Corporate Finance Canadian Edition

Cover
Title
Copyright
About the Authors
In Memoriam
Brief Contents
Contents
Preface
Part 1 Overview
	CHAPTER 1 Introduction to Corporate Finance
		Executive Summary
		1.1 WHAT IS CORPORATE FINANCE?
			The Balance-Sheet Model of the Firm
			Capital Structure
			The Financial Manager
			Identification of Cash Flows
			Timing of Cash Flows
			Risk of Cash Flows
				Concept Questions
		1.2 CORPORATE SECURITIES ASCONTINGENT CLAIMS ON TOTAL FIRM VALUE
			Concept Questions
		1.3 BUSINESS ORGANIZATION FORMS
			The Sole Proprietorship
			The Partnership
			The Corporation
			The Income Trust
				Concept Questions
		1.4 GOALS OF THE CORPORATE FIRM
			Agency Costs and the Set-of-Contracts Viewpoint
			Managerial Goals
			Separation of Ownership and Control
			In Their Own Words: B. Espen Eckbo on corporate governance
				Concept Questions
		1.5 FINANCIAL INSTITUTIONS,FINANCIAL MARKETS, AND THE CORPORATION
			Financial Institutions
			Money Versus Capital Markets
			Primary Versus Secondary Markets
			Listing
			Foreign Exchange Market
				Concept Questions
		1.6 TRENDS IN FINANCIAL MARKETS AND MANAGEMENT
			In Their Own Words: Maria Strömqviston hedge funds and the financial crisis of 2008
				Concept Question
		1.7 OUTLINE OF THE TEXT
		1.8 SUMMARY AND CONCLUSIONS
		Appendix 1A Taxes
	CHAPTER 2 Accounting Statements and Cash Flow
		Executive Summary
		2.1 THE STATEMENT OF FINANCIAL POSITION
			Liquidity
			Debt Versus Equity
			Value Versus Cost
				Concept Questions
		2.2 STATEMENT OF COMPREHENSIVE INCOME
			International Financial Reporting Standards
			Non-Cash Items
			Time and Costs
				Concept Questions
		2.3 NET WORKING CAPITAL
			Concept Questions
		2.4 FINANCIAL CASH FLOW
			Concept Questions
		2.5 SUMMARY AND CONCLUSIONS
			Minicase: Cash Flows at Eshopwise Ltd.
		Appendix 2A Financial Statement Analysis
		Appendix 2B Statement of Cash Flows
	CHAPTER 3 Financial Planning and Growth
		Executive Summary
		3.1 WHAT IS FINANCIAL PLANNING?
			Concept Questions
		3.2 A FINANCIAL PLANNING MODEL: THE INGREDIENTS
		3.3 THE PERCENTAGE OF SALES METHOD
			The Statement of Comprehensive Income
			The Statement of Financial Position
				Concept Questions
		3.4 WHAT DETERMINES GROWTH?
			Concept Questions
			Some Caveats on Financial Planning Models
			In Their Own Words: Robert C. Higgins on sustainable growth
		3.5 SUMMARY AND CONCLUSIONS
			Minicase: Ratios and Financial Planning at East Coast Yachts
Part 2 Value and Capital Budgeting
	CHAPTER 4 Financial Markets and Net Present Value: First Principles of Finance
		Executive Summary
		4.1 THE FINANCIAL MARKET ECONOMY
			The Anonymous Market
			Market Clearing
				Concept Questions
		4.2 MAKING CONSUMPTION CHOICES OVER TIME
			Concept Questions
		4.3 THE COMPETITIVE MARKET
			How Many Interest Rates Are There in a Competitive Market?
				Concept Questions
		4.4 THE BASIC PRINCIPLE
			Concept Question
		4.5 PRACTISING THE PRINCIPLE
			A Lending Example
			A Borrowing Example
				Concept Questions
		4.6 ILLUSTRATING THE INVESTMENT DECISION
			Concept Questions
		4.7 CORPORATE INVESTMENT DECISION MAKING
			Concept Question
		4.8 SUMMARY AND CONCLUSIONS
	CHAPTER 5 The Time Value of Money
		Executive Summary
		5.1 THE ONE- PERIOD CASE
			Concept Questions
		5.2 THE MULTIPERIOD CASE
			Future Value and Compounding
			The Power of Compounding: A Digression
			Present Value and Discounting
			Finding the Number of Periods
			The Algebraic Formula
				Concept Questions
		5.3 COMPOUNDING PERIODS
			Compounding Over Many Years
			Continuous Compounding (Advanced)
