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:lock: ADVANCED CORPORATE FINANCE BY : …
:lock:
ADVANCED CORPORATE FINANCE
BY :
:check:
CHAPTER 1 ;
GOALS & GOVERNANCE OF THE FIRM
:pencil2: Agency Theory
works when the principal appoints an agent to represent his or her interests.
:star: Corporate Governance
system of rules, practices and processes by which company is directed and controlled
:no_entry: Agency Problem
when the actions taken by the firms’ manager is based on their self-interest rather than the shareholders’ interest.
:<3: Goals
Profit Maximization
Maximization Shareholder Wealth
:fire: Areas of Financial Manager
Capital Structure
Asset Management
Capital Budgeting
:information_source:
Definition:
Process involved to obtain and allocate financial resources effectively and efficiently to achieve corporation's objectives
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CHAPTER 2 ;
RAISING CAPITAL
:moneybag: Venture Capital
Definition:
Money provided by investors to start-ups firms and small business with perceived long-term potential growth
:question: Choosing A Venture Capitalist
Financial Strength
Style
References
Contacts
Exit stratergy
:silhouette: Stages Of Venture Capital
Seed Stage
Early Stage
Start-up Stage
:pen: Equity Capital
Initial Public Offering
Seasonal Equity Offering
Right Offer
:potable_water: Dilution
when a firm or company issues new stock or increase the number of outstanding shares
Percentage of ownership
EPS & Market Value
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CHAPTER 6 ; EFFICIENT MARKET & BEHAVIORAL FINANCE
:signal_strength: Market in which securities reflects all possible & relevant information
:bulb: Efficient Market Theory
:three: Form of Efficiency Market
:two: Semi-strong EMH
:three: Strong EMH
:one: Weak EMH
:point_right::skin-tone-5: Comes in different strength depending on the information available to investors.
:walking: Random Walk Theory
:point_right::skin-tone-5: Trend of a stock prices cannot be used to predicts its future movement
:scales: Lessons of Market Efficiencies
:three: Read the Entrails
:four: Seen one stock, Seen them All
:two: Trust Market Prices
:five: Do it yourself alternatives
:one: Markets have no Memory
:level_slider: Behavioral Finance
:point_right::skin-tone-5: Key aspects of behavioral finance is the influence of biases.
:point_right::skin-tone-5: Takes the view that market are not fully efficient
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CHAPTER 7 ; PAYOUT POLICY
:question: How firm pay dividends?
:two: Ex-dividend date
:three: Record date
:one: Declaration date
:four: Payment date
:pushpin: Stock Repurchase
:point_right::skin-tone-5: A company buyback its own share from the market place because management consider the stock is undervalue
:round_pushpin: Reason of repurchase stock
:left_speech_bubble: Want to free out profit
:left_speech_bubble: Company's fiduciary duty
:left_speech_bubble: Benefit from temporary undervalue of stock
:left_speech_bubble: To show good image
:left_speech_bubble: Reduce number of share outstanding
:pushpin: Cash Dividend
:point_right::skin-tone-5: Fund paid to stakeholder generally as part of the corporation current earnings
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CHAPTER 5 ; PROJECT ANALYSIS & EVALUATION
:pencil2: What if Analysis
:fountain_pen: Scenario Analysis
:money_with_wings: Worse Case
:money_with_wings: Best Case
:money_with_wings: Base Case
:fountain_pen: Sensitivity Analysis
:point_right::skin-tone-5: To see how sensitive NPV if one variables changes
:pencil2: Evaluate NPV : Forecasting Risk
:point_right::skin-tone-5: The possibility that errors in PCF will lead to incorrect decisions
:pencil2: Break-even Analysis
:star: Accounting Break-even
:star: Cash Break-even
:star: Financial Break-even
:pencil2: Degree of Operating Leverage (DOL)
:point_right::skin-tone-5: Firm relies on fixed cost
:pencil2: Capital Rationing
:information_source: Soft Rationing
:information_source: Hard Rationing
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CHAPTER 8 ;
MERGER & ACQUISITION
:office:
Acquisition
; One company purchase all or most of another company's shares or assets.
:classical_building: Type of acquisition
:blue_book: Conglomerate Acquisition
:writing_hand: Bidder and Target firm are not related in the line of business
:orange_book: Vertical Acquisition
:writing_hand: Two companies at the same industry but have different process of production
:green_book: Horizontal Acquisition
:writing_hand: Firm that same industry, have same business and competitors to each other.
:post_office:
Merger
; Complete absorption of one company where is the acquiring firm retain their identity and the acquired firm ceases to exist as a separate entity.
:question: What is the purpose?
:star: Promote growth
:star: Acquire valuable asset
:star: Increase market share
:money_mouth_face: Gain from Acquisition
:two: Revenue Enhancement
:three: Cost Reduction
:one: Synergy
:no_entry: Defensive Tactics
:forbidden: Golden Parachute
:red_cross: Benefits pay due to the company top management staff in case of acquisition
:crown: Crown Jewel
:red_cross: Selling the most valuable asset of TC to a third party
:warning: Leverage Buyout
:red_cross: Transaction when company acquired using debt as the main source of consideration
:pill: Poison pill
:red_cross: The dilution of shares of TC in order to make it expensive for acquire to obtain controlling interest
:white_flag: White knight
:red_cross: A company that acquire another company in order to save that company from the acquisition by hostile bidder
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CHAPTER 3 ;
CAPITAL STRUCTURE
:money_with_wings: Capital Structure & Cost of Capital
M&M Proposition (without tax)
M&M Proposition I
Value of firm independent of the firm's capital structure
M&M Proposition II
Firm's cost of equity capital is positive linear function of the firm's capital structure
M&M Proposition (with tax)
M&M Proposition I
Value of firm increases as total debt increases because of the interest tax shield
M&M Proposition II
Firm's cost of equity rises as the firm relies more heavily on debt financing
:forbidden:
Cost Of Financial Distress
Costs arising from bankruptcy or distorted business decisions before bankruptcy
:four_leaf_clover:
Trade-Off Theory
Capital structure is based on trade-off between tax savings and distress cost of debt
:bird:
Pecking Order Theory
Firms prefer to issue debt over equity if internal finances are insufficient
Asymmetric Information
Signalling Hypothesis
:warning: Factors Affecting Capital Structure
Size
Tangible Assets
Profitability
Market to book
:bank: Bankruptcy Costs
Direct
Costs that are directly associated with bankruptcy (legal & administrative expenses)
Indirect
Costs which does involve cash outflow but makes the survival of the company tougher
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CHAPTER 4 ;
CASH FLOW DETERMINATION
:explode: Incremental Cash Flows
Sunk Costs
Opportunity Costs
Net Working Capital
Financing Costs
:money_mouth_face: Projected Cash Flows
OCF
Bottom-Up Approach
Tax Shield Approach
Changes in NWC
Capital Spending
:loudspeaker: Special Cases
Evaluating Cost Cutting Proposal (NPV)
Setting minimum bid price
Determine the price that makes NPV=0
Evaluate Equipment With Different Useful Lives
Equivalent Annual Costs
