Category: corporate finance
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Payback period
In this lesson, we’ll learn about the (discounted) payback period rule, which is a popular capital budgeting tool that helps corporate managers make investment decisions. We’ll discuss the pros and cons of this rule vis-à-vis the net present value (NPV) rule and will offer a (discounted) payback period calculator as well. What is the “payback…
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Seasoned equity offering
When a public firm (i.e., a firm whose shares are already listed on a stock exchange) sells shares to the public, this is known as a seasoned equity offering, or an SEO. This is contrast to an initial public offering (IPO) whereby a private firm (i.e., an unlisted firm) transforms into a public firm by…
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Book building
In an initial public offering (IPO), book building is the process in which underwriters (the investment banks managing the issue) elicit indications of interest from institutional investors. Underwriters, then, use the information gathered to “build the book” and establish a demand curve with the ultimate objective of setting an offer price. Book building is by…