				Concept Questions
		5.4 SIMPLIFICATIONS
			Perpetuity
			Growing Perpetuity
			Annuity
			Mortgages
			Using Annuity Formulas
			Growing Annuity
				Concept Questions
		5.5 WHAT IS A FIRM WORTH?
		5.6 SUMMARY AND CONCLUSIONS
			Minicase: The MBA Decision
	CHAPTER 6 How to Value Bonds and Stocks
		Executive Summary
		6.1 DEFINITION AND EXAMPLE OF A BOND
		6.2 HOW TO VALUE BONDS
			Pure Discount Bonds
			Level-Coupon Bonds
			Consols
				Concept Questions
		6.3 BOND CONCEPTS
			Interest Rates and Bond Prices
			Yield to Maturity
			Current Yield
			Holding-Period Return
			The Present Value Formulas for Bonds
				Concept Questions
		6.4 THE PRESENT VALUE OF COMMON STOCKS
			Dividends Versus Capital Gains
			Valuation of Different Types of Stocks
		6.5 ESTIMATES OF PARAMETERS IN THE DIVIDEND DISCOUNT MODEL
			Where Does g Come From?
			Where Does r Come From?
			A Healthy Sense of Skepticism
		6.6 GROWTH OPPORTUNITIES
			NPVGOs of Real Companies
			Growth in Earnings and Dividends Versus Growth Opportunities
			Dividends or Earnings: Which to Discount?
			The No-Dividend Firm
		6.7 THE DIVIDEND GROWTH MODEL AND THE NPVGO MODEL (ADVANCED)
			The Dividend Growth Model
			The NPVGO Model
			Summary
		6.8 COMPARABLES
			Price–Earnings Ratio
				Concept Questions
		6.9 VALUING THE ENTIRE FIRM
		6.10 STOCK MARKET REPORTING
		6.11 SUMMARY AND CONCLUSIONS
			Minicase: Stock Valuation at Ragan Engines
		Appendix 6A The Term Structure of Interest Rates
			Concept Question
	CHAPTER 7 Net Present Value and Other Investment Rules
		Executive Summary
		7.1 WHY USE NET PRESENT VALUE?
			Concept Questions
		7.2 THE PAYBACK PERIOD RULE
			Defining the Rule
			Problems With the Payback Method
			Managerial Perspective
			Summary of Payback
				Concept Questions
		7.3 THE DISCOUNTED PAYBACK PERIOD RULE
		7.4 THE AVERAGE ACCOUNTING RETURN
			Defining the Rule
			Analyzing the Average Accounting Return Method
				Concept Questions
		7.5 THE INTERNAL RATE OF RETURN
			Concept Question
		7.6 PROBLEMS WITH THE INTERNAL RATE OF RETURN APPROACH
			Definition of Independent and Mutually Exclusive Projects
			Two General Problems Affecting Both Independent and Mutually Exclusive Projects
			Problems Specific to Mutually Exclusive Projects
			Redeeming Qualities of the Internal Rate of Return
			A Test
				Concept Questions
		7.7 THE PROFITABILITY INDEX
			Concept Questions
		7.8 THE PRACTICE OF CAPITAL BUDGETING
		7.9 SUMMARY AND CONCLUSIONS
			Minicase: BC Copper Mining
	CHAPTER 8 Net Present Value and Capital Budgeting
		Executive Summary
		8.1 INCREMENTAL CASH FLOWS
			Cash Flows—Not Accounting Income
			Sunk Costs
			Opportunity Costs
			Side Effects
			Allocated Costs
				Concept Questions
		8.2 THE MAJESTIC MULCH ANDCOMPOST COMPANY: AN EXAMPLE
			An Analysis of the Project
			Which Set of Books?
			A Note on Net Working Capital
			Interest Expense
				Concept Questions
		8.3 INFLATION AND CAPITAL BUDGETING
			Interest Rates and Inflation
			Cash Flow and Inflation
			Discounting: Nominal or Real?
