Corporate Finance Vocab

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Most Common Goal for Financial Managers

Maximizing the present value of the expected future returns
Total Shareholder Wealth=

Number of Shares*Market Price/Share
Present Value

The value today of all future returns evaluated at a discount rate
Discount Rate

factors returns from other investments during a specific (future time period)
Stockholders and Creditors (Agency Problem)

Creditors (Bond holders) have a fixed financial claim on company resources (long run debt)
Disadvantages of Incorporation
- Separation of ownership and management
- Pay taxes at corporate level and on any dividends