Financial Management Decisions Company Capital Budgeting Financing (2004 Revenue) Boeing($52.5b) $7b to design,build,test and Negotiate with suppliers to help to finance the sell 787 Dreamliner aircraft Dreamliner project.A Japanese supplier,who will build the wing and fuselage,are raising and investing more than $1.5b Bank of America($48.9b) Acquired Fleet Boston Financial Issued about 600 million new shares to finance the for $49b acquisition BP($285b) Invested 600m to develop oil Announced plans to return surplus cash flow to fields offshore in the Gulf of shareholders through share repurchase Mexico LVMH ($17.1b) Acquired Glenmorangie PLC,a Issued a 7-year bond in July 2004,raising the euro producer of scotch malt equivalent of $812 m whiskies Pfizer($52.5b) $7.7b on research and testing Finance the research and testing with reinvested of new medicines cash flow generated by sales of pharmaceutical products Toyota($164b) Building an $800m automobile Total borrowings increased by $2.9b,mainly due to plant in San Antonio,Texas issuance of short-term debt in US Wal-Mart($285b) Plan for 2005 call for up to 530 Issued $1883m long-term debt,maturing in 2036 new retail stores in US and 165 and paying interest at 5.25%per year stores in other countries 10
10 Financial Management Decisions Company (2004 Revenue) Capital Budgeting Financing Boeing ($52.5b) $7b to design, build, test and sell 787 Dreamliner aircraft Negotiate with suppliers to help to finance the Dreamliner project. A Japanese supplier, who will build the wing and fuselage, are raising and investing more than $1.5b Bank of America ($48.9b) Acquired Fleet Boston Financial for $49b Issued about 600 million new shares to finance the acquisition BP ($285b) Invested $ 600m to develop oil fields offshore in the Gulf of Mexico Announced plans to return surplus cash flow to shareholders through share repurchase LVMH ($17.1b) Acquired Glenmorangie PLC, a producer of scotch malt whiskies Issued a 7-year bond in July 2004, raising the euro equivalent of $812 m Pfizer ($52.5b) $7.7b on research and testing of new medicines Finance the research and testing with reinvested cash flow generated by sales of pharmaceutical products Toyota ($164b) Building an $800m automobile plant in San Antonio, Texas Total borrowings increased by $2.9b, mainly due to issuance of short-term debt in US Wal-Mart ($285b) Plan for 2005 call for up to 530 new retail stores in US and 165 stores in other countries Issued $1883m long-term debt, maturing in 2036 and paying interest at 5.25% per year
Balance Sheet Model of the Firm Total Value of Assets: Total Firm Value to Investors: Current Liabilities Current Assets Long-Term Debt Fixed Assets 1 Tangible Shareholders' 2 Intangible Equity
11 Balance Sheet Model of the Firm Current Assets Fixed Assets 1 Tangible 2 Intangible Total Value of Assets: Shareholders’ Equity Current Liabilities Long-Term Debt Total Firm Value to Investors:
The Capital Budgeting Decision Total Value of Assets: Total Firm Value to Investors: Current Liabilities Current Assets Long-Term Debt Fixed Assets 1 Tangible What long-term investments Shareholders' 2 Intangible should the firm Equity choose? 12
12 The Capital Budgeting Decision What long-term investments should the firm choose? Current Assets Fixed Assets 1 Tangible 2 Intangible Total Value of Assets: Shareholders’ Equity Current Liabilities Long-Term Debt Total Firm Value to Investors: