a corporate finance provides managers the ability to identify and select corporate strategies or projects that add value to their business and show the funding requirement of their company and devise ways of gathering the funds for their company.
b 1 sole proprietorship; this is when a the company is owned by a single individual owner it advantages is that it is easily formed, it is not taxed at corporate level and it has few government regulations. its disadvantage is that it is difficult to obtain large sum of capital, owner has unlimited debts and the business life is limited to the life of the owner.
ii partnership is when two or more people own the business equally. ...view middle of the document...
2 yes because stock price maximization require efficient lowcost operation that provide high quality
goods and services at the lowest possible cost. it requires creation of product customers want or
need and this would lead to creation of new jobs for people. also price maximization makes
services to be efficient which would benefit the public as a whole as they would get quality
services which is good.
3 yes because there is a connection between ethics and long run profitability a firm who operates
ethically would follow quality which would result in profits. and they can reduce the probability of
liability lawsuits from occurring which results in a good name for the business are less payment for
damages which would save money for the business.
e the three aspects that affects cash flows are amount of expected cash flows, timing of cash flow streams and riskiness of cash flows
f free cash flows are the cash flows available for distribution to investors when expenses have been paid and necessary investment to support growth has been made by the company.
g the weighted average cost of capital is the average rate of return required by all of the company ' investors . it is affected by the company's capital structure, interest rate compny's ricks and maket attitude towards risk.
h the business value is the sum of all future free cash flow converted to current dollars
value = fcf/(1+wacc)1 +fcf/(1+wacc)2+fcfn/(1+wacc)n
i households are savers while non financial corporations are borrowers government are net borrowers but net savers in a surplus. capital is transferred through direct transfer like dollars, an investment banking house like an ipo offering and financial intermediary like deposits in banks.
j the price a borrower pays for debt capital is interest rate while the price of equity capital is the return of equity which comes in form of dividends and capital gains. the four most fundamental factors that affects the cost of money is production opportunity, time preference for consumption, inflation and risks.
k some economic condition that affects the cost of money is the federal reserve policy, the federal deficit budget or surplus , the level of business activity and international factors like exchange rate...