Principles of

Corporate Chapter 35
Finance
Conclusion: What We Do and
Seventh Edition
Do Not Know About Finance
Richard A. Brealey
Stewart C. Myers

Slides by
Matthew Will

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35- 2

Topics Covered

 What We Do Know
 What We Do Not Know

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7 Most Important Ideas in Finance

 Net Present Value

 Capital Asset Pricing Model (CAPM)
 Efficient Capital Markets
 Value Additivity & Law Conservation of
Value
 Capital Structure Theory
 Option Theory
 Agency Theory

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10 Unsolved Problems In Finance

 What determines project risk and preset value?

 Risk and return - what have we missed?
 How important are the exceptions to the efficient
market theory?
 Is management and off-balance-sheet liability?
 How can we explain the success of new markets and
new securities?

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10 Unsolved Problems In Finance

 How can we resolve the dividend controversy?

 What risks should a firm take?
 What is the value of liquidity?
 How can we explain merger waves?
 How can we explain international differences
in financial architecture?

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