Financial Engineering to Enhance Shareholder Value ESSAY

Financial Engineering to Enhance Shareholder Value

Resource: Risk Management
Buffett, W. (1984, May 17). The superinvestors of Graham-and-Doddsville. https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors
Sumflows. (2013). Warren Buffett: Diversification [Video] | Transcript https://www.youtube.com/watch?v=wbjPiYE-F4Y
How Warren Buffett thinks about risk [Blog post]. (2016, March 9). Newstex Global Business Blogs.
Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.
The following chapters advance the concept of risk by relating it to return. The concepts of risk and return are directly correlated. They affect investment and capital project selection and are incorporated in corporation and investment value.
Chapters 10, “Risk and Return: Lessons from Market History,” pages 287-315.
Chapters 11, “Return and Risk: The Capital Asset Pricing Model (CAPM),” pages 316-356.
Simon, B. (2013). Finance lecture – risk, return and CAPM [Video] | Transcript https://www.youtube.com/watch?v=3BIIiUyr3-w
View the segment 1:01:00-1:16:00.
Resources: Efficient Market Hypotheses and Behavioral Finance Models
Klontz, B. T., & Horwitz, E. J. (2017). Behavioral finance 2.0: Financial psychology. Journal of Financial Planning, 30(5), 28-29.
This article describes how behavioral finance is the application of cognitive psychology to finance.
Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.
Chapter 13, “Efficient Capital Markets and Behavioral Challenges,” pages 390-422. This chapter contrasts two of the primary theories of investing: the efficient market hypothesis (EMH) and the behavioral finance view. They are primarily mutually exclusive concepts and color investors’ views of how much they can impact investment returns.
YaleCourses. (2012). Behavioral finance and the role of psychology [Video] | Transcript https://www.youtube.com/watch?v=chSHqogx2CI
Resource: Cost Of Financing
Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.
Chapter 12, “Risk, Cost of Capital, and Valuation,” pages 357-389. This chapter deals with one of the most well known financial concepts: the cost of capital, or how to figure the threshold rate for investment projects.
Edspira. (n.d.). Weighted average cost of capital (WACC) [Video] | Transcript https://youtu.be/46oLXwClvkw
Beers, B. (2018, February 9). How is debt “a relatively cheaper form of finance than equity”? https://www.investopedia.com/ask/answers/05/debtcheaperthanequity.asp
Resource: WACC & Capital Structure
Pysh, P. (2012). What is financial risk [Video] | Transcript https://www.youtube.com/watch?v=-4mXnFK0ecM
Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.
These two chapters deal with the capital structure of a firm, that is, how a firm will finance itself, via debt or equity. An examination of the features, benefits, and negatives of financing through both financing types will be discussed in these chapters.Chapter 14, “Capital Structure: Basic Concepts,” pages 423-450.
Chapter 15, “Capital Structure: Limits to the Use of Debt,” pages 451-479.
Understanding Finance. (2014). James Tompkins: The capital structure decision and taxes [Video] | Transcript https://www.youtube.com/watch?v=HeWcPUk8rGw
View the first 15 minutes of the video.
Resources: Dividend Policies
Corporate dividend policy revisited. Managerial Finance, 41(2), 126-144.
Bochman, A. (2013, June 24). Do dividends create shareholder value? [Blog post]. https://blogs.cfainstitute.org/investor/2013/06/24/do-dividends-create-shareholder-value/
Chemmanur, T. J., & Liu, M. H. (2011). Institutional trading, information production, and the choice between spin-off, carve-outs, and tracking stock issues. Journal of Corporate Finance, 17(1), 62-82.
Boyte-White, C. (2017). How dividends affect stock prices. https://www.investopedia.com/articles/investing/091015/how-dividends-affect-stock-prices.asp
Picardo, E. (2018, March 7). Impact of share repurchases. https://www.investopedia.com/articles/investing/112013/impact-share-repurchases.asp
Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.
Chapter 16, “Dividends and Other Payouts,” pages 480-514. This chapter discusses dividend policy and deals with real returns to shareholders and, thus, it has a profound impact on stock valuation and price. Short-term financial planning is the essential discipline of finance to ensure that the firm’s liquidity is intact and that ongoing operations of firm are secure.

Resource: Short Term Cash Management
Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2021). Corporate finance: Core principles and applications (6th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.
Chapter 18, “Short-Term Finance and Planning,” pages 551-582. In this chapter, see how short-term financial planning is the essential discipline of finance to ensure that the firm’s liquidity is intact and that ongoing operations of firm are secure.
Moy, R. (2013). Short term financial planning – uses and sources of cash [Video] | Transcript https://www.youtube.com/watch?v=waO9sBRaSDc
Additional Resources
Calculating WACC and Maximizing Shareholder Value
Adams, M. (2017, September 26). How to calculate the WACC from a balance sheet. https://bizfluent.com/how-5325911-calculate-wacc-balance-sheet.html
Macabacus. (n.d.). Spin-offs and split-offs. http://macabacus.com/restructuring/spin-offs
Hollberg, M. (2017). That’s WACC! The Web’s best WACC calculator. http://thatswacc.com/index.php
rnrfinance. (2012). Preferred stock valuation [Video] | Transcript https://www.youtube.com/watch?v=w5X0Ri8LopY
Yang, J. L. (2013, August 26). Maximizing shareholder value: The goal that changed corporate America. The Washington Post. https://www.washingtonpost.com/business/economy/maximizing-shareholder-value-the-goal-that-changed-corporate-america/2013/08/26/26e9ca8e-ed74-11e2-9008-61e94a7ea20d_story.html?utm_term=.0111a712b4cc

Financial Engineering to Enhance Shareholder Value ESSAY

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