FINS1612 Lecture Notes - Lecture 3: Capital Budgeting, Capital Structure, Dividend Policy
Document Summary
Summary: the objective of financial management is to maximise shareholder value, corporate managers face important decisions in their attempt to maximise shareholder wealth, four main aspects of management. 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 investment and financing decisions, a corporation first determines the assets in which it will invest funds according to organisational objectives. Financial assets, e. g. equities, bonds: competing investment alternatives should be evaluated on the basis of shareholder wealth maximisation, two important measures used to quantify the contribution of an investment to shareholder wealth. Pricing a security: definition of financial asset, price is _____________________, present value = cf/ (1+i) n, p(cid:396)i(cid:272)e = cfi/ (1+i) n. Cf = expected future cash flows i = required rate of return n = number of periods.
