Corporate finance is the study of the financing decisions made by firms. No matter what your role in a corporation, an understanding for the key financial decisions made by the firm is vital. In this course we will focus on two broad financial decisions: - The capital structure decision: What is t he optimal mix of securities issued by firms to finance their activities? - The payout decision: How much cash should the firm distribute to its equity holders and how? These encompass a large component of the activity of financial managers. Thanks to the evolution of the theory of modern corporate finance in the last 30 years, financial managers don’t anymore deal with these issues in an adhoc fashion but have at their d isposal a self - consistent and well - articulated theory. To understand the “nuts and bolts” of corporate financial decisions, we first study them in the context of perfect capital markets; subsequently, we examine how capital market imperfections – such as taxes, information asymmetries and investors and managerial incentives – shape financial decisions and drive them away from results obtained under perfect capital markets. The analysis is grounded on three core ideas: - Law of one price (absence of arbitrage opportunities); - The trade - off between risk and return - Net present value These concepts, which students should already be familiar with from earlier courses in economics and finance, are the microeconomic foundations of the modern theory of corporate fina nce. To succeed in this course, students need to grasp well these concepts, and see clearly their implications for corporate finance decisions.

Pre-requesites: NA