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Current
Table of Contents
About the Authors
Acknowledgments
Dedication
Preface
1
Introduction to Modern Corporate Finance
1.1
Modern Corporate Finance
1.2
What Is Finance?
1.3
Defining the Corporation
1.4
What Is Meant by Modern?
1.5
The Goal or Purpose of the Corporation
1.6
Economic Foundations of Finance
1.7
Time and Risk
1.8
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2
Markets and Contracts
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2.1
Market Efficiency
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2.2
Inefficient Markets
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2.3
Acquiring Assets in the Financial System
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2.4
Real versus Financial Assets
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2.5
Asset Ownership Through Financial Intermediation
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2.6
Markets
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2.7
Contracting
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2.8
End-of-Chapter Material
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3
Corporate Ethics and Shareholder Wealth Maximization
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3.1
Corporate Ethics Introduced
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3.2
Can Corporations Act Ethically?
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3.3
Two Approaches to Corporate Ethics
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3.4
The Contractual-Rights Approach to Corporate Ethics
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3.5
The Societal-Good Approach to Corporate Ethics
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3.6
Debating the Two Approaches to Corporate Ethics
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3.7
Unrequired Behavior versus Required Behavior: “Oughttas” versus “Gottas”
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3.8
Personal versus Public-Policy Debates
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3.9
Public-Policy Ethical Decisions
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3.10
Corporate Ethics and Shareholder Wealth Maximization
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3.11
Corporate Ethics and Market Values
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3.12
End-of-Chapter Material
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3.13
Appendix: Overview in the History of the Philosophy of Ethics and Economics
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3.14
Appendix: The Origin of Individual Rights
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4
The Time Value of Money
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4.1
Time Value
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4.2
Dollars Through Time as Different Commodities
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4.3
Discounting Cash Flows
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4.4
Compounding Cash Flows
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4.5
The Techniques of Discounting and Compounding
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4.6
The Time Value for More than One Cash Flow
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4.7
The Present Value of Annuities
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4.8
Beginning and Ending Payments
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4.9
The Future Value of an Annuity
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4.10
Solving for the Interest Rate
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4.11
Solving for the Time Period
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4.12
End-of-Chapter Material
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5
The Valuation of Financial Securities
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5.1
Review of Discounting Annuities
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5.2
Financial Securities
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5.3
The Valuation of Common Stock
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5.4
End-of-Chapter Material
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6
Introduction to Options
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6.1
The Importance of Option Theory
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6.2
The Mechanics of Options
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6.3
Who Pays the Profits to Call Option Buyers?
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6.4
The Black-Scholes Option Pricing Model
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6.5
Option Pricing—A Two-State Example
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6.6
An Application of Option Theory to the Equity of a Firm
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6.7
End-of-Chapter Material
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6.8
Appendix: The Black-Scholes Option Pricing Model
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7
The Techniques of Capital Budgeting
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7.1
Creating Value
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7.2
Net Present Value
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7.3
Competitors of NPV
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7.4
NPV versus IRR—Which Method Is Better?
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7.5
Project Selection and the Required Rate of Returns
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7.6
End-of-Chapter Material
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8
Estimating Project Cash Flows
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8.1
Estimating Project Cash Flows
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8.2
Estimating Cash Flow and NPV for Project Wivo
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8.3
Errors in Project Cash Flow Estimation
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8.4
Sensitivity Analysis
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8.5
End-of-Chapter Material
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9
Real Options
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9.1
Real Options
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9.2
Decision Trees
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9.3
Why a Traditional NPV Can Fail
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9.4
End-of-Chapter Material
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10
Advanced Topics in Capital Budgeting
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10.1
Overview—Complexities in Capital Budgeting Analysis
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10.2
Projects with Unequal Lives
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10.3
Least-Cost Decisions
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10.4
Inflation and Investment Decisions
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10.5
Capital Rationing
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10.6
End-of-Chapter Material
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10.7
Appendix: Integer Linear Programming
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11
Risk and Diversification
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11.1
Return and Risk on Individual Assets
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11.2
Return and Risk on Portfolios
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11.3
The Normal Distribution
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11.4
Return and Risk on Portfolios
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11.5
A First Look at Portfolio Risk
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11.6
End-of-Chapter Material
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12
Modern Portfolio Theory and the Capital Asset Pricing Model
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12.1
Portfolio Management Theory
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12.2
Beta
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12.3
The CAPM and Capital Budgeting
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12.4
End-of-Chapter Material
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12.5
Appendix: Why Expected Returns Lie in a Straight Line Against Beta
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13
Financial Leverage
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13.1
An Introduction to Corporate Financing
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13.2
An Overview of Corporate Financing
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13.3
The Mechanics of Financial Leverage
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13.4
Capital Structure and Firm Value—The Traditionalists’ View
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13.5
Capital Structure and Firm Value—The Modernists’ View
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13.6
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14
Financing: Why Might it Matter
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14.1
The Rationale for Capital Structure Relevance
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14.2
Capital Structure with Corporate Taxes
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14.3
The Miller Tax Model
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14.4
Bankruptcy and Capital Structure
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14.5
Transactions Costs, Agency Costs, and Information Signaling
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14.6
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15
The Dividend Decision
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15.1
An Overview of the Firm’s Dividend Decision
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15.2
The Traditionlists’ View of Cash Dividends
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15.3
The Modernists’ Viewpoint—The M&M Model without Taxes
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15.4
Market Imperfections and Dividend Policy
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15.5
The Miller Tax Model
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15.6
Summary of the Two Tax Models for Dividends
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15.7
Dividends and Bankruptcy
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15.8
Dividends and Information Signaling
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15.9
Stock Dividends and Stock Splits
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15.10
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16
Financial Analysis
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16.1
Two Views of Financial Analysis
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16.2
Financial Statements
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16.3
Ratio Analysis
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16.4
Statement of Cash Flows
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16.5
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17
Working Capital Management
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17.1
An Overview of Working Capital Management
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17.2
Current Asset Management
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17.3
Current Liability Management
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17.4
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18
Corporate Financial Planning
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18.1
Short-Term Financial Planning and the Cash Budget
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18.2
Cash Forecasting
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18.3
Long-Range Financial Planning
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18.4
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19
International Finance
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19.1
An Overview of International Finance
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19.2
The Economics of Multiple Currencies
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19.3
Multiple Currencies and the Passage of Time
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19.4
Multiple Currencies with Time and Risk
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19.5
Political Risk
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19.6
Practical Considerations of International Financial Managment
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19.7
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20
Mergers and Other Reorganizations
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20.1
The Market for Corporate Control
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20.2
The Traditional View of Corporate Reorganizations
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20.3
The Modernists’ View of Mergers
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20.4
Divestitures and Liquidations
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20.5
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21
Financial Engineering
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21.1
An Overview of Financial Engineering
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21.2
Environmental Risk and Core Business Risk
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21.3
Risk Exposure Profiles
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21.4
Combining Risk Exposure Profiles: An Introduction
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21.5
The Use of Derivatives in Financial Engineering
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21.6
Financial Engineering and Financial Theory
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21.7
End-of-Chapter Material
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