Strategic Financial Management; Part I Introduction and The Investment Decision

Robert Alan Hill
Strategic Financial Management:
Part I
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Robert Alan Hill
Strategic Financial Management: Part I
Introduction & The Investment Decision
Download free eBooks at bookboon.com
3

Strategic Financial Management: Part I: Introduction & The Investment Decision
1
st
edition
© 2010 Robert Alan Hill &
bookboon.com
ISBN 978-87-7681-570-7
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Strategic Financial Management: Part I
4
Contents
Contents
About the Author 7
Part One: An Introduction 8
1 Finance – An Overview 9
1.1 Financial Objectives and Shareholder Wealth 9
1.2 Wealth Creation and Value Added 11

1.3 e Investment and Finance Decision 12
1.4 Decision Structures and Corporate Governance 15
1.5 e Developing Finance Function 16
1.6 e Principles of Investment 20
1.7 Perfect Markets and the Separation eorem 22
1.8 Summary and Conclusions 25
1.9 Selected References 27
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Strategic Financial Management: Part I
5
Contents
Part Two: e Investment Decision 28
2 Capital Budgeting Under Conditions of Certainty 29
2.1 e Role of Capital Budgeting 30

2.2 Liquidity, Protability and Present Value 31
2.3 e Internal Rate of Return (IRR) 37
2.4 e Inadequacies of IRR and the Case for NPV 38
2.5 Summary and Conclusions 40
3 Capital Budgeting and the Case for NPV 41
3.1 Ranking and Acceptance Under IRR and NPV 42
3.2 e Incremental IRR 44
3.3 Capital Rationing, Project Divisibility and NPV 44
3.4 Relevant Cash Flows and Working Capital 46
3.5 Capital Budgeting and Taxation 47
3.6 NPV and Purchasing Power Risk 49
3.7 Summary and Conclusions 51
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