Types of enterprises
- Sole trader (zzp’er of eenmanszaak)
- Partnership
- Corporation (company) owner of a share is not leading the business, but gives it to a
manager separation of owner & control
The owner has limited liability can only lose what is invested
The corporation is a legal person; entity on itself and pays taxes etc.
The role of the financial manager
1 giving out shares
2 investing capital into the company
3 profits of the company
4a re-invest the profit in the company for
further growth
4b pay-out dividends or interests (for
example)
The financial goal of the corporation
Stockholders want 3 things; maximize current wealth, transform wealth into most desirable time
pattern of consumption & manage risk characteristics of chosen consumption plan
The company is only involved in the first maximize shareholder (stockholder) value
Criticism are that:
- Managers will focus on making ‘fast’ money; they have a short-term view, might turn out
worse for the future, producing on a non-low waste base might be cheap now; higher profits,
but can turn out worse in the future for the company
- Shareholders (mensen met aandelen) vs. stakeholders (iedereen die betrokken is) and
sustainability. Focusing on maximizing the shareholder value, can be at the expense of
stakeholders (environment, employees
Time value of money
Future value: amount of investment is worth more in the future (mostly one year from now)
Simple (enkelvoudige) or compounded (samengestelde) interest
Future Value FV = Present Value PV (1 + r)t t
= tot de macht
FV
Leads to; PV =
( 1+ r ) t
1
Discount factor = DF = PV/FV DF =
( 1+r )t
, Present Value of cash flows in multiple periods = CF 1 / (1 + r) + CF2 / (1 + r)2
Perpetuity (consol): going on cash flows forever (infinite)
C
V= met C = cash flow & r = interest (1 + r) & V0 = worth of the (perpetual) bond
r
The interest of a perpetuity becomes simple interest
The value of a growing perpetuity (constant growth)
C1
PV = met r & g = 0.0x x% & r > g ! (unless it’s not a perpetuity)
r−g
You use this to calculate the value of a company, it is supposed to live on forever (means cash flows
forever)
Market capitalization (market cap) = value of a company
Delayed Perpetuity: a perpetuous cash flow starts x years from now
There is always a year in between payment and the time you calculate the value for (for the interest)
Make a timeline to get it straight
C delayed years
Delayed Perpetuity PV = : ( 1+r )
r
Perpetuity due: a perpetuity that start immediately, to calculate it;
C C
PV Perpetuity Due=C + = (1+r )
r r
Annuity: a level stream of cash flows for a fixed period of time (instead of a perpetuity; infinite)
(The formula is Perpetuity – Delayed Perpetuity)
C 1
PV Annuity= (1− )
r ( 1+ r )t
With a delayed annuity, again you divide the PV of the annuity (at the year right before the payments
start) by (1 + r)the delayed years
With a annuity due, the PV is again the same worth as a normal annuity, but multiplied by (1 + r).
C
PV Growing Annuity= ¿
r−g
C t
FV Annuity= [( 1+r ) −1]
r
Real assets: tangible and intangible assets active
Securities: claims on real (financial) assets
- Sole trader (zzp’er of eenmanszaak)
- Partnership
- Corporation (company) owner of a share is not leading the business, but gives it to a
manager separation of owner & control
The owner has limited liability can only lose what is invested
The corporation is a legal person; entity on itself and pays taxes etc.
The role of the financial manager
1 giving out shares
2 investing capital into the company
3 profits of the company
4a re-invest the profit in the company for
further growth
4b pay-out dividends or interests (for
example)
The financial goal of the corporation
Stockholders want 3 things; maximize current wealth, transform wealth into most desirable time
pattern of consumption & manage risk characteristics of chosen consumption plan
The company is only involved in the first maximize shareholder (stockholder) value
Criticism are that:
- Managers will focus on making ‘fast’ money; they have a short-term view, might turn out
worse for the future, producing on a non-low waste base might be cheap now; higher profits,
but can turn out worse in the future for the company
- Shareholders (mensen met aandelen) vs. stakeholders (iedereen die betrokken is) and
sustainability. Focusing on maximizing the shareholder value, can be at the expense of
stakeholders (environment, employees
Time value of money
Future value: amount of investment is worth more in the future (mostly one year from now)
Simple (enkelvoudige) or compounded (samengestelde) interest
Future Value FV = Present Value PV (1 + r)t t
= tot de macht
FV
Leads to; PV =
( 1+ r ) t
1
Discount factor = DF = PV/FV DF =
( 1+r )t
, Present Value of cash flows in multiple periods = CF 1 / (1 + r) + CF2 / (1 + r)2
Perpetuity (consol): going on cash flows forever (infinite)
C
V= met C = cash flow & r = interest (1 + r) & V0 = worth of the (perpetual) bond
r
The interest of a perpetuity becomes simple interest
The value of a growing perpetuity (constant growth)
C1
PV = met r & g = 0.0x x% & r > g ! (unless it’s not a perpetuity)
r−g
You use this to calculate the value of a company, it is supposed to live on forever (means cash flows
forever)
Market capitalization (market cap) = value of a company
Delayed Perpetuity: a perpetuous cash flow starts x years from now
There is always a year in between payment and the time you calculate the value for (for the interest)
Make a timeline to get it straight
C delayed years
Delayed Perpetuity PV = : ( 1+r )
r
Perpetuity due: a perpetuity that start immediately, to calculate it;
C C
PV Perpetuity Due=C + = (1+r )
r r
Annuity: a level stream of cash flows for a fixed period of time (instead of a perpetuity; infinite)
(The formula is Perpetuity – Delayed Perpetuity)
C 1
PV Annuity= (1− )
r ( 1+ r )t
With a delayed annuity, again you divide the PV of the annuity (at the year right before the payments
start) by (1 + r)the delayed years
With a annuity due, the PV is again the same worth as a normal annuity, but multiplied by (1 + r).
C
PV Growing Annuity= ¿
r−g
C t
FV Annuity= [( 1+r ) −1]
r
Real assets: tangible and intangible assets active
Securities: claims on real (financial) assets
