Chapter 5: Interest Rates-1
Chapter 5: Interest Rates
Big Picture: Cash flows usually occur more than once per year and interest usually compounds
more than once per year. We have to adjust for these.
I. Interest Rate Quotes and the Time Value of Money
A.
Chapter 4
The Time Value of Money
The Time Value of Money
Learning Objectives
Explain the mechanics of compounding, which
is how money grows over a time when it is
invested.
Be able to move money through time using
time value of money tables, financial
Chapter 23
Raising Equity Capital
1
How are start-up firms
usually financed?
Founders resources
Angel investors
Venture capital funds
Institutional investors
Corporate investors
2
Angel Investors
Individual investors
Oftentimes they receive a large
equity
CALIFORNIA STATE UNIVERSITY, FULLERTON
MIHAYLO COLLEGE OF BUSINESS AND ECONOMICS
Department of Finance
Finance 320: Business Finance
Instructor:
Dr. Dipasri Ghosh
Class Meets: TTh 1:00-2:15pm
Office:
SGMH 5196
Phone:
(657)-278-4821
Office Hours: Thursdays
1-1
Chapter 1
The Corporation
1-2
Overview of Financial Management
and the Financial Environment
Financial management
Forms of business organization
Objective of the firm: Maximize wealth
Determinants of stock pricing
The financial environment
Financial
Chapter 20: Financial Options-1
Chapter 20: Financial Options
I. Options Basics
A. Understanding Option Contracts
Basic Terms:
financial option: contract that gives the owner the right to buy or sell an asset at a
fixed price in the future
call option: ri
Chapter 3: Arbitrage and Financial Decision Making-1
Chapter 3: Arbitrage and Financial Decision Making
Big picture:
1) If the price of an asset is less than its value, we should buy it.
2) If the price of an asset is greater than its value, we should sel
Chapter 7: Fundamentals of Capital Budgeting-1
Chapter 7: Fundamentals of Capital Budgeting
Big Picture: To value a project, we must first estimate its cash flows.
Note: most managers estimate a projects cash flows in two steps:
1) Impact of the project o
Chapter 14: Capital Structure in a Perfect Market-1
Chapter 14: Capital Structure in a Perfect Market
I. Overview
1. Capital structure: mix of debt and equity issued by the firm to fund its assets
Note: usually use leverage ratios like debt/assets to meas
Chapter 16: Financial Distress, Managerial Incentives, and Information-1
Chapter 16: Financial Distress, Managerial Incentives, and Information
I. Basic Ideas
1. As debt increases, chance of bankruptcy increases
=> bankruptcy costs make debt less attracti
Chapter 10: Capital Markets and the Pricing of Risk-1
Chapter 10: Capital Markets and the Pricing of Risk
Big Picture:
1) To value a project, we need an interest rate to calculate present values
2) The interest rate will depend on the risk of the project
Chapter 15: Debt and Taxes-1
Chapter 15: Debt and Taxes
I. Basic Ideas
1. Corporate Taxes
=> interest expense is tax deductible
=> as debt increases, corporate taxes fall
=> incentive to fund the firm with debt
2. Personal taxes
=> equity income is usuall
Chapter 22: Real Options-1
Chapter 22: Real Options
I. Introduction to Real Options
A. Basic Idea
=> firms often have the ability to wait to make a capital budgeting decision
=> may have better information later
=> may be able to avoid negative outcomes
=
Chapter 11: Optimal Portfolio Choice and the CAPM-1
Chapter 11: Optimal Portfolio Choice and the Capital Asset Pricing
Model
Goal: determine the relationship between risk and return
=> key to this process: examine how investors build efficient portfolios
Chapter 21: Option Valuation-1
Chapter 21: Option Valuation
I. The Binomial Option Pricing Model
Intro:
1. Goal: to be able to value options
2. Basic approach: create portfolio of stock and risk-free bonds with same payoff as
option
3. Law of One Price: v