Corporate Finance: MBAC 6060

Corporate Finance
Professor Jaime F. Zender
Course Overview:
Purpose and Focus
Review of the syllabus
Course objectives and learning goals
 Prerequisites: accounting, economics, statistics
Steve Ross – the economics of risk and time
Course materials, schedule, assignments
 See D2L
 Homework on
Homework versus Practice
Course policies
Grading guidelines
Corporate Finance Decisions
Financial analysis and planning.
Pro forma financial statements – look
 Cash flow for valuation.
 Higgins
Capital budgeting.
Decisions that involve what fixed assets
the firm should acquire.
 “Investment” or “left-hand side” decisions.
Corporate Finance Decisions
Capital 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 Headed
Assets 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.”
An 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:
4  ....
V C 
0 (1  r )
(1  r ) 2 (1  r )3 (1  r ) 4
We can actually see some of where we are
going from this seeming gibberish. Use this
to remind yourself why we are doing things.