Deze samenvatting is geschreven aan de hand van het handboek Principes of Corporate finance, gedoceerd aan de HUBrussel in het tweede semester van het academiejaar 2011 – 2012 aan het tweede bachelor handelsingenieur, door docent L. De Moor. Deze samenvatting is gebaseerd enerzijds op het handboek, anderzijds op de slides en de in de les opgemaakte nota’s. De structuur werd uit het boek overgenomen. Contents preface 1
Contents 2
Part One – Value 4
Goals and governance of the firm 4
1. What is a corporation? 4
2. Separation of ownership and managementship 4
3. The role of the financial manager and the financial markets 4
How to calculate present values 5
1. Future values and present values 5
2. Looking for shortcuts – Perpetuities and annuities 6
3. More shortcuts – Growing perpetuities and annuities 7
4. How interests is paid and quoted 7
Valuing bonds 7
1. Using the present value formula to value bonds 7
2. How bond prices vary with interest rates 8
3. Real and nominal rates of interest 8
The value of common stocks 8
1. How common stocks are traded 8
2. How common stocks are valued 9
3. Estimating the cost of equity capital 9
4. The link between stock price and earnings per share 10
Net present value and other investment criteria 11
1. A review of the basics 11
2. Payback 12
3. Internal (or Discounted-Cash-Flow) rate of return 12
1) Pitfall 1 - Lending or borrowing 12
2) Pitfall 2 - Multiple rates of return 12
3) Pitfall 3 - Mutually Exclusive projects 12
4. Choosing capital investment when resources are limited 14
Making investment decisions with the net present value rule 15
1. Applying the NPV rule 15
1) Only cash flow is relevant 15
2) Always estimate cash flows on an incremental basis 15
3) Treat inflation consistently 16
2. Example - IM&C's Fertilizer Project 16
3. Equivalent annual cash flows 16
Part Two – Risk 18
Introduction to risk and return 18
1. Over a century of capital market history in one easy