describing and discussing corporate finance

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Write a paper describing and discussing corporate finance, including the corporate finance principles. In the paper, discuss, describe, and give examples of time value of money, Net Present Value (NPV) & investment rules, the importance of interest rates, Stock valuation, Cost of Capital, and Capital Structure. The paper should be at least 10 pages excluding the reference (bibliography) page(s).Note: free plagiarism

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Explanation & Answer

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Running Head: CORPORATE FINANCE

Corporate Finance
Institutional affiliation
Date

CORPORATE FINANCE

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Corporate Finance
All decisions that are made within an entity usually have financial implications. Besides,
any business decision involving the use of money is considered a corporate financial decision. In
a broader definition, every activity done within an entity fits under the definition of corporate
finance. It is however unfortunate to have the name corporate finance, this is because to many it
gives a suggestion that focuses on how large corporations make business decisions with regards
to finance and excludes the small and privately owned businesses. In my opinion, a title that
would fit or be more appropriate and cover all aspects of businesses for this discipline would be
Business Finance. This is because; the basic principles are all similar irrespective of whether one
is looking at a small or large business (Stulz, 1999).
For this reason, all entities and companies need wisely invest their resources; find the
right mix and kind of financing for funding the project and return the money to the owners in
cases where there are no investments considered to be good enough (Tirole, 2010). In corporate
finance, the term firm is generally used when referring to any kind of business from large, small,
private or public or service or manufacturing. PepsiCo and a small retail store are all firms in this
discipline. The investment of the firm is considered the asset which can be categorized as fixed
or current assets in accounting. However, in this case assets are considered as properties in place
and development properties. Assets in place are basically the assets that a firm has already
invested in while growth assets is used to refer to the assets that the company supposes to invest
in, in the future.
It could be strange that firms can get value from an investment it hasn’t yet made, firms
that are growing fast receives the bulk of their value from the reserves that have not been made

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yet. A firm can finance its assets through debts or equities. Debts is where firms chose to get
funding by lending from financial institutions or investors with the promise of a fixed claim that
is the payments of interest on the flow of cash that is generated from the assets. This entails
limited or no role for the investors in the daily running of activities within the business. Equities
on the other hand involve offering a residual claim on the flow of cash. That is the investors get
what remains from the payment of interest rates. Here, the investors aid in the daily running of
activities and operations within the business.
Corporate finance is basically the study of decisions that are related to money in a
business. It is applicable to all businesses and not only corporations. The main goal of corporate
finance is figuring out on ways of maximizing the value of a company by making great decisions
on investment, dividends and finances (Damodaran, 1998). That is finding a way in which a
business can allocate its scarce resources for the purpose of minimizing the expenses and
maximizing the revenue. The different ways of how companies can acquire these resources may
be through bonds and stock, bank loans or owner capital. Corporate finance also determines what
a company should do with its profits, that is how much to reinvest in the business and how much
to pay out to the owner of the business.
The term corporate finance is however defined differently in various countries of the
world. For example in the United States, corporate finance is used in a much broader way
compared to the UK in describing decisions, activities and techniques dealing with numerous
facets of the finance and wealth of a firm. In UK, the terms corporate financier and corporate
finance are associated with the transactions involving raising of capital for the purpose of
creating, developing and growing or acquiring businesses. Mostly in the UK the term

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is associated with some degree in change of business ownership that has a connection with a
corporate transaction leading to the creation of new shareholder base and...

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