Introduction to Corporate Finance

The concepts of arbitrage and the Law of One Price have important implications for valuation. These include the pricing and trading of individual securities and assets. They also broadly underpin the firm decision making in maximizing shareholder value.

1. What are the implications for firm decision making and firm value?
2. What conditions must exist for these implications to hold?
3. How does the trading of securities in a normal market neither create nor destroy value and hence how is value for the firm created?