Basic Business Finance - Tim Davis：基本的商业金融-提姆戴维斯.docx

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1、BusinessFinanceSummaryBusinessFinance,Investors,FirmsandMarkets·Investmentsinassetsareimportantbecauseassetsgeneratethecashflowsthatareneededtomeetoperatingexpensesandprovideareturntoownersofthebusiness.·Financingdecisionsinvolvedgeneratingfundsinternallyorformexternalsources

2、tothebusiness.Suchasbyissuingdebtorequitysecurities.·Financingchargesamounttonon-operatingcashflows·Therequiredrateofreturncatersforthecoststobothshareholdersanddebtholdersforfundscommittedtotheproject.Therefore,usingtherequiredrateofreturninvolvesthefinancingchargesbeinginco

3、rporatedintothediscountrateNOTtheNetCashFlows.·FishersSeparationTheoremstates:§Twotimepoints:presentandfuture§Nouncertainty,outcomeofalldecisionsisknownnow§Noimperfectionsinthecapitalmarket§Alldecisionmakersarerational§CompaniesmanagersuseresourcesaccordingtoshareholdersoThet

4、heoremassumesthatthereiscertaintyandafrictionlesscapitalmarketinwhichtheinterestratesforborrowersequalsinterestrateforlenders.oShowsacompanycanmakeadividend/investmentdecisionthatisinthebestinterestofallshareholders.oUsingRORitispossibletoshowthattheviabilityofprojectwilldepe

5、ndontheRORinrespecttointerestrateintroducedthroughthecapitalmarketoIftheinterestrateislowerthanbothprojects,thenthecombinationofbothprojectsisbestacceptedandifnocombinationispossible(i.e.anupgradeandanotherproject)thenbothprojectsareaccepted.oNPVcalculatestheprojectsREQUIREDR

6、ATEOFRETURNtoconvertfuturecashflowstotheirequivalentvaluestoday.CapitalrationingdescribesthesituationwherefirmshavelimitedresourcesandindependentprojectsTherefore,IFACAPITALMARKETEXSISTSMANAGERSCANMAKEASINGLEDECISIONTHATISOPTIMALANDMEETSSHAREHOLDERSNEEDS.IFACAPITALMARKETDOESN

7、’TEXISTSHAREHOLDERSCANNOTAGREEONAINVESTMENTDECISIONAccountingrateofreturn-istheratioofaverageannualearningstoinitialoutlay.Anotheristheratioofaverageannualearningstoaverageinvestmentintheproject.PaybackPeriod–Timeittakesanentitytorecovertheprojectsinitialcashoutlay.Timevalueo

8、fthemoneyisnotconsideredinthepaybackperiod.CapitalExpenditureProcess