6/7/20102Lec1Lec 2Lec 3Lec 4The 3 DecisionTimeValue of MoneyBond ValuationRRRType of MarketPV,FV & FormulasShare ValuationRisk & ReturnFisher EquationCash Flows,Compounding & DiscountingExpected Return for Individual and Portfolios Securities Ordinary Annuity, Annuity Due, Perpetuity,Growing PerpetuityCAPMWorking Capital Management DecisionsAffect current asset, current liability and current working capital (CA-CL)Capital Budgeting DecisionsDetermine what long-term productive assets the firm will purchaseFinancing DecisionsDetermine the firm’s capital structure. (ratio of Debt and Equity)The management’s objective is –Maximize Shareholder’s Value (Wealth) –Which reflects on Share Prices
6/7/20103Primary Market Vs Secondary MarketMoney Market Vs Capital MarketPublic Market Vs Private MarketInterest rate is the price for moneyHence it decides the cost of financial decisions, and value of bonds and sharesReal rate of interestInflation-adjusted return earned by lender-saversInflation-adjusted cost incurred by borrowers spendersRarely observable as inflation > 0Nominal rate of interestThe rate that we actually observe in the marketplace at a given timeFisher Equation(1+Nominal) = (1+Real)*(1+ Inflation)i = r + Δpe
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