				Concept Questions
		8.4 ALTERNATIVE DEFINITIONS OF OPERATING CASH FLOW
			The Bottom-Up Approach
			The Top-Down Approach
			The Tax Shield Approach
			Conclusion
		8.5 APPLYING THE TAX SHIELDAPPROACH TO THE MAJESTICMULCH AND COMPOST COMPANY PROJECT
			Present Value of the Tax Shield on Capital Cost Allowance
			Total Project Cash Flow Versus Tax Shield Approach
				Concept Questions
		8.6 INVESTMENTS OF UNEQUAL LIVES: THE EQUIVALENT ANNUAL COST METHOD
			The General Decision to Replace (Advanced)
				Concept Question
		8.7 SUMMARY AND CONCLUSIONS
			Minicase: Beaver Mining Company
			Minicase: Goodweek Tires Inc.
		Appendix 8A Capital Cost Allowance
		Appendix 8B Derivation of the Present Value of the Capital Cost Allowance Tax Shield Formula
	CHAPER 9 Risk Analysis, Real Options, and Capital Budgeting
		Executive Summary
		9.1 DECISION TREES
			Concept Questions
		9.2 SENSITIVITY ANALYSIS, SCENARIO ANALYSIS, AND BREAK-EVEN ANALYSIS
			Sensitivity Analysis and Scenario Analysis
			Break-Even Analysis
				Concept Questions
			Break-Even Analysis, Equivalent Annual Cost, and Capital Cost Allowance
		9.3 MONTE CARLO SIMULATION
			Step 1: Specify the Basic Model
			Step 2: Specify a Distribution for Each Variable in the Model
			Step 3: The Computer Draws One Outcome
			Step 4: Repeat the Procedure
			Step 5: Calculate Net Present Value
		9.4 REAL OPTIONS
			The Option to Expand
			The Option to Abandon
			Timing Options
			Real Options in the Real World
				Concept Questions
		9.5 SUMMARY AND CONCLUSIONS
			Minicase: Bunyan Lumber, LLC
Part 3 RISK
	CHAPTER 10 Risk and Return: Lessons From Market History
		Executive Summary
		10.1 RETURNS
			Dollar Earnings
			Percentage Returns or Rate of Return
				Concept Questions
		10.2 HOLDING- PERIOD RETURNS
			Concept Questions
		10.3 RETURN STATISTICS
			Concept Question
		10.4 AVERAGE STOCK RETURNS AND RISK- FREE RETURNS
			Concept Questions
		10.5 RISK STATISTICS
			Variance and Standard Deviation
			Normal Distribution and Its Implications for Standard Deviation
			Value at Risk
			Further Perspective on Returns and Risk
				Concept Questions
		10.6 MORE ON AVERAGE RETURNS
			Arithmetic Versus Geometric Averages
			Calculating Geometric Average Returns
			Arithmetic Average Return or Geometric Average Return?
				Concept Question
		10.7 2008: A YEAR OF FINANCIAL CRISIS
		10.8 SUMMARY AND CONCLUSIONS
			Minicase: A Job at Deck Out My Yacht Corporation
	CHAPTER 11 Risk and Return: The Capital Asset Pricing Model
		Executive Summary
		11.1 INDIVIDUAL SECURITIES
		11.2 EXPECTED RETURN, VARIANCE, AND COVARIANCE
			Expected Return and Variance
			Covariance and Correlation
				Concept Questions
		11.3 THE RISK AND RETURN FOR PORTFOLIOS
			The Example of Supertech and Slowpoke
			The Expected Return on a Portfolio
			Variance and Standard Deviation of a Portfolio
				Concept Questions
		11.4 THE EFFICIENT SET FOR TWO ASSETS
			Application to International Diversification
				Concept Questions
		11.5 THE EFFICIENT SET FOR MANY SECURITIES
			Variance and Standard Deviation in a Portfolio of Many Assets
				Concept Questions
		11.6 DIVERSIFICATION: AN EXAMPLE
			Risk and the Sensible Investor
				Concept Questions
		11.7 RISK- FREE BORROWING AND LENDING
			The Optimal Portfolio
				Concept Questions
		11.8 MARKET EQUILIBRIUM
			Definition of the Market Equilibrium Portfolio
			Definition of Risk When Investors Hold the Market Portfolio
			The Formula for Beta
			A Test
				Concept Questions
		11.9 RELATIONSHIP BETWEENRISK AND EXPECTED RETURN (CAPITAL ASSET PRICING MODEL)
			Expected Return on Market
			Expected Return on Individual Security
				Concept Questions
		11.10 SUMMARY AND CONCLUSIONS
			Minicase: A Job at Deck Out My Yacht, Part 2
