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Finance Transcends All

Finance Transcends All. If the CEO believes that Finance is a specialized interest then the CFO. The key is to articulate strategic goals into Value. . Capital Constrained?. Incentives to Preserve Capital Budgeting Process. Max Value - What is Guide?.

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Finance Transcends All

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  1. Finance Transcends All If the CEO believes that Finance is a specialized interest then the CFO. The key is to articulate strategic goals into Value.

  2. Capital Constrained? • Incentives to Preserve Capital • Budgeting Process

  3. Max Value - What is Guide? Important Role of Market Efficiency. Now market prices may deviate substantially from “intrinsic value.’’ • Liquidity • Intrinsic value impossible to pin down. But market provides objective benchmark Q: Do we respond to market fads?

  4. Anheuser-Busch Project • Start with Historical Financial Statements • Decide on Level of Precision • Decide on needed Decomposition • Divisions • Geography • Build Economically Meaningful Picture of Past (Free Cash Flows) • Ratios - Be imaginative

  5. Anheuser-Busch Project (cont’d.) • Project Cash Flows -- Value • Key Value Drivers • Strategic Analysis

  6. Financing Starting Point for Developing Intuition is that in the absence of market frictions, how economic activity is financed is irrelevant to value. This is a result of the absence of arbitrage. The shareholder could do /undo any financing by the firm. (An example of Larry Summers’ “Catsup Economics.” • An example of this irrelevance is in the Excel spreadsheet M&M.

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