AI2144 Corporate Finance
KTH Royal Institute of Technology
Knowledge in quantitative methods equivalent to the content in the course AI2152.
Interest rates and bond valuation. The relationship between financial leverage, risk and return. The Modigliani and Miller theory of capital structure in a perfect capital market and the effect of market imperfections on a firm’s choice of capital structure. Divident policy. The main methods of capital budgeting with leverge and market imperfections. The process of raising equity capital and debt financing.
After the completion of the course, students should be able to:
-
Describe and explain the main factors affecting interest rates and be able to value risk-free and risky bonds.
-
Describe and explain Modiglani and Miller’s theory of irrelevance of the capital structure for the value of a firm in perfect capital markets and derive and explain the relationship between leverage and the required rate of return on a firm’s assets as well as the firm’s debt and equity.
-
Describe, explain, compare and critically discuss how market imperfections such as taxes, financial distress, risk of bankruptsy, agency costs and benefits and asymmetric information may affect a firm’s choice of capital structure.
-
Describe and explain different ways of distributing capital to shareholder and Modigliani and Miller’s theory of irrelevance of dividend policy for the value of a firm in perfect capital markets and how market imperfections may affect a firm’s choice of dividend policy.
-
Describe, explain, compare and critically discuss the main methods for capital budgeting with leverage and market imperfections and their suitability depending on the capital structure of the firm. Furthermore, through group work the studends should apply the different methods of capital budgeting by constructing computer based valuation models for a firm with different assumptions regarding the firm’s capital structure.
-
Describe and explain the process of raising equity capital and debt financing for new and mature firms.
Reviews
Improve accuracy by rating this course