文档介绍：The Objective in Corporate Finance
“If you don’t know where you are going, it does not
matter how you get there”
Aswath Damodaran 1
First Principles
Invest in projects that yield a return greater than the minimum
acceptable hurdle rate.
• The hurdle rate should be higher for riskier projects and reflect the
financing mix used - owners’ funds (equity) or borrowed money (debt)
• Returns on projects should be measured based on cash flows generated
and the timing of these cash flows; they should also consider both positive
and negative side effects of these projects.
Choose a financing mix that minimizes the hurdle rate and matches the
assets being financed.
If there are not enough investments that earn the hurdle rate, return the
cash to the owners of the firm (if public, these would be stockholders).
• The form of returns - dividends and stock buybacks - will depend upon
the stockholders’ characteristics.
Objective: Maximize the Value of the Firm
Aswath Damodaran 2
The Classical Viewpoint
Van Horne: "In this book, we assume that the objective of the firm is
to maximize its value to its stockholders"
Brealey & Myers: "ess is usually judged by value: Shareholders
are made better off by any decision which increases the value of their
stake in the firm... The secret of ess in financial management is to
increase value."
Copeland & Weston: The most important theme is that the objective
of the firm is to maximize the wealth of its stockholders."
Brigham and Gapenski: Throughout this book we operate on the
assumption that the management's primary goal is stockholder wealth
maximization which translates into maximizing the price of the
common stock.
Aswath Damodaran 3
The Objective in Decision Making
In traditional corporate finance, the objective in decision making is to
maximize the value of the firm.
A narrower objective is to maximize stockholder wealth. When the
stock is traded and mar