Lecture Notes in Finance: Corporate Finance III, First Edition

Greetings. For those who have taken Corporate Finance I and Corporate Finance II you will see these notes are consistent with my previous notes in the series. These notes are intended for MBA level courses in corporate finance. Many of the topics of Corporate Finance I and II are reiterated in this text but with more depth. Also, additional topics such as capital structure and equivalent annual cost are included.It is my wish that these notes equip the reader in at least three ways. First, I would like the reader to gain knowledge in identifying ways to improve operating, investing, and financing activities. Second, I would like the reader to learn the use of tools for project selection, project risk assessment, and project risk management. Third, I would like the reader to become familiar with the implications of debt vs. equity financing.Throughout the notes you will find questions to check your understanding of the material. These questions foster classroom interaction. Also, I have intentionally left out numerical example details to encourage note taking during class. Numerical examples will be worked in class so you can fill in the blanks. These lecture notes are organized into three parts. Part I covers the fundamental concepts of financial management including the financial manager's role, corporate governance, the time value of money, bond valuation, stock valuation, and risk and return. Part II utilizes the concepts of Part I to analyze and forecast forecast financial statements, compute the cost of capital, and to increase awareness of the debt vs. equity choice.While Part II is focused on broader issues in corporate value, Part III is focused on project selection concepts. Part III includes detailed discussions on project selection criteria, project risk assessment, and managing project risk using real options.