Corporate Finance Case

Course Outline 1. Corporate Finance -- The Balance-Sheet Model of the firm; Capital Structure and The Financial Manager; Goals of the Corporate Firm--Agency Costs and Set-of- Contracts Perspectives; Managerial Goals; Separation of Ownership and Control

2. Financial Statements and Cash Flow -- The balance Sheet-Accounting liquidity, Debt versus Equity, Value versus Cost, The Income Statement - GAAP, Non-cash Items, Time and Costs, Financial Cash Flow, The Accounting Statement of Cash Flows-Operating, Investing and Financing activities.

3. Capital structure theory & policy--Pie theory, Can an Optimum Capital Structure be determined? MM proposition-I & II, Firm Value and Financial Leverage, Taxes - corporate taxes; Expected returns & leverage; Capital Structure & Cost of Capital; Capital Structure: Limits to the use of debt -- cost of financial distress, -- personal & corporate taxes; Debt signaling, pecking order theory explaining financial choices, Option Pricing Implications--The Bondholder Wealth Expropriation Hypothesis, Agency theory and its effects on capital structure; Checklist

4. Dividend Policy -- Dividend Types of Dividend, Methods of Dividend Payment, Dividend versus Capital Gains, Dividend and Firm value -- Dividend irrelevance argument, Homemade Dividend, Bird-in-the-Hand fallacy, Market imperfection & taxes; Real world factors favoring a high dividend policy, A Resolution of Real world factors -- Linter model; Information content of dividend (Dividend Signaling), clientele effects; Ex-dividend stock price behavior, Common Stock Repurchase, Stock Dividend and Stock Split; What we know and do not know about dividend policy

5. Making Capital Investment Decision -- The Financial Evaluation of Investment Proposals -- Why use NPV? Other techniques- Payback Period, ARR, IRR, NPV profile, Problems with IRR approach, NPV vs. IRR. MIRR, Incremental

Cash Flows; Inflation and Capital Budgeting; Investments of Unequal Lives- replacement decisions, Equivalent Annual Cost Method; Investment Decision under Capital Rationing. Corporate Strategy and Investment Decision.

6. Issuing Securities to the Public -- The Public Issue, Prospectus, Alternative issue methods-Cash Offer and Right Offer, - Firm Commitment and Best Effort, Flotation Methods-Fixed Price, Auction Pricing, Direct Listing and Book Building Method (Two-stage fixed price method), IPO valuation, The cost of new issues, IPO puzzle- under-pricing,