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ADVANCED CORPORATE FINANCE (Chapter 4: Cash Flow Determination (:star…
ADVANCED CORPORATE FINANCE
Chapter 5 : Project Analysis and Evaluatio
n :
:pencil2:Degree of Operating Leverage
:pencil2:Forecasting Risk
:pencil2:What If Analysis
Scenario Anlysis
Best Case Scenario
Base-Case Scenario
Worst Case Scenario
Sensitivity Analysis
:pencil2:Breakeven Analysis
Cash Breakeven
Financial Breakeven
Accounting Breakeven
Chapter 6: Efficient Market and Behavioral Finance
:pencil2:What is an Efficient Market?
Random Walk Theory
Efficient Market Hypothesis
:pencil2:The Evidence against Market Efficiency
Irrational exuberance
Behavioural economics
:pencil2:Behavioral Finance
:pencil2:Six Lessons of Market Efficiency
Trust Market Prices
Read the Entrails
Markets Have No Memory
There are No Financial Illusions
Remember the Do-It-Yourself Alternative
Seen One Stock, Seen Them All
Chapter 7: Payout Policy
:pencil2:The Payout Controversy
The
leftists
stress tax effects, which favor low dividens
The rightists stick to the traditional traditional position that investors like high dividend payout
The
middle-of-the-roaders
believes dividend policy is irrelevant
:pencil2:How Do Companies Decide On Payouts
• The cost of external capital is lower than the cost of a dividend cut.
• Managers are reluctant to make dividend changes that may have to be reversed.
:pencil2:How Firms Pay Dividend and Repurchase Stock
Paying Cash Dividends
Repurchasing Stocks
:pencil2:Stock Dividend & Stock Split
Stock Dividend
Stock Split
Chapter 2: Raising Capital
:pencil2:Venture capital is financing for new, often high-risk ventures.
:check:Financial strength
:check:Style
:check:References
:check:Contacts
:check:Exit strategy
Initial Public Offering:
:pencil2:A company's first equity issue made available to the public
Seasonal equity offering:
:pencil2:A new equity issue of securities by a company that has previously issued securities to the public
Chapter 4: Cash Flow Determination
:star:Operating cash flow (OCF)
Bottom-up approach
Top-down approach
Tax shield approach
:star:Changes in net working capital
:star:Capital spending
:red_flag:Setting minimum bid price (Determine the price that makes NPV=0)
:red_flag:Evaluating Equipment with different useful lives (Equivalent annual cost)
:red_flag:Evaluating cost cutting proposal (NPV)
Sunk cost
Opportunity cost
Net working capital
Side effects
Financing cost
Chapter 3: Capital Structure
Value of the firm will be low:!:
WACC will be high:!:
Cost of equity will low:!:
Value of the firm will be high:!:
WACC will be low:!:
Cost of equity will be high:!:
:pencil2:Capital structure is based on trade-off between tax savings and distress cost of debt.
:pencil2:Theory stating firms prefer to issue debt over equity if internal finances are insufficient.
:fire:Adapt target dividend payout ratio
:fire:If external finances are required, firms issues the safest security first
:fire:Firms prefer internal finance
Profitability
Tangible assets
Market to book
Size
Chapter 1: Goals and Governance of the Firm
Corporate Finance
:pencil2:Concerned with the efficient and effective management of the finances of an organization in order to achieve the objective of the organization.
The mixture of debt and equity maintained by the firm
A firm's short-term assets and liabilities
The process of planning and managing a firm's long-term investment
:warning:The possibility of conflict of interest between the stockholders and management of the firm
:check:The board of director must earn the trust of shareholder by making sure that the firm can be manage in order to achieve the company's goal.
:check:Stockholder have the right to choose the board of directors and change them when needed.
Chapter 8: Merger & Acquisition
:pencil2:Defensive Tactics
Golden Parachute
Crown Jewel
Leverage Buyout
White Knight
Poison Pill
:pencil2:Gains From Acquisition
Revenue Enhancement
Cost Reduction
Lower Taxes
Reduction Capital Needs
Synergy
:pencil2:
Merger
: One company where is the acquiring firm retains their identity and the acquired firm ceases to exist as a seperate entity
:pencil2:
Acquisition
: One company purchase all or most of another company's share or assets
:pencil2:Types of Acquisition
Conglomerate Acquisition
Horizontal Acquisition
Vertical Acquisition
Definition
Three main areas of concerned:
:star:Capital structure:
Agency problem
Control of the firm
:star:Capital budgeting:
:star:Working capital management:
Definition
Choosing a venture capital
Equity capital
Project cash flow consist:
Special cases
Incremental cash flows:question:
M&M Proposition (with tax)
M&M Proposition (without tax)
Pecking-order theory
Trade-off theory
Implications of pecking-order
Factors affecting CS:question: