the issues McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights reserved 10- The Value of an Investment of $1 in 1900 Index $17,545 ... portfolio in first asset x rate of return on first asset ) ) fraction of portfolio rate of return + x in second asset on second asset McGraw- Hill/Irwin Copyright © 2007 by Th...

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... The beta of your portfolio will be an average of the betas of the securities in the portfolio  If you owned all of the S&P Composite Index stocks, you would have an average beta of 1.0 McGraw- Hill/Irwin ... The average change of 1.6 % (-0.8 to 0.8) divided by the 2% (-1.0 to 1.0) change in the market produces a beta of 0.8 B = McGraw- Hill/Irwin 1.6 = 0.8 Copyright © 2007 by...

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... degrees of risk Capital Structure - The firm’s mix of long term financing and equity financing McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights reserved 12- Cost of ... The McGraw- Hill Companies, Inc All rights reserved 12- WACC Weighted Average Cost of Capital (WACC) - The expected rate of return on a portfolio of all the firm’s securities Com...

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... Preferred Stock  Corporate Debt  Convertible Securities  Patterns of Corporate Financing McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights 13- Types of Securities ... $38/sh # of shares x 352 Market Value $13.376 billion McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights 13- Common Stock McGraw- Hill/Irwin Copyri...

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... the true value of the security McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights 14 - Initial Public Offering McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill ... Issue of securities offered only to current stockholders McGraw- Hill/Irwin Copyright © 2007 by The McGraw- Hill Companies, Inc All rights 14 - 13 Rights Issue Rights Issue - Issue o...

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