Ch13-16

Ch13-16 - II. Issues in Corporate Finance 1. Investment...

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Part D Corporate Finance
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Introduction to Part D – Corporate Finance I. Review of Valuation We have learned at the outset of the course that: Corporate financial decisions often reduce to valuing CFs. Values of CFs are determined in financial markets. We have learned the following about valuation: 1. Two characteristics of a CF: timing and risk 2. A CF can be valued by arbitrage: Find a matching CF using traded assets The given CF has the same value as the matching CF. 3. Market prices reflect available information. 4. Time value of money: Term structure of interest rates 5. Risk premium: CAPM APT. Now we apply what we know to corporate financial decisions. c ± Jiang Wang Fall 2003 15.407 Lecture Notes
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Introduction to Part D – Corporate Finance
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Unformatted text preview: II. Issues in Corporate Finance 1. Investment Decisions (capital budgeting): Which investments should the rm take? How should its assets be used? 2. Financing Decisions: How should the rm nance its investments?-Internal funds vs. external funds-Debt vs. equity-Public vs. private equity-Bonds vs. bank debt ... 3. Payout Decisions (dividend policy) What to pay out vs. retain inside the rm?-Level of Dividends-Cash vs. share repurchases-Acquisitions ... 4. Risk Management Decisions (hedging policies) Which risks should the rm hedge? How much should the rm hedge? How should the rm hedge these risks? 15.407 Lecture Notes Fall 2003 c Jiang Wang...
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This note was uploaded on 01/19/2011 for the course 15 15.407 taught by Professor Wang during the Fall '03 term at MIT.

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Ch13-16 - II. Issues in Corporate Finance 1. Investment...

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