Law 325 - Corporate Finance Outline - de Fontenay[99]

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Law 325 - Corporate Finance Outline - de Fontenay[99]I. Part I: Introduction a. 1. Introduction to Corporate Finance i. BMA, Chapter 1 1. In finance, we’re focusing on how money gets from investo... rs to firms who actually do something with the money 2. Finance is the study of how to allocate one’s money through time 3. Finance: choosing between “money now” and “money later,” according to the interest rate 4. A safe dollar is worth more than a risky dollar (greater returns require greater risk) 5. Themes that will continuously pop up: a. 1) Valuation b. 2) Reduce everything you can to a stream of cash flows or rely on market c. 3) Think in terms of the opportunity cost of capital i. In finance, we’re choosing between money now v. money later ii. Think of interest rate as price of using another people’s money iii. If interest rate goes up, you’ll shift towards investing for money later iv. Money now = borrowing v. Opportunity cost of capital is next best thing you could be doing with your money vi. Money tomorrow is worth less to you 6. Concept we’ll most often work with is concept of actual return 7. Start with “don’t expect to beat the market” concept as default 8. Market value paradigm assumes things should be priced accurately a. So, can’t get higher rate of return by investing on same things 9. Investment Decision = LEFT side of the balance sheet 10. Financing Decision = RIGHT side of the balance sheet 11. Overall, investors are risk averse 12. IPO is financing decision 13. Releasing new product is investment decision 14. Firm’s investment decision must consider the opportunity cost of capital [Show More]

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