What This Document Is
This document presents a detailed lecture outline focusing on corporate finance within an introductory economics framework. Specifically, it delves into the foundational principles of how firms secure funding, examining the roles of both debt and equity in financial structures. It’s part of a lecture series from an introductory economics course at the University of California, Berkeley. The material builds upon prior concepts related to valuing firm claims and introduces complexities arising from real-world market imperfections.
Why This Document Matters
This outline is invaluable for students seeking a deeper understanding of financial economics. It’s particularly helpful for those preparing for exams, reviewing lecture material, or needing a structured reference for understanding firm financing decisions. Students who are interested in pursuing further study in finance, investment banking, or related fields will find this a strong foundation. It’s best utilized *during* and *after* the corresponding lecture to reinforce key concepts and provide a roadmap for further exploration.
Topics Covered
* Firm financing strategies – debt vs. equity
* The impact of risk and market conditions on borrowing rates
* Valuation of firms under different financing scenarios
* The Modigliani-Miller theorem and its implications
* Investment decisions and their relationship to financing choices
* Models of investment, including Tobin’s q model
* The role of capital costs and installation expenses in investment
What This Document Provides
* A structured outline of a lecture on firm financing.
* A framework for understanding the relationship between capital structure and firm value.
* A presentation of key theoretical concepts and models used in corporate finance.
* A foundation for analyzing investment decisions within a firm.
* Connections to influential work in the field of investment dynamics.
