ppt_ch05a-1 Corporations Issuing Equity in the Share Market 外汇与外汇市场 教学课件.pptVIP

Chapter 5 Corporations Issuing Equity in the Share Market Website: .au Learning Objectives Examine issues relevant to the choice between debt and equity funding Outline ASX floatation and listing rules Describe the equity-funding alternatives available to newly listed and established corporations Distinguish between equity and quasi-equity securities Chapter Organisation 5.1 Introduction 5.2 The Investment Decision 5.3 The Financing Decision 5.4 Initial Public Offering (IPO) 5.5 Listing a Business on the Stock Exchange 5.6 Equity-funding Alternatives for Listed Companies 5.7 Summary 5.1 Introduction The objective of financial management is to maximise shareholder value There are four main aspects of financial management Investment decision (capital budgeting) In which assets to invest? Financing decision (capital structure) How to fund the purchase of these assets? 5.1 Introduction (cont.) Liquidity (working capital) management How to best manage current assets and current liabilities? Dividend policy decision How to retain and/or distribute profits? This chapter focuses on the financing (funding) decision 5.2 The Investment Decision A corporation first determines the assets in which it will invest funds according to organisational objectives Real assets e.g. plant and equipment Financial assets e.g. equities, bonds Competing investment alternatives should be evaluated on the basis of shareholder wealth maximisation 5.2 The Investment Decision (cont.) Two important measures used to quantify the contribution of an investment to shareholder wealth are Net present value (NPV) Internal rate of return (IRR) 5.2 The Investment Decision (cont.) NPV The difference between the present value of cash flows associated with an investment, and the cost of the investment The NPV decision rule Accept an investment that has a positive NPV i.e. reject an investment with a negative NPV 5.2 The Investment Decision (cont.) A company is considering the purchase of a new machine th