Corporate Finance Foundations

Introduction

• Finance for business decision making

1. What is Finance

• The board of directors discusses finance
• Finance inside of companies
• Finance outside of companies

2. Risk and Return

• What is risk and why don't we like it?
• Reducing risk through diversification
• Beta: The concept
• Beta: Examples
• Risk-free rate
• Equity risk premium
• Capital asset pricing model (CAPM)

3. Obtaining Long-Term Financing

• Introducing long-term financing
• Does capital structure matter?
• Factors influencing optimal capital structure
• Cost of capital: All debt or all equity financing
• Cost of capital: Split debt-equity financing
• Weighted-average cost of capital

4. Understanding Securities Markets

• The difference between a stock and a bond
• Stock markets
• Bond markets
• Publicly-traded shares: What impacts the share price?
• Initial public offering (IPO): Microsoft

5. Capital Budgeting

• Capital budgeting overview
• The importance of the time value of money
• Example: Buying light switches

Conclusion

• Next steps