	CHAPTER 12 An Alternative View of Risk and Return: The Arbitrage Pricing Theory
		Executive Summary
		12.1 FACTOR MODELS: ANNOUNCEMENTS, SURPRISES, AND EXPECTED RETURNS
			Concept Questions
		12.2 RISK: SYSTEMATIC AND UNSYSTEMATIC
			Concept Questions
		12.3 SYSTEMATIC RISK AND BETAS
			Concept Questions
		12.4 PORTFOLIOS AND FACTOR MODELS
			Portfolios and Diversification
				Concept Questions
		12.5 BETAS AND EXPECTED RETURNS
			The Linear Relationship
			The Market Portfolio and the Single Factor
				Concept Question
		12.6 THE CAPITAL ASSET PRICINGMODEL AND THE ARBITRAGE PRICING THEORY
			Differences in Pedagogy
			Differences in Application
				Concept Questions
		12.7 PARAMETRIC APPROACHES TO ASSET PRICING
			Empirical Models
			Style Portfolios
				Concept Questions
		12.8 SUMMARY AND CONCLUSIONS
			Minicase: The Fama–French Multifactor Model and Mutual Fund Returns
	CHAPTER 13 Risk, Return, and Capital Budgeting
		Executive Summary
		13.1 THE COST OF EQUITY CAPITAL
			Concept Questions
		13.2 ESTIMATION OF BETA
			Concept Question
			Beta Estimation in Practice
			Stability of Beta
			Using an Industry Beta
				Concept Questions
		13.3 DETERMINANTS OF BETA
			Cyclicality of Revenues
			Operating Leverage
			Financial Leverage and Beta
				Concept Questions
		13.4 EXTENSIONS OF THE BASIC MODEL
			The Firm Versus the Project: Vive la différence
			The Cost of Debt
			The Cost of Preferred Stock
			The Weighted Average Cost of Capital
			The Capital Structure Weights
			Taxes and the Weighted Average Cost of Capital
				Concept Question
		13.5 ESTIMATING THE COST OF CAPITAL FOR SUNCOR ENERGY
			Concept Question
		13.6 FLOTATION COSTS AND THE WEIGHTED AVERAGE COST OF CAPITAL
			The Basic Approach
			Flotation Costs and Net Present Value
			Internal Equity and Flotation Costs
		13.7 REDUCING THE COST OF CAPITAL
			What Is Liquidity?
			Liquidity, Expected Returns, and the Cost of Capital
			Liquidity and Adverse Selection
			What the Corporation Can Do
				Concept Questions
		13.8 SUMMARY AND CONCLUSIONS
			Minicase: The Cost of Capital for Goff Communications Inc.
		Appendix 13A Economic Value Added and the Measurement of Financial Performance
Part 4 Capital Structure and Dividend Policy
	CHAPTER 14 Corporate Financing Decisions and Efficient Capital Markets
		Executive Summary
		14.1 CAN FINANCING DECISIONS CREATE VALUE?
			Concept Question
		14.2 A DESCRIPTION OF EFFICIENT CAPITAL MARKETS
			Foundations of Market Efficiency
				Concept Questions
		14.3 THE DIFFERENT TYPES OF EFFICIENCY
			The Weak Form
			The Semistrong and Strong Forms
			Some Common Misconceptions About the Efficient Market Hypothesis
				Concept Questions
		14.4 THE EVIDENCE
			The Weak Form
			The Semistrong Form
			The Strong Form
				Concept Questions
		14.5 THE BEHAVIOURAL CHALLENGE TO MARKET EFFICIENCY
			Concept Question
		14.6 EMPIRICAL CHALLENGES TO MARKET EFFICIENCY
			Concept Question
		14.7 REVIEWING THE DIFFERENCES
			In Their Own Words: A random talk with Burton Malkiel
		14.8 IMPLICATIONS FOR CORPORATE FINANCE
			Accounting and Efficient Markets
			The Timing Decision
			Speculation and Efficient Markets
			Information in Market Prices
				Concept Question
		14.9 SUMMARY AND CONCLUSIONS
			Minicase: Your Retirement Plan at Deck Out My Yacht
	CHAPTER 15 Long-Term Financing: An Introduction
		Executive Summary
		15.1 COMMON STOCK
			Authorized Versus Issued Common Stock
			Retained Earnings
			Market Value, Book Value, and Replacement Value
			Shareholders' Rights
			Dividends
			Classes of Shares
			In Their Own Words: Shares climb as Stronach to give up voting control
				Concept Questions
		15.2 CORPORATE LONG-TERM DEBT: THE BASICS
			Interest Versus Dividends
			Is It Debt or Equity?
			Basic Features of Long-Term Debt
			Different Types of Debt
			Repayment
			Seniority
			Security
			Indenture
				Concept Questions
		15.3 PREFERRED SHARES
			Stated Value
			Cumulative and Non-Cumulative Dividends
			Are Preferred Shares Really Debt?
			Preferred Shares and Taxes
			Beyond Taxes
				Concept Questions
		15.4 INCOME TRUSTS
			Income Trust Income and Taxation
		15.5 PATTERNS OF LONG-TERM FINANCING
			Concept Questions
		15.6 SUMMARY AND CONCLUSIONS
	CHAPTER 16 Capital Structure: Basic Concepts
		Executive Summary
		16.1 THE CAPITAL STRUCTURE QUESTION AND THE PIE MODEL
			Concept Question
		16.2 MAXIMIZING FIRM VALUEVERSUS MAXIMIZING SHAREHOLDER INTERESTS
			Concept Question
		16.3 FINANCIAL LEVERAGE AND FIRM VALUE: AN EXAMPLE
			Leverage and Returns to Shareholders
			The Choice Between Debt and Equity
			A Key Assumption
				Concept Questions
		16.4 MODIGLIANI AND MILLER: PROPOSITION II (NO TAXES)
			Risk to Equityholders Rises With Leverage
			Proposition II: Required Return to Equityholders Rises With Leverage
			Modigliani and Miller: An Interpretation
			In Their Own Words: Merton Miller on the MM results
				Concept Questions
		16.5 TAXES
			The Basic Insight
			Taxation of Corporate Income
			Present Value of the Tax Shield
			Value of the Levered Firm
			Expected Return and Leverage Under Corporate Taxes
			The Weighted Average Cost of Capital and Corporate Taxes
			Stock Price and Leverage Under Corporate Taxes
				Concept Questions
		16.6 SUMMARY AND CONCLUSIONS
			Minicase: Stephenson Real Estate Recapitalization
	CHAPTER 17 Capital Structure: Limits to the Use of Debt
		Executive Summary
		17.1 COSTS OF FINANCIAL DISTRESS
			Bankruptcy Risk or Bankruptcy Cost?
				Concept Questions
		17.2 DESCRIPTION OF COSTS
			Direct Costs of Financial Distress: Legal and Administrative Costs of Liquidation or Reorganization
			Indirect Costs of Financial Distress
			Agency Costs
				Concept Questions
		17.3 CAN DEBT COSTS BE REDUCED?
			Protective Covenants
			Consolidation of Debt
				Concept Question
		17.4 INTEGRATION OF TAXEFFECTS AND FINANCIAL DISTRESS COSTS
			Pie Again
				Concept Questions
		17.5 SIGNALLING
			Concept Questions
		17.6 SHIRKING, PERQUISITES, AND BAD INVESTMENTS: A NOTE ON AGENCY COST OF EQUITY
			Effect of Agency Costs of Equity on Debt-to-Equity Financing
			Free Cash Flow
				Concept Questions
		17.7 THE PECKING- ORDER THEORY
			Rules of the Pecking Order
			Implications
				Concept Questions
		17.8 GROWTH AND THE DEBT-TO- EQUITY RATIO
			No Growth
			Growth
				Concept Question
		17.9 PERSONAL TAXES
			The Miller Model
				Concept Question
		17.10 HOW FIRMS ESTABLISH CAPITAL STRUCTURE
			Concept Questions
		17.11 SUMMARY AND CONCLUSIONS
			Minicase: McKenzie Restaurants Capital Budgeting
	CHAPTER 18 Valuation and Capital Budgeting for the Levered Firm
		Executive Summary
		18.1 ADJUSTED PRESENT VALUE APPROACH
			Concept Questions
		18.2 FLOW TO EQUITY APPROACH
			Step 1: Calculating Levered Cash Flow
			Step 2: Calculating r[sup(S)]
			Step 3: Valuation
				Concept Questions
		18.3 WEIGHTED AVERAGE COST OF CAPITAL METHOD
			Concept Question
		18.4 A COMPARISON OF THE ADJUSTEDPRESENT VALUE, FLOW TO EQUITY, AND WEIGHTED AVERAGE COST OF CAPITAL APPROACHES
			Caveat: Adjusted Present Value, Flow to Equity, and Weighted Average Cost of Capital Do Not Always Yield the Same Results
			A Guideline
				Concept Questions
		18.5 ADJUSTED PRESENT VALUE EXAMPLE
			Concept Question
		18.6 CAPITAL BUDGETING WHENTHE DISCOUNT RATE MUST BE ESTIMATED
			Concept Question
		18.7 BETA AND LEVERAGE
			The Project Is Not Scale Enhancing
				Concept Question
		18.8 SUMMARY AND CONCLUSIONS
			Minicase: The Leveraged Buyout of Cheek Products Ltd.
	CHAPTER 19 Dividends and Other Payouts
		Executive Summary
		19.1 DIFFERENT TYPES OF DIVIDENDS
		19.2 STANDARD METHOD OF CASH DIVIDEND PAYMENT
			Concept Questions
		19.3 THE BENCHMARK CASE: AN ILLUSTRATION OF THE IRRELEVANCE OF DIVIDEND POLICY
			Current Policy: Dividends Set Equal to Cash Flow
			Alternative Policy: Initial Dividend Is Greater Than Cash Flow
			The Indifference Proposition
			Homemade Dividends
			A Test
			Dividends and Investment Policy
				Concept Questions
		19.4 REPURCHASE OF STOCK
			Dividend Versus Repurchase: Conceptual Example
			Dividends Versus Repurchases: Real-World Considerations
				Concept Questions
		19.5 PERSONAL TAXES, ISSUANCE COSTS, AND DIVIDENDS
			Firms Without Sufficient Cash to Pay a Dividend
			Firms With Sufficient Cash to Pay a Dividend
			Summary of Personal Taxes
				Concept Questions
		19.6 REAL- WORLD FACTORS FAVOURING A HIGH- DIVIDEND POLICY
			Desire for Current Income
			Behavioural Finance
			Agency Costs
			Information Content of Dividends and Dividend Signalling
				Concept Question
		19.7 THE CLIENTELE EFFECT:A RESOLUTION OF REAL- WORLD FACTORS?
			Concept Questions
			In Their Own Words: Why Amazon.com Inc. pays no dividend
			Why Rogers Communications pays dividends
		19.8 WHAT WE KNOW AND DO NOT KNOW ABOUT DIVIDEND POLICY
			Corporate Dividends Are Substantial
			Fewer Companies Pay Dividends
			Corporations Smooth Dividends
			Some Survey Evidence on Dividends
		19.9 PUTTING IT ALL TOGETHER
		19.10 STOCK DIVIDENDS AND STOCK SPLITS
			Some Details on Stock Splits and Stock Dividends
			Value of Stock Splits and Stock Dividends
			Reverse Splits
				Concept Questions
		19.11 SUMMARY AND CONCLUSIONS
			Minicase: Electronic Timing Ltd.
Part 5 Long-Term Financing
	CHAPTER 20 Issuing Equity Securities to the Public
		Executive Summary
		20.1 THE PUBLIC ISSUE
		20.2 THE BASIC PROCEDURE FOR A NEW ISSUE
			The Prompt Offering Prospectus System
			Alternative Issue Methods
				Concept Questions
		20.3 THE CASH OFFER
			Types of Underwriting
			The Selling Period
			The Overallotment Option
			Investment Banks
			The Offering Price and Underpricing
			The Decision to Go Public
			Pricing Initial Public Offerings
			Underpricing: A Possible Explanation
			In Their Own Words: Jay Ritter on IPO underpricing around the world
				Concept Questions
		20.4 THE ANNOUNCEMENT OF NEWEQUITY AND THE VALUE OF THE FIRM
		20.5 THE COST OF ISSUING SECURITIES
			The Costs of Going Public: A Case Study
				Concept Questions
		20.6 RIGHTS
			The Mechanics of a Rights Offering
			Subscription Price
			Number of Rights Needed to Purchase a Share
			The Value of a Right
			Ex-Rights
			Value of Rights After Ex-Rights Date
			The Underwriting Arrangements
			Effects on Shareholders
			Cost of Rights Offerings
				Concept Questions
		20.7 THE PRIVATE EQUITY MARKET
			Private Placement
			The Private Equity Firm
			Venture Capital
			Suppliers of Venture Capital
			Stages of Financing
			Some Venture Capital Realities
				Concept Questions
		20.8 SUMMARY AND CONCLUSIONS
			Minicase: East Coast Yachts Goes Public
	CHAPTER 21 Long-Term Debt
		Executