Slide 1Course Overview: Purpose and FocusCorporate Finance DecisionsCorporate Finance DecisionsValuation Basics – Where We Are HeadedValuationIntroductionCorporate FinanceProfessor Jaime F. ZenderCourse Overview:Purpose and FocusReview of the syllabusCourse objectives and learning goalsPrerequisites: accounting, economics, statisticsSteve Ross – the economics of risk and timeCourse materials, schedule, assignmentsSee D2LHomework on myfinancelab.comHomework versus PracticeCourse policiesGrading guidelinesCorporate Finance DecisionsFinancial analysis and planning.Pro forma financial statements – look forward.Cash flow for valuation.HigginsCapital budgeting.Decisions that involve what fixed assets the firm should acquire.“Investment” or “left-hand side” decisions.Corporate Finance DecisionsCapital structure.How best to raise cash to “buy” productive assets.Financing or “Right-hand side” decisions.Working capital management.“Both sides” of the balance sheet but only the current section.Risk and return.An important and difficult question is exactly how we should measure risk.Valuation Basics – Where We Are HeadedAssets have value due to the future “benefits” they provide for those who buy them.Commonly “benefits” equals cash flow but not always.The price you are willing to pay depends on the benefits you receive from owning an asset.All else equal, more is better.Timing matters – a concept labeled the “time value of money.”When you receive the cash has an impact on value.Risk is also a piece of the puzzle.“The benefits you expect to receive.”ValuationAn important goal for us will be to value different assets. It is often helpful to see where we are headed: Discounted cash flow (DCF) valuation:We can actually see some of where we are going from this seeming gibberish. Use this to remind yourself why we are doing
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