Silke Putzeys Corporate Finance 2025-2026
Lecture 0: Introduction of Corporate Finance (video
lecture)
What does finance mean?
- Finance is all about money – how it’s made, used and managed
- = how people or companies get money, spend money and grow money
- Including = borrowing, investing, saving and managing money
What does corporate finance mean?
- Corporate = company/business
- = How does a company handles money? How does a company make financial
decisions like:
A) Waar geven we geld aan uit? What to spend money on?
B) Hoe krijgen we dat geld om dingen te kunnen doen? How to get that money?
Big picture
1. Asset investment decision (capital budgeting): what a company spends its
money on. (left side of kolom)
a. Buying land for making wine you have to get a land for grapes
2. The financing decision: how a company raises its money (eg. Debt vs equity)
right side
WHICH DECISION IS MORE IMPORTANT ?
Asset investment decision (that’s your business plan) is more important. If you don’t
have a good business plan you go bankrupt. But you also need the financing
decision (also be optimal), its not necessarily undo your business plan.
Financial principles as it affects firm value
- Theory and practice of the asset investment decision
- Every single topic has to affect firm value
ROADMAP:
1. Measuring value
What was the name of a model you learned for measuring value?
- Time value of money
1
,Silke Putzeys Corporate Finance 2025-2026
Why have a model to measure value?
- If you are going to manage value, you need to be able to measure it. (ex: if
you want to lose weight, you have to measure your evolution with a weight
scale)
In the TVOM (time value of money) model, what two items did you need to value
anything?
- Cash flows
- Discount rate = many names for the DR, depending on its application. Your
book has many different notations too (interest rate, cost of capital, cost of
equity or common stock, required rate of return of equity).
For example, if the discount rate here 10%, then what would today’s value be of the
above 110€?
2. The asset investment decision (capital budgeting)
You applied the TVOM model to what I call the asset investment decision
What in theory had to be true for an asset investment decision to create value?
- Positive net present value (bottomline analyses)
If the discount rate were 10% for the asset investment decision then the net present
value would be:
What two items did I need to value this decision?
- Cash flows
- Discount rate
But for now you assumed you knew the discount rate for the asset investment
decision
3. Valuing financial securities, stocks and bonds
Discount rate assumed
4. The discount rate for financial securities
Stay at the right side.
It turns out that de discount rate for the asset investment decision is highly related
to the discount rate for financial securities.
5. The discount rate for the asset investment decision
What should be the DR for the asset investment decision?
2
,Silke Putzeys Corporate Finance 2025-2026
Lecture 1: Time value of money: single cash flows (1)
(29/09)
Assets and Liabilities
Left side: what a company spends its money on (assets = bezittingen), what a
company buys or builds to earn money:
- Current assets (huidige bezittingen)= just the cash that the company has
NOW, cash to make the payments. Cash that you can use fast (ex: contant
geld, geld op de bank, spullen die snel verkocht kunnen worden…)
- Fixed assets (vaste bezittingen) = things that the company uses for a long
time. (ex: building, machines, computers, transportation..)
Asset investment decision (capital budgeting): de beslissing over
waar het geld naartoe gaat.
Right side: liabilities (verplichtingen, financiering), where the money comes from. A
company can get money in a lot of different ways:
- Debt (Schuld): geld lenen bij de bank of via leningen (needs to pay it back
but with the interest)
- Equity (eigen vermogen): geld ophalen door aandelen (shares) te verkopen
(stukjes van het bedrijf) investeerders krijgen dan een deel van de winst
- Hybrid securities (mix van beide) = een soort tussenoplossing, bijvoorbeeld
convertible bonds of preferente aandelen (vaak gebruikt bij startups
Financing decision: how a company raises its money (eg debt vs
equity)
Asset side: valuation
How do we value an investment project?
- New plant and equipment.
- Research & Development (R&D) investment. (to generate for instance a new
pattent)
- The introduction of a new product.
- Entering a new market.
- Shutting down a division.
- The acquisition of another company.
3
, Silke Putzeys Corporate Finance 2025-2026
- Buying or renting / leasing. (personal finance, a building, company, car…)
Money has 2 dimensions:
- How much
- When
A dollar today is worth more than a dollar tomorrow. If nothing
else, you could put it in the bank and make interest.
These two sides are interrelated
Two central questions:
- How to value corporate investment opportunities?
o E.g., what is the value of a project, taking the financing of it into
consideration?
- How to finance corporate activities?
o E.g., how much money can a company raise for selling 10% of its
shares? (what is the value of 10% of the shares?) we need to know
what the fair price is?
Defi nitions
Effective periodic rate (r)
= the amount of interest made from one dollar after one period
Example = suppose I deposit 1€ today and 6 months later I have 1.05€, what is the
effective 6 months rate?
- 5%
Nominal or stated or advertised or annual percentage rate (APR)
= the interest rate that’s quoted per year, without taking compounding into account,
this is not the true rate (because if the interest is compounded monthly, the
effective annual rate is higher than your annual percentage rate)
Example: Suppose a bank advertises that it pays 10% compounded semi-annually
- 10% = APR
- Unless the statement specifically states it is an effective rate, then you must
assume it is an APR
- Annual by convention
- What is the ONLY first step you can do to the 10%?
o Divide it by 2 (since there are 2 semi-annual periods in a year)
o Effective 6 month rate is 0,05= 5%
Single cash flow principles (Lecture video)
4
Lecture 0: Introduction of Corporate Finance (video
lecture)
What does finance mean?
- Finance is all about money – how it’s made, used and managed
- = how people or companies get money, spend money and grow money
- Including = borrowing, investing, saving and managing money
What does corporate finance mean?
- Corporate = company/business
- = How does a company handles money? How does a company make financial
decisions like:
A) Waar geven we geld aan uit? What to spend money on?
B) Hoe krijgen we dat geld om dingen te kunnen doen? How to get that money?
Big picture
1. Asset investment decision (capital budgeting): what a company spends its
money on. (left side of kolom)
a. Buying land for making wine you have to get a land for grapes
2. The financing decision: how a company raises its money (eg. Debt vs equity)
right side
WHICH DECISION IS MORE IMPORTANT ?
Asset investment decision (that’s your business plan) is more important. If you don’t
have a good business plan you go bankrupt. But you also need the financing
decision (also be optimal), its not necessarily undo your business plan.
Financial principles as it affects firm value
- Theory and practice of the asset investment decision
- Every single topic has to affect firm value
ROADMAP:
1. Measuring value
What was the name of a model you learned for measuring value?
- Time value of money
1
,Silke Putzeys Corporate Finance 2025-2026
Why have a model to measure value?
- If you are going to manage value, you need to be able to measure it. (ex: if
you want to lose weight, you have to measure your evolution with a weight
scale)
In the TVOM (time value of money) model, what two items did you need to value
anything?
- Cash flows
- Discount rate = many names for the DR, depending on its application. Your
book has many different notations too (interest rate, cost of capital, cost of
equity or common stock, required rate of return of equity).
For example, if the discount rate here 10%, then what would today’s value be of the
above 110€?
2. The asset investment decision (capital budgeting)
You applied the TVOM model to what I call the asset investment decision
What in theory had to be true for an asset investment decision to create value?
- Positive net present value (bottomline analyses)
If the discount rate were 10% for the asset investment decision then the net present
value would be:
What two items did I need to value this decision?
- Cash flows
- Discount rate
But for now you assumed you knew the discount rate for the asset investment
decision
3. Valuing financial securities, stocks and bonds
Discount rate assumed
4. The discount rate for financial securities
Stay at the right side.
It turns out that de discount rate for the asset investment decision is highly related
to the discount rate for financial securities.
5. The discount rate for the asset investment decision
What should be the DR for the asset investment decision?
2
,Silke Putzeys Corporate Finance 2025-2026
Lecture 1: Time value of money: single cash flows (1)
(29/09)
Assets and Liabilities
Left side: what a company spends its money on (assets = bezittingen), what a
company buys or builds to earn money:
- Current assets (huidige bezittingen)= just the cash that the company has
NOW, cash to make the payments. Cash that you can use fast (ex: contant
geld, geld op de bank, spullen die snel verkocht kunnen worden…)
- Fixed assets (vaste bezittingen) = things that the company uses for a long
time. (ex: building, machines, computers, transportation..)
Asset investment decision (capital budgeting): de beslissing over
waar het geld naartoe gaat.
Right side: liabilities (verplichtingen, financiering), where the money comes from. A
company can get money in a lot of different ways:
- Debt (Schuld): geld lenen bij de bank of via leningen (needs to pay it back
but with the interest)
- Equity (eigen vermogen): geld ophalen door aandelen (shares) te verkopen
(stukjes van het bedrijf) investeerders krijgen dan een deel van de winst
- Hybrid securities (mix van beide) = een soort tussenoplossing, bijvoorbeeld
convertible bonds of preferente aandelen (vaak gebruikt bij startups
Financing decision: how a company raises its money (eg debt vs
equity)
Asset side: valuation
How do we value an investment project?
- New plant and equipment.
- Research & Development (R&D) investment. (to generate for instance a new
pattent)
- The introduction of a new product.
- Entering a new market.
- Shutting down a division.
- The acquisition of another company.
3
, Silke Putzeys Corporate Finance 2025-2026
- Buying or renting / leasing. (personal finance, a building, company, car…)
Money has 2 dimensions:
- How much
- When
A dollar today is worth more than a dollar tomorrow. If nothing
else, you could put it in the bank and make interest.
These two sides are interrelated
Two central questions:
- How to value corporate investment opportunities?
o E.g., what is the value of a project, taking the financing of it into
consideration?
- How to finance corporate activities?
o E.g., how much money can a company raise for selling 10% of its
shares? (what is the value of 10% of the shares?) we need to know
what the fair price is?
Defi nitions
Effective periodic rate (r)
= the amount of interest made from one dollar after one period
Example = suppose I deposit 1€ today and 6 months later I have 1.05€, what is the
effective 6 months rate?
- 5%
Nominal or stated or advertised or annual percentage rate (APR)
= the interest rate that’s quoted per year, without taking compounding into account,
this is not the true rate (because if the interest is compounded monthly, the
effective annual rate is higher than your annual percentage rate)
Example: Suppose a bank advertises that it pays 10% compounded semi-annually
- 10% = APR
- Unless the statement specifically states it is an effective rate, then you must
assume it is an APR
- Annual by convention
- What is the ONLY first step you can do to the 10%?
o Divide it by 2 (since there are 2 semi-annual periods in a year)
o Effective 6 month rate is 0,05= 5%
Single cash flow principles (Lecture video)
4
