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FIN544: ADVANCED CORPORATE FINANCE (Chapter 11,12: Mergers &…
FIN544: ADVANCED
CORPORATE FINANCE
Chapter 7,8: Project Analysis
and Evaluation
Scenario Analysis
Best Case Scenario
Worst Case Scenario
Base Case Scenario
Sensitivity Analysis
Break-even Analysis
Accounting Break-even
Cash Break-even
Financial Break-even
Operating Leverage
Degree of Financial Leverage
Degree of Total Leverge
Degree of Leverage
Capital Rationing
Soft Rationing
Hard Rationing
Chapter 11,12: Mergers & Acquisitions
Forms of Takeovers
Possible forms
Proxy contest
Going private
Acquisition
Types of Acquisitions
Horizontal
Vertical
Conglomerate
Accounting Treatment of Merger and Acquisition
Accounting
Purchase Accounting
Pooling of interests accounting no longer allowed
Taxes
Tax-free acquisition
Taxable acquisition
Gains from Acquisitions
Revenue enhancement
Cost Reduction
Synergy
Lower taxes
Asset write-ups
Reducing Capital Needs
Defensive Tactics
Standstill agreements :
Poison pills & Poison put
Targeted repurchase aka greenmail:
Golden parachute
Corporate charter
Crown jewel
White Knight
Divestitures and Restructurings
Spin-off
Split-up
Equity carve-out
Divestiture
Chapter 10: Dividend Payout Policy
Types of Dividend
Stock dividend
Stock split
Cash dividends
Stock repurchase
Types of Dividend Policy
Constant growth dividend policy
Constant payout ratio
Residual dividend policy
Compromise dividend policy
Dividends & Signal
Asymmetric Information
Changes in dividends convey information
Dividend increases
Dividend decreases
Does Dividend Policy Matter to the investor?
Dividends matter
Clientele Effect
Low Payout Please
High Payout Please
Dividend does not matter
Dividend Irrelevance Theory (Company point of view)
Dividend irrelevance theory (Investors point of view)
Lessons of Efficient Market
Seen one stock, seen them all
Do-it-Yourself alternative
There are no financial illusion
Markets have no memory
Read the entrails
Trust market price
Behavioral Finance
Limits to abitrage
Incentive problems and Subprime crisis
Sentiment
Benefits about probabilities
Attitudes towards risk
Efficient Market
(1) Random Walk Theory
(2) Efficient Market Theory
Technical Analysis
Fundamental Analysis
Chapter 9: Efficient Mkt & Behavioral Finance
Forms of Efficient Market
Semi-strong Efficiency
Strong Efficiency
Weak Form Efficiency