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WELCOME TO FINANCE 254

Corporate Financial Management

The First Day Agenda
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Course Administrative Overview Top 10 List What is corporate finance The goal of the firm 10 Principles of Financial Management Things you should know from Chapter 1

Scott.Required Class Materials  Textbook: Financial Management. Petty. Principles and Applications. and Scott.  Texas Instruments BAII Plus financial calculator .  Finance 254 Syllabus Book by yours truly in campus bookstores. 9th Edition by Keown.

pearsoncmg.htm  Syllabus and Lecture Notes  Assignments Posted Here  Textbook Website: http://myphlip1.edu/~mdyer/fin254.cba.uiuc.Important Internet Addresses  Course Website: http://www.com/student  Select Financial Management 9th edition by Keown .

Dyer Office: 328J DKH  Telephone: 244-7807  Office Hours:   2-4 Monday & Wednesday  1-3 Thursday  e-mail: dyer1@uiuc.Contacting Prof.edu .

TOP 10 LIST .

What is Corporate Finance? The Balance Sheet .

Chapter 1 Things To Know    What is finance? The goal of the firm Advantages and disadvantages of different business organizations (in discussion)  Sole proprietorship and partnerships  Corporations  How corporations raise money  10 Principles of Financial Management .

What is Corporate Finance? In the simplest sense: involves what assets a company should invest in and how to raise cash to finance these investments in order to maintain and maximize economic value.  Where does a company get cash to run and finance its business?  .

 This means:  Maximizing Firm Value (market price per share of common stock x number of outstanding shares)  Maximizing stock price. .Goal of the Firm  The primary goal is shareholder wealth maximization.

.What Determines Shareholder Value?  Managerial decisions affecting:    Expected cash flows. Riskiness of cash flows. Timing of cash flows. stock price = risk-adjusted present value of future expected cash flows.  Financial managerial decisions include capital structure. working capital management.  In other words. and investment strategies. dividend policy.

.Why not Profit Maximization?  Ignores timing of cash flows.  Ignores risk (or uncertainty) of cash flows.

The Corporation and Financial Markets Corporation cash securities reinvest Secondary markets Investors Cash flow tax dividends. Government . etc.

The Corporation and Financial Markets Primary Market  Market in which new issues of a security are sold to initial buyers. . Secondary Market  Market in which previously issued securities are traded.

The Corporation and Financial Markets Initial Public Offering (IPO)  The first time the firm’s stock is sold to the general public. Seasoned New Issue  A new stock offering by a firm that already has stock that is traded in the secondary market. .

is king  4) Incremental cash flows count  5) The curse of competitive markets  6) Efficient capital markets  7) The agency problem  8) Taxes bias business decisions  9) All risk is not equal  10) Ethical dilemmas are everywhere in finance .not profits .Financial Management Principles or Axioms  1) Risk .return trade-off  2) Time value of money  3) Cash .

Key Financial Decision Making Rule  Finance is concerned with raising cash to invest in assets that are expected to generate future cash flows  Net Present Value (NPV) = present value of future expected cash flows .  A firm that follows the practice of investing in positive NPV assets will increase shareholder wealth & firm value. .initial outlay.  This idea ties together most of the 10 Principles or Axioms together neatly.

The Nitty Gritty  Grade Breakdown 420 points from 3 exams: 140 points each (with optional final)  31 multiple choice questions: 15 questions worth 4 points each. 16 problems worth 5 points each.  A few extra credit “pop” quizzes in discussion .  Formula sheets will be given at the end of each exam.  100 points from 4 homework sets  posted on Website on Assignments Page  1st assignment posted next week.

Conflict 3-5 pm #2. 3. Conflict 3-5 pm Optional final exam dates:  Wednesday. Nov. Conflict 3-5 pm pm. 21: 1:30-3:30 pm . Monday. Monday. 12 & 21) pm. 7 (Chapters 1. Dec.4 & 8) #3. Monday. 9 (Chapters 9.Exam Dates     #1. Dec. Oct. 18: 9-11 am  Saturday. 4 (Chapters 2. 6 & 7)  7-9  7-9  7-9 pm. Dec. 10. 14. 5.

25 Homework 3 Due (25 points) Nov.Assignment Due Dates    All are due in your TA’s mailbox in 340 Wohlers Hall by 4 PM on the below dates and must be typed. 22 Homework 4 Due (30 points) Late assignments are accepted with 50% penalty through the following Wednesday. 27 Homework 2 Due (20 points) Oct.      Sept. . Can be done in groups of four if all group members have the same TA. 20 Homework 1 Due (25 points) Sept. Name(s) and discussion section(s) must be typed on 1st page with NO cover page.

Register at http://myphlip1.com/ . but you are responsible for knowing how to do them.pearsoncmg. Lecture Note Powerpoint files will be posted on the Fin 254 Website Helpful textbook items: online study guide and questions at MyPhlip website. Solutions to all assigned textbook problems are in the back of syllabus.Miscellaneous Items     Textbook problems assigned in syllabus will not be graded.

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