Corporate Finance Notes

| The partners are jointly and severally liable for business debts and obligations. The partners are held personally responsible for the business and may be sued personally for liability. Partners’ personal assets are subject to lawsuit(s) made against the business. Lack of continuity; death of a partner may end the partnership/business if a buy/sell agreement is not in place. Disagreements may be difficult to resolve.

Ross, S. A., Westerfield, R. W., & Jordan, B. D. (Eds.). (2011). Essentials of corporate finance (7th ed., Rev.). New York, NY: McGraw-Hill Irwin.

We use Capital Asset Pricing Model (CAPM) approach to calculate the cost of equity. The formula of CAPM is re = rf + β × (E[RMkt] – rf).

General Partnerships are not without their disadvantages. Without being an incorporated company the owners are still subject to issues such as liability, control, and location issues.

In this situation, the manager will try to increase profits as much as possible, meaning they may: • Select accounting methods that maximise profit instead of ones that better reflect the firm’s current position such as using a different depreciation method, accelerating revenue recognition or changing the level of depreciation. Try to manipulate accounting figures. Adopting a short-term focus instead of a long-term one. In this perspective, PAT is siding towards regulation. The Agency Costs of Equity One part of residual agency problems is the agency cost of equity. This is because managers’ shirking (they become less productive because they see no need to work for no extra pay) and conflicts with outside equity interests reduce the value of the firm. To minimise this, monitoring and bonding costs are required to implement measures to minimise its detrimental effect on the value of the firm. It must be noted that no firm will completely eliminate this as costs will increase exponentially as one tries to eradicate more and more. Thus, there is an optimal trade-off point between monitoring costs and agency costs. This is where the marginal monitoring and bonding cost equals the marginal shirk. The Agency Costs of Debt Much like the agency cost of equity, there is also one from debt. This is due to the fact that managers will always try to shift wealth from debt to equity holders. Managers have their stake in the firm’s equity and

This course applies corporate finance concepts to make management decisions. Students learn methods to evaluate financial alternatives and create financial plans. Other topics include cash flows, business valuation, working capital, capital budgets, and long-term financing.

This solutions manual provides the answers to all the review questions and end-of-chapter problems in Financial Management: Principles and Practice, by Timothy Gallagher. The answers and the steps taken to obtain the answers are shown. Readers are reminded that in finance there is often more than one answer to a question or to a problem, depending on one‘s viewpoint and assumptions. One answer is

Week 1 – Introduction – Financial Accounting (Review) Week 2 – Financial Markets and Net Present Value Week 3 – Present Value Concepts Week 4 – Bond Valuation and Term Structure Theory Week 5 – Valuation of Stocks Week 6 – Risk and Return – Problem Set #1 Due Week 7* – Midterm (Tuesday*) Week 8 - Portfolio Theory Week 9 – Capital Asset Pricing Model Week 10 – Arbitrage Pricing Theory Week 11 – Operation and Efficiency of Capital Markets Week 12 – Course Review – Problem Set #2 Due

Managers and shareholders are the utmost contributors of these conflicts, hence affecting the entire structural organization of a company, its managerial system and eventually to the company's societal responsibility. A corporation is well organized with stipulated division of responsibilities among the arms of the organizational structure, shareholders, directors, managers and corporate officers. However, conflicts between managers in most firms and shareholders have brought about agency problems. Shares and their trade have seen many companies rise to big investments. Shareholders keep the companies running

3    • Control – A major disadvantage of the limited partnership becomes obvious when discussing the actual management of the general partnership. Limited partners have no control of the day-to-day operations of the general partnership. Profit Retention – The limited partner receives an agreed portion of the profits that typically reflects the percentage of the amount that has been invested into the general partnership.   Location – If the general partners expand or move into another state, the burden of regulatory requirements is solely on the general partners and not the limited partners. If the partners plan to move or expand into another state, they simply need to file a new DBA in that state. Convenience / Burden – A

Parrino, R., Kidwell, D. S., & Bates, T. W. (2012). Fundamentals of Corporate Finance (2nd ed.). John Wiley & Sons, Inc. Retrieved from the University of Phoenix eBook database.

The course project involved developing a great depth of knowledge in analyzing capital structure, theories behind it, and its risks and issues. Before I began this assignment, I knew nothing but a few things about capital structure from previous unit weeks; however, it was not until this course’s final project that came along with opening

Firstly, even though there are different types of partnership such as general, limited and limited liability partnership. This three different type has its advantages and disadvantages however we will be mainly focused on general partnership. One advantage of the general partnership is raising capital due to the nature of the business the partners will raise capital to start-up the business. Therefore more partners mean more capital can be put to the business, this allows the business to have more potential for growth and profitability. Another advantage is that a partnership is less complicated to form and run than a company they don’t have legal filing requirements, this means they don’t have to file accounts and documents with Companies House.

This project evaluates the discounted Net Present Value which shows the estimated cash flow. The cash flow forecast is for 10 year which incorporates International complexities as well as the cost of capital.

It describe that how the returns of Market explain returns of Experian PLC. It should be over 30%, here it is 42%, which means the 42% movement in Experian PLC stock price is due to FTAS.