1. Today: Syllabus and Introduction Principles of Corporate Finance

2. For This Course You Need to Have: 1. The textbook – Lasher. Buy a used book. Order on-line if cheap. I have pdf files of the first few chapters if you don’t have your book yet. 2

3. For This Course You Need to Have: 2. A financial calculator HP 10-Bii is less than $30. You have time to order it on-line. The calculator needs to do IRR (the most basic TI does not) Textbook letter and Links on website Other models of calculators do more than we need but are OK 3

4. Syllabus and Website Hand out syllabus Contact information Exam dates Get out of the final with a 93% Term Project dates Attendance policy Grading weights Office hours Website 4

5. Expectations Buy a book and calculator Come to class: be engaged and ask questions Do assignments Keep up/study for tests Pretend that you LOVE Finance 5 We are what we pretend to be, so we must be careful what we pretend to be. Kurt VonnegutKurt Vonnegut, Mother Night US novelist (1922 - 2007)

6. Assignments Go to the course web page : http://www.agecon.purdue.edu/academic/agec424/index2.html At this site you can download : Lecture PowerPoint slides Assignments/schedule Spreadsheet templates Term project information Lab information Grades 6

7. What is going on in my life? Teaching AGEC 424, AGEC 600, and supervising graduate students Teach 2 nd - 3 rd grade Sunday School class at Saint Andrew United Methodist Church Dealing with my wood hobby/business Parenting two daughters (college freshman/sophomore) 7

8. This first week in AGEC 424 Read Chapter 1. Read Chapter 2. Accounting review is covered with via a set of test-type questions in lab this week. Relationship to MGMT 200/AGEC 311 We will start Chapter 3 as soon as Fri. or Mon. Commentary on “reading” the chapters Assignments and HW due dates listed on web site Don’t make yourself take the final because you didn’t do the homework Bring your book and a calculator to lab this week 8

9. 9 Chapter AFN. Additional funds needed and part of Ch. 13

10. The Price of Securities—A Link Between the Firm and the Market Investors buy securities (stock and bonds) for the future cash flows expected from them Price investors are willing to pay depends on expectations of how well the companies are likely to do (present value of future cash flows expected) Link between company management and investors comes from this relationship between price and expected financial results Everything firm does is evaluated by market and ‘graded’ by either an increase, decrease, or no change in security price 10

11. Sole proprietorship Partnership Corporation 11 Alternative Forms of Business Organization :

12.  Advantages:  Unlimited life  Easy transfer of ownership  Limited liability  Ease of raising capital  Disadvantages:  Double taxation  Cost of set-up and report filing 12 Corporation:

13. What are shares of Stock? Equity = Stock (Par Value & surplus) + retained earnings plus/minus a few other items A = L + OE “book” versus market value Book value of equity (per share) = (Owners Equity)/#shares Why would stock be worth more (or less) than Book Value? Publicly traded versus Privately held Reporting requirements 13

14. The primary goal is shareholder wealth maximization, which translates to maximizing stock price. 14 Goal of the Corporation:

15. Projected earnings per share Timing of the earnings stream Riskiness of the earnings stream Use of debt (capital structure) Dividend policy 15 Factors Influenced by Managers that Affect Stock Price:

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