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Corporation Finance FI 3300 – Fall 2010

Corporation Finance FI 3300 – Fall 2010. Instructor - Ryan Williams. My information. Ryan Williams Email: rwilliams83@gsu.edu Website: myrobinson.gsu.edu, Ulearn , http://www.ryanwilliams7.com Office location: Alpharetta Center, 123D Office phone:404-413-7769

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Corporation Finance FI 3300 – Fall 2010

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  1. Corporation FinanceFI 3300 – Fall 2010 Instructor - Ryan Williams

  2. My information • Ryan Williams • Email: rwilliams83@gsu.edu • Website: myrobinson.gsu.edu, Ulearn, http://www.ryanwilliams7.com • Office location: Alpharetta Center, 123D • Office phone:404-413-7769 • OFFICE HOURS: Mondays and Wednesdays from 11:00am – 12:00pm

  3. Today’s Agenda • Quick summary of syllabus • Discussion of course • My expectations • Math Skills • Chapter 1 - Introduction

  4. Syllabus – Important Highlights • Attendance policy – Department-wide! On this – you are allowed to miss two weeks of class. That means only FOUR classes. • I reserve the right to pass the attendance sheet at any point in time. • Exam 1 – 9/27/2010 • Exam 2 – 11/1/2010 • Final Exam – 12/11/2010 at 3:45-6:15

  5. Grading Policy • Two midterms: 25% each • One Final Exam: 40% • Quizzes: 6% • Resume: 2% • Problem Set: 2% • We will have 5 quizzes and I will drop the lowest 2. If you miss a class you will receive a 0% for the quiz.

  6. Texts • Main text: “Lectures in Corporate Finance”, 5th ed., by Jayant Kale and Richard Fendler. • Optional: 12-week subscription to The Economist, cheap student rates. Go to http://www.economistacademic.com and use Faculty ID code 6105.

  7. Calculator • Texas Instruments BA II Plus • HP also makes a version • Can use NO calculator with a memory • We have used calculators available for $20. First come, first serve. Contact Prof. Genna Brown gbrown@gsu.edu

  8. Course Outline • Split into 3 sections: • 1) Blending Accounting and Finance • Financial Statements, F.S. Analysis, Fin. Mngt • 2) Valuation from an Investor’s point of view • Time value of money, valuing stocks, valuing bonds • 3) Valuation from a CFO’s point of view • Capital Budgeting

  9. Classroom rules • Cellphones OFF – If your phone rings, I get to answer it. (Also true for me). • No texting. If I see you texting you will be asked to solve a problem on the board. • I prefer no laptops. However, if you take notes on the laptop, please sit near the back of the classroom so you do not distract students behind you.

  10. Final words of wisdom • This class is hard, however: • You may have heard the class requires a lot of math formulas, but everything is based on ONE FORMULA – not much memorization • This class rewards thinking, not arithmetic.

  11. Math Test

  12. Chapter 1- Introduction Why are you here?

  13. Learning Objectives • Identify the three main subject areas in finance • Know the different forms of business organization and discuss the agency problem • Define the goal of corporate financial management • Compare/contrast finance and accounting • Understand how cash affects value

  14. Why is finance important? • A horrible product (usually) dooms a business. • A great product is not enough - horrible financial management coupled with a great product (usually) also dooms a business.

  15. 3 subfields of finance • Financial markets and institutions (or Banking) = Middleman • Investments = Surplus (they invest money in stock, bonds, and savings accounts) • Corporate Financial Management (or Corporate Finance) = Deficit (they take money from investors and buy stuff) *Identifying, managing, and valuing risky cash flows is the goal of finance*

  16. Basic forms of Business Organization • Sole proprietorship • Partnership • Corporation • Advantages/Disadvantages?

  17. Ownership structures Also taxation and liquidity differences

  18. Agency Problem • Getting the agent (the person running the business) to act in the interest of the principal (the shareholders who own the business).

  19. Financial manager’s goal • Maximize value of the firm. • Same as maximizing stock price. • NOT the same as “maximizing profits”. Why not? • She accomplishes this goal by two basic decisions: How to get money (raise capital), and what to do with it (real investment).

  20. Accounting and Finance • Accounting USUALLY deals in Book Value (i.e. cost) • Finance USUALLY deals with Market Value (what someone would pay you for it today). • Accounting is historical data (annual reports, 10-K filings, etc). • Finance attempts to project future data – BUT YOU NEED TO UNDERSTAND ACCOUNTING TO DO THIS

  21. Cash and Value • Value = all future expected cash flows discounted by their riskiness (we will slightly refine this definition later). • CASH is the only thing that matters here! • This may seem counterintuitive right now, but should be more clear when we look at Stock Valuation in Chapter 9.

  22. Class Summary – Why should you care? • After the introductory accounting chapters, this entire class is associated with VALUE. • Specifically, how to value a bond, a stock, or a new project for a company.

  23. Next Monday: • You owe me: • Resume, upload picture to MyRobinson • Prepare for Quiz 1: Introduction, Income Statement and Balance Sheet

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