Goals and Governance of the Firm.pptxVIP

LECTURE 1GOALS AND GOVERNANCE OF THE FIRM Chapter 1 Corporate finance Lecture 1 2 Is about how corporations make financial decisions Is about money and markets, also about people Is also known as business finance or financial management Top ASX Listed 3 AMP AMP Limited Financials ANZ Australia and New Zealand Banking Group Limited Financials BHP BHP Billiton Limited Materials BXB Brambles Limited Industrials CBA Commonwealth Bank of Australia Limited Financials CSL CSL Limited Health Care FGL Fosters Group Limited Consumer Staples MQG Macquarie Group Limited Financials NAB National Australia Bank Limited Financials NCM Newcrest Mining Limited Materials ORG Origin Energy Limited Energy QBE QBE Insurance Group Limited Financials RIO Rio Tinto Limited Materials SUN Suncorp Limited Financials TLS Telstra Corporation Limited Telecommunications Services WBC Westpac Banking Corporation Limited Financials WDC Westfield Group Financials WES Wesfarmers Limited Consumer Staples WOW Woolworths Limited Consumer Staples WPL Woodside Petroleum Limited Energy Most important ideas in Finance Lecture 1 5 Net present value Portfolio theory Capital asset pricing theory Efficient market theory Agency theory Capital structure theory Signaling theory Option theory 1) Net present value Lecture 1 6 What real assets, tangible and intangible, should the firm purchase (investment decision) to produce goods and services? Identify an investment opportunity or “project” Evaluate whether the project is worth more than the capital required to undertake it (capital budgeting or capital expenditure decision) If the project has a positive net present value (NPV), then considers funding Investment decisions involve spending money Net present value: example Lecture 1 7 Consider an investment that requires $1000 of initial outlay and provides a single cash inflow of $1210 after one year The