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Advanced Corporate Finance :two_women_holding_hands: Hawa & Aina :two…
Advanced Corporate Finance
:two_women_holding_hands: Hawa & Aina
:two_women_holding_hands:
Chapter 1 : Goals & Governance of Firm
Objectives / goals of a firm
Profit maximization
Maximization shareholder's wealth
Maximization of the total market value
Agency theory
3 main areas
Capital Budgeting
Capital structure
Assets Management
Corporate Governance
Agency problem
Chapter 3 : Capital Structure
Trade off theory
M&M PROPOSITION I AND II (WITHOUT TAX)
M&M PROPOSITION I AND II (WITH TAX)
financial distress
:
as a condition where a company or individual disable to generate sales or income
Cost of financial distress
Bankruptcy cost
Cost of financial distress short of bankruptcy
Pecking order theory
Chapter 5 : Project Analysis and Evaluation
Sensitivity Analysis
A variation on a scenario analysis that useful in pinpointing the areas where forecasting risk is severe
Degree of operating leverage
Degree which a project or firm relies on fixed cost
Scenario analysis
Best case
Worst case
Base case
Break even analysis
cash breakeven
Financial breakeven
Accounting breakeven
Capital Rationing
Capital rationing occurs when a firm or division has limited resources
Soft rationing
Hard rationing
Chapter 7 : Payout Policy
Cash dividend
Regular cash dividend
Extra cash dividend
Special cash dividend
Liquidating dividend
Stock dividend
Stock Repurchase
Stock split
Chapter 8 : Mergers and Acquisition
Forms of takeover
Proxy contest
Going private
Acquisition
Type of acquisition
Horizontal
Vertical
Conglomerate
Defensive tactics
Crown jewel
Golden parachute
White knight
Bear hug
Merger
Chapter 2 : Raising Capital
Venture capital
Definition : Money provided by investors to startup firms and small business with perceived long term growth potential.
How to Choose venture capital.
References
Contracts
Style
Exit Strategy
Financial strength
Equity capital
Initial Public offering (IPO)
A company's first equity issue made available to he public
Seasonal Equity Offering (SEOs)
A new equity issue of securities by a company that has previously issued securities to public
Chapter 6 : Efficient market and behavioral finance
Three form of market efficiency
Semi-Strong form
Strong form
Weak form
Six lessons of market efficiency
There are no financial illusion
Do it yourself alternative
Market have no memory
Read the entrails
seen one stock, seen them all
Trust market price
Concept behavioral finance
Herd behavior
Anchoring
Mental accounting
High self-rating
Random walk theory
Efficient market theory
Chapter 4 : Cash flow Determination
Incremental Cash Flow
The stand-alone principle allows us to analyze each project in isolation from the firm simply by focusing on incremental cash flows
b)
Opportunity Costs:
- the most valuable alternative that is given up if a particular investment is undertaken
c)
Financing costs:
- Interest, dividend and principle payment
a)
Sunk cost:
- Cost that has already been incurred and cannot be removed
d)
Net working capital
: - working capital appears due to the project such as inventories cost, debt to supplier, bills etc.
Methods for computing OCF
The bottom up approach
Tax Shield Approach