Dilemma: Should the firm use retained earnings for: a) financing profitable capital inⅴ estments? b)Paying dividends to stockholders

2 concepts that enhance our understanding of risk... 1) Operating Leverage affects a firm's business risk. 2) Financial Leverage affects a firm's financial risk

Top Creators of shareholder value 1999 invested cost of MVA capital return capital Microsoft3282571095456.16%12.64 Gen elect285,320652981929911.92 Intel

Three Measures of a Project's Risk Project Standing Alone risk

Capital Budgeting: the process of planning for purchases of long term assets。 ° example Suppose our firm must decide whether to purchase a new plastic molding machine for $125.000. How do we decide? will the machine be profitable? Will our firm earn a high rate of return on the investment?

Characteristics of Bonds o Bonds pay fixed coupon ( interest) payments at fixed intervals(usually every 6 months)and pay the par value at maturity

The Time value of money Compounding and Discounting Single Sums

Financial statement analysis Are our decisions maximIzing shareholder wealth?

Goal of the Firm 1) Profit Maximization? this goal ignores: a) TIMING of Returns (Time Value of Money Ch. 5) b) UNCERTAINTY of Returns (Risk- Ch. 6)

Sports Marketi A Strategic perspective Matthew D. shank Professor of Marketing and Chair Department of management and Marketing northern Kentucky university