复旦大学：《财务管理 Financial Management》课程教学资源（课件）Lecture 1 Introduction

Financial Management Lecture 1 Introduction Jianbing Huang 夏E吧

2013-2-25 1-0 Financial Management Lecture 1 Introduction Jianbing Huang

Road Map Part A: Introduction of Financial management Objective of manager and role of financial markets Given cash flows and discount rates, finding present value Part b: Valuation of financial securities Part C: Analysis of the determination of risk-adjusted discount rates Part D: Analyze how a firms financial decisions affect its value 2013-2-25

2013-2-25 1-1 Road Map • Part A: Introduction of Financial Management „ Objective of manager and role of financial markets „ Given cash flows and discount rates, finding present value • Part B: Valuation of Financial Securities • Part C: Analysis of the determination of risk-adjusted discount rates • Part D: Analyze how a firm’s financial decisions affect its value

Motivating question 1 Deciding on long-lived project for short-lived owner d You are a financial manager of a firm that is owned entirely by a single individual Your assistant has identified a new project u The project required an invest today of $1M, and ten years from now it will give back S100M How do you decide whether or not to invest in this project? Suppose you conclude that the project is a very profitable one However, the owner does not want you to invest in it because she is not sure if she will be alive for another 10 vears What should you tell the owner? 2013-2-25

2013-2-25 1-2 Motivating Question 1 • Deciding on long-lived project for short-lived owner: „ You are a financial manager of a firm that is owned entirely by a single individual. „ Your assistant has identified a new project „ The project required an invest today of $1M, and ten years from now it will give back $100M. • How do you decide whether or not to invest in this project? • Suppose you conclude that the project is a very profitable one. However, the owner does not want you to invest in it because she is not sure if she will be alive for another 10 years. What should you tell the owner?

Motivation Question 2 Deciding on a risky project for owners with diverse risk aversion You are still the financial manager of same firm, but the old owner has died and the firm has been inherited by the two children a son and a daughter (each gets 50%o of shares The son is called Meek Smith, and the daughter is called Take-A-Chance Smith, and the name describe their attitudes toward taking risk A risky project has been identified it requires an investment today of SIOM, and next year it will have a payoff of either $100M or 0 When you ask the owners, Meek says that the project is too risky and should not be accepted, while Take-A-Chance says: Let's do it What should you tell the owners? How can the disagreements between shareholders be resolved? 2013-2-25

2013-2-25 1-3 Motivation Question 2 • Deciding on a risky project for owners with diverse risk aversion „ You are still the financial manager of same firm, but the old owner has died and the firm has been inherited by the two children: a son and a daughter (each gets 50% of shares) „ The son is called Meek Smith, and the daughter is called Take-A-Chance Smith, and the name describe their attitudes toward taking risk „ A risky project has been identified: it requires an investment today of $10M, and next year it will have a payoff of either $100M or 0 • When you ask the owners, Meek says that the project is too risky and should not be accepted, while Take-A-Chance says: “Let’s do it!” • What should you tell the owners? • How can the disagreements between shareholders be resolved?

Key Concepts Corporate finance The corporate Cash flow between Investors and Firms i Role of the financial manager ■ Financial markets Valuation of investment Two important Characteristics of Cash Flows d Opportunity Cost of Capital ■ Net presentⅤ alue and Investment rules Role of financial markets Objective of Financial manager 2013-2-25 1-4

2013-2-25 1-4 Key Concepts • Corporate Finance „ The corporate „ Cash flow between Investors and Firms „ Role of The Financial Manager „ Financial Markets • Valuation of Investment „ Two important Characteristics of Cash Flows „ Opportunity Cost of Capital „ Net Present Value and Investment Rules • Role of Financial Markets • Objective of Financial Manager

Alternative Forms of Business organization torshi P ■Ad Ease of formation Subject to fe ulations No corporate income taxes Disadvantage Limited life Unlimited liability Difficult to raise capital A partnership has roughly the same advantages and disadvantages as a ole proprietors 2013-2-25 1-5

2013-2-25 1-5 Alternative Forms of Business Organization • Sole proprietorship „ Advantages: ¾Ease of formation ¾Subject to few regulations ¾No corporate income taxes „ Disadvantages: ¾Limited life ¾Unlimited liability ¾Difficult to raise capital • Partnership „ A partnership has roughly the same advantages and disadvantages as a sole proprietorship. • Corporation

Corporation Advantages Unlimited li Easy transfer of ownership ■ Limited liability Ease of raising capital Disadvantages: ■ Double taxation Cost of set-up and report filing Difficult to define a Separation of Management and Ownership 2013-2-25 1-6

2013-2-25 1-6 Corporation • Advantages: „ Unlimited life „ Easy transfer of ownership „ Limited liability „ Ease of raising capital • Disadvantages: „ Double taxation „ Cost of set-up and report filing • Difficult to Define: „ Separation of Management and Ownership

Corporate Structure Sole proprietorships Unlimited liability Personal tax on profits Partnerships Limited liability Corporations Corporate tax on profits Personal tax on dividends

2013-2-25 1-7 Corporate Structure Sole Proprietorships Corporations Partnerships Limited Liability Corporate tax on profits + Personal tax on dividends Unlimited Liability Personal tax on profits

Goals of the corporation The primary goal is shareholder wealth maximization, which translates to maximizing stock price. Should firms behave ethically? YES! Do firms have any responsibilities to society at large? YES! Shareholders are also members of society 2013-2-25 1-8

2013-2-25 1-8 Goals of the Corporation • The primary goal is shareholder wealth maximization, which translates to maximizing stock price. „ Should firms behave ethically? YES! „ Do firms have any responsibilities to society at large? YES! Shareholders are also members of society

Course objective The objective: provide you with an understanding of the basic theory and the tools necessary to make good financial decisions Finance is really about value ■Fims Projects and real investments ■ Securities Central question How can we create value through investment and financing d eciSions 2013-2-25 1-9

2013-2-25 1-9 Course Objective • The objective: provide you with an understanding of the basic theory and the tools necessary to make good financial decisions. • Finance is really about value „ Firms „ Projects and real investments „ Securities • Central question „ How can we create value through investment and financing decisions?