By Denzil Watson, Antony Head
This quantity addresses the center subject parts in company finance and establishes an built-in figuring out of the 3 choice parts in finance - funding, financing, and the dividend decision.
content material: Preface and guided travel of the publication 1 The finance functionality 2 Capital markets, industry potency and ratio research three brief time period finance: the administration of operating capital administration four long-term finance: fairness finance five long-term finance: debt finance, hybrid finance and leasing 6 an summary of funding appraisal equipment 7 funding appraisal: functions and danger eight Portfolio conception and the capital asset pricing version nine the price of capital and capital constitution 10 Dividend coverage eleven Mergers and takeovers 12 possibility administration thirteen overseas funding judgements word list Appindix: solutions to end-of-chapter questions Index
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E. the market value of the company reflecting the true value of the company) will depend heavily upon the efficiency of the stock market and hence on the speed and accuracy with which share prices change to reflect new information about companies. The importance of stock market efficiency to corporate finance is considered in Chapter 2. Finally, at stage 4, the share price is taken to be a surrogate for shareholder wealth and so shareholder wealth will be maximised when the market capitalisation of the company is maximised.
Finally, volatility is inherent in markets. Indeed, one reason for the accounting shenanigans uncovered when the stock market bubble burst was management’s desire to report steadily rising earnings per share. In the real world, business performance goes up and down – a reality that investors must learn to accept. The PwC survey also showed that more companies are using share awards as incentives, up from 57 per cent to 68 per cent for FTSE-100 chief executives. They are finding it cheaper since employees see more value in free shares than in options potentially worth more.
1 Explain how the concept of the time value of money can assist a financial manager in deciding between two investment opportunities. 2 Calculate the following values assuming a discount rate of 12 per cent: (a) £500 compounded for five years; (b) the present value of £500 to be received in five years’ time; (c) the present value of £500 received each year for ever; (d) the present value of £500 to be received each year for the next five years. 3 What are the functions and areas of responsibility under the control of the financial manager?