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Academy of Finance – MBA Program, Finance

Lecture 1

Introduction to Corporate Finance The Nature of the Financial Markets Exchange Rate Determination and the Foreign Exchange Market Debt and Equity Capital

Reference: Chapter 13, Finance and Accounting for Business, 2nd Edition (Ryan)

Academy of Finance – MBA Program, Finance

Learning objectives

What is Corporate Finance? Securities and the financial markets

To understand the characteristics of a financial market security To understand the nature of the financial markets and the different motives of traders To understand the money markets and the determinants of exchange rates.

The capital markets

To be able to distinguish between the roles of the primary and secondary capital markets To understand the distinguishing features of equity and debt capital

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Academy of Finance – MBA Program, Finance

What is Corporate Finance?

A field of finance dealing with financial decisions that business enterprises make and the tools and analysis used to make these decisions The primary goal of corporate finance is to maximize corporate value while managing the firm's financial risks The discipline can be divided into long-term and short-term decisions and techniques

In this module we will look at long-term decision-making

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Academy of Finance – MBA Program, Finance

Corporate Finance First Principles

MAXIMIZE THE VALUE OF THE FIRM MAXIMIZE THE VALUE OF THE FIRM

INVESTMENT DECISION INVESTMENT DECISION Invest in projects that Invest in projects that yield a return greater yield a return greater than the minimum than the minimum acceptable hurdle rate acceptable hurdle rate

FINANCING DECISION FINANCING DECISION Choose a financing mix Choose a financing mix that maximizes the that maximizes the value of the project, value of the project, and matches the assets and matches the assets being financed being financed

DIVIDEND DECISION DIVIDEND DECISION If there are not enough If there are not...