BUS 420 Chapter_01

BUS 420 Chapter_01 - Chapter 1 Chapter An Overview of...

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Chapter 1 Chapter 1 An Overview of Financial Management 1
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Focus Areas Focus Areas Goal of Corporate Finance: to create shareholder value The Cost of Money Agency relationships: Stockholders versus managers Stockholders versus creditors 2
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Why is corporate finance Why is corporate finance important to all managers? (a) important to all managers? (a) Corporate finance provides the skills managers need to: Identify and select the corporate strategies and individual projects that add value to their firm. Forecast the funding requirements of their company, and devise strategies for acquiring those funds. 3
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What should be management’s What should be management’s primary objective? (b, b1) primary objective? (b, b1) The primary objective should be shareholder wealth maximization, which translates to maximizing stock price. Do firms have any responsibilities to society at large? YES! Shareholders are also members of society. 4
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Is maximizing stock price good for Is maximizing stock price good for society, employees, and customers? society, employees, and customers? (b2, b3) (b2, b3) Employment growth is higher in firms that try to maximize stock price. Consumer welfare implications Should firms behave ethically? YES! Can ethics be taught? 5
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What three aspects of cash flows What three aspects of cash flows affect an investment’s value? (c) affect an investment’s value? (c) Amount of expected cash flows Timing of the cash flow stream Risk of the cash flows 6
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This note was uploaded on 02/14/2012 for the course BUS 420 taught by Professor Poindexter during the Spring '08 term at N.C. State.

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BUS 420 Chapter_01 - Chapter 1 Chapter An Overview of...

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