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Corporate Finance (Objective function firm (Allocated return (Interest,…
Corporate Finance
Objective function firm
Role of CFO
Raise K
Inst
Allocated return
Interest
Tax
Dividends
Framework Decision
Invest
Firm
Dividend
NPV > 0
Value creation
Increase Stock Price
Maximise Shareholder weath
Governance Mechanism
AGM
Activists
Agency Conflict
Mgr vs Shareholder
Imperfect informaiton
Iimplications
Implications
Mngr Selfinterest
M&A defensive strategy
Compensations
No Activist
Board of Directors
Rising Capital
Processes
Angels/ VC
IPO
Underpricing
(P. first day - P offer)/P offer
Market ineficiency
Deliberately
Signalling
Good companies can afford to underprice
Adverse selection
Advertising expenses
Type of securities
Debt
Hybrid
Equity
Capital Structure
VL different VNL
Trade off
Tax
Tax benefit
Tax shield
Cost
Bankruptcy cost
Agency Cost
Pecking order
The more profitable the company the lower the debt
Preference
Internal funds
External funds
Debt
Equity