公司理财讲义（1）--巫和懋

CorporateFinance1-0©ProfessorHo-MouWuIntroductiontoCorporateFinanceCorporateFinanceaddressesthefollowingthreequestions:1.Whatlong-terminvestmentsshouldthefirmengagein?2.Howcanthefirmraisemoneyfortherequiredinvestments?3.Howmuchshort-termcashflowdoesacompanyneedtopayitsbills?(RWJch.1)1-1CorporateFinance©ProfessorHo-MouWuTheBalance-SheetModeloftheFirmCurrentAssetsFixedAssets1Tangible2IntangibleTotalValueofAssets:Shareholders’EquityCurrentLiabilitiesLong-TermDebtTotalFirmValuetoInvestors:1-2CorporateFinance©ProfessorHo-MouWuTheBalance-SheetModeloftheFirmCurrentAssetsFixedAssets1Tangible2IntangibleShareholders’EquityCurrentLiabilitiesLong-TermDebtWhatlong-terminvestmentsshouldthefirmengagein?TheCapitalBudgetingDecision(InvestmentDecision)1-3CorporateFinance©ProfessorHo-MouWuTheBalance-SheetModeloftheFirmHowcanthefirmraisethemoneyfortherequiredinvestments?TheCapitalStructureDecision(FinancingDecision)CurrentAssetsFixedAssets1Tangible2IntangibleShareholders’EquityCurrentLiabilitiesLong-TermDebt1-4CorporateFinance©ProfessorHo-MouWuTheBalance-SheetModeloftheFirmHowmuchshort-termcashflowdoesacompanyneedtopayitsbills?TheNetWorkingCapitalInvestmentDecision(FinancialDecision)NetWorkingCapitalShareholders’EquityCurrentLiabilitiesLong-TermDebtCurrentAssetsFixedAssets1Tangible2Intangible1-5CorporateFinance©ProfessorHo-MouWuCapitalStructureThevalueofthefirmcanbethoughtofasapie.Thegoalofthemanageristoincreasethesizeofthepie.TheCapitalStructuredecisioncanbeviewedashowbesttosliceupathepie.Ifhowyouslicethepieaffectsthesizeofthepie,thenthecapitalstructuredecisionmatters.50%Debt50%Equity25%Debt75%Equity70%Debt30%Equity1-6CorporateFinance©ProfessorHo-MouWuCashflowfromfirm(C)TheFirmandtheFinancialMarketsTaxes(D)FirmGovernmentFirmissuessecurities(A)Retainedcashflows(F)Investsinassets(B)Dividendsanddebtpayments(E)CurrentassetsFixedassetsFinancialmarketsShort-termdebtLong-termdebtEquitysharesUltimately,thefirmmustbeacashgeneratingactivity.Thecashflowsfromthefirmmustexceedthecashflowsfromthefinancialmarkets.1-7CorporateFinance©ProfessorHo-MouWuFinancialMarkets•PrimaryMarket–Whenacorporationissuessecurities,cashflowsfrominvestorstothefirm.–Usuallyanunderwriterisinvolved•SecondaryMarkets–Involvethesaleof“used”securitiesfromoneinvestortoanother.–Securitiesmaybeexchangetradedortradeover-the-counterinadealermarket.1-8CorporateFinance©ProfessorHo-MouWuFinancialMarketsFirmsInvestorsSecondaryMarketmoneysecuritiesSueBobStocksandBondsMoneyPrimaryMarket1-9CorporateFinance©ProfessorHo-MouWuInvestmentEnvironment1-10CorporateFinance©ProfessorHo-MouWuInvestment＝Activitiesthatsacrificepresentconsumptionforfuture(uncertain)rewards.RisklessInvestment:(1)theassetisdefault-free.(2)thematurityoftheassetmatchestheinvestmenthorizonoftheinvestor.representedbydollarreturnsrepresentedbytherateofreturnRisklessInvestmentdealswiththetimevalueofmoney$100$11010%TwoElementsofInvestment:TimeandRisk1-11CorporateFinance©ProfessorHo-MouWuRiskyInvestmentandCapitalBudgetingHoldingPeriodRateofReturnrt+1＝t1tt1tPDPPTheCapitalBudgetingDecision=Howtochooseinvestmentprojects?$80$90$100$130$140$100-20%-10%0%30%40%1-12CorporateFinance©ProfessorHo-MouWu•Thebasicfeatureofadebtisthatitisapromisebytheborrowingfirmtorepayafixeddollaramountofbyacertaindate.•Theshareholder’sclaimonfirmvalueistheresidualamountthatremainsafterthedebtholdersarepaid.•Ifthevalueofthefirmislessthantheamountpromisedtothedebtholders,theshareholdersgetnothing.CapitalStructure:DebtandEquity1-13CorporateFinance©ProfessorHo-MouWuDebtandEquityasOptions$F$FPayofftodebtholdersValueofthefirm(X)Debtholdersarepromised$F.Ifthevalueofthefirmislessthan$F,theygetthewhateverthefirmifworth.Ifthevalueofthefirmismorethan$F,debtholdersgetamaximumof$F.$FPayofftoshareholdersValueofthefirm(X)Ifthevalueofthefirmislessthan$F,shareholdersgetnothing.Ifthevalueofthefirmismorethan$F,shareholdersgeteverythingabove$F.Algebraically,thebondholder’sclaimis:Min[$F,$X]Algebraically,theshareholder’sclaimis:Max[0,$X–$F]1-14CorporateFinance©ProfessorHo-MouWuCombinedPayoffstoDebtandEquity$F$FCombinedPayoffstodebtholdersandshareholdersValueofthefirm(X)Debtholdersarepromised$F.PayofftodebtholdersPayofftoshareholdersIfthevalueofthefirmislessthan$F,theshareholder’sclaimis:Max[0,$X–$F]=$0andthedebtholder’sclaimisMin[$F,$X]=$X.Thesumoftheseis=$XIfthevalueofthefirmismorethan$F,theshareholder’sclaimis:Max[0,$X–$F]=$X–$Fandthedebtholder’sclaimis:Min[$F,$X]=$F.Thesumoftheseis=$X1-15CorporateFinance©ProfessorHo-MouWuCorporateGovernanceSeparationofOwnershipandControlBoardofDirectorsManagementAssetsDebtEquityShareholdersDebtholders1-16CorporateFinance©ProfessorHo-MouWuAsymmetricInformationandAgencyCosts•Thereisasymmetricinformationbetweenshareholdersandmanagers.•Howtoinducemanagerstoactintheshareholders’interests?–Theshareholderscandevisecontractsthataligntheincentivesofthemanagerswiththegoalsoftheshareholders.–Theshareholderscanmonitorthemanagersbehavior.•(AgencyCost)Thiscontractingandmonitoringiscostly.