公司理财讲义（1）--巫和懋

1、Introduction to Corporate FinanceCorporate Finance addresses the following three questions:What long-term investments should the firm engage in?How can the firm raise money for the required investments?How much short-term cash flow does a company need to pay its bills? (RWJ ch.1)The Balance-Sheet Mo

2、del of the FirmCurrent AssetsFixed Assets1 Tangible2 IntangibleTotal Value of Assets:Shareholders EquityCurrent LiabilitiesLong-Term DebtTotal Firm Value to Investors:The Balance-Sheet Model of the FirmCurrent AssetsFixed Assets1 Tangible2 IntangibleShareholders EquityCurrent LiabilitiesLong-Term De

3、btWhat long-term investments should the firm engage in?The Capital Budgeting Decision(Investment Decision)The Balance-Sheet Model of the FirmHow can the firm raise the money for the required investments?The Capital Structure Decision (Financing Decision) Current AssetsFixed Assets1 Tangible2 Intangi

4、bleShareholders EquityCurrent LiabilitiesLong-Term DebtThe Balance-Sheet Model of the FirmHow much short-term cash flow does a company need to pay its bills?The Net Working Capital Investment Decision(Financial Decision)Net Working CapitalShareholders EquityCurrent LiabilitiesLong-Term DebtCurrent A

5、ssetsFixed Assets1 Tangible2 IntangibleCapital StructureThe value of the firm can be thought of as a pie.The goal of the manager is to increase the size of the pie.The Capital Structure decision can be viewed as how best to slice up a the pie.If how you slice the pie affects the size of the pie, the

6、n the capital structure decision matters.50% Debt50% Equity25% Debt75% Equity70% Debt30% EquityCash flowfrom firm (C)The Firm and the Financial MarketsTaxes (D)FirmGovernmentFirm issues securities (A)Retained cash flows (F)Investsin assets(B)Dividends anddebt payments (E)Current assetsFixed assetsFi

7、nancialmarketsShort-term debtLong-term debtEquity sharesUltimately, the firm must be a cash generating activity.The cash flows from the firm must exceed the cash flows from the financial markets. Financial MarketsPrimary MarketWhen a corporation issues securities, cash flows from investors to the fi

8、rm.Usually an underwriter is involvedSecondary MarketsInvolve the sale of “used” securities from one investor to another.Securities may be exchange traded or trade over-the-counter in a dealer market. Financial MarketsFirmsInvestorsSecondary MarketmoneysecuritiesSueBobStocks and BondsMoneyPrimary Ma

9、rketInvestment EnvironmentTwo Elements of Investment: Time and Risk Risky Investment and Capital BudgetingThe basic feature of a debt is that it is a promise by the borrowing firm to repay a fixed dollar amount of by a certain date.The shareholders claim on firm value is the residual amount that rem

10、ains after the debtholders are paid.If the value of the firm is less than the amount promised to the debtholders, the shareholders get nothing.Capital Structure :Debt and EquityDebt and Equity as Options$F$FPayoff to debt holdersValue of the firm (X)Debt holders are promised $F. If the value of the

11、firm is less than $F, they get the whatever the firm if worth. If the value of the firm is more than $F, debt holders get a maximum of $F. $FPayoff to shareholdersValue of the firm (X)If the value of the firm is less than $F, share holders get nothing. If the value of the firm is more than $F, share

12、 holders get everything above $F. Algebraically, the bondholders claim is: Min$F,$XAlgebraically, the shareholders claim is: Max0,$X $FCombined Payoffs to Debt and Equity$F$FCombined Payoffs to debt holders and shareholdersValue of the firm (X)Debt holders are promised $F. Payoff to debt holdersPayo

13、ff to shareholdersIf the value of the firm is less than $F, the shareholders claim is: Max0,$X $F = $0 and the debt holders claim is Min$F,$X = $X. The sum of these is = $XIf the value of the firm is more than $F, the shareholders claim is: Max0,$X $F = $X $F and the debt holders claim is: Min$F,$X

14、= $F. The sum of these is = $XCorporate Governance Separation of Ownership and Control Board of DirectorsManagementAssetsDebtEquityShareholdersDebtholdersAsymmetric Information and Agency CostsThere is asymmetric information between shareholders and managers.How to induce managers to act in the shareholders interests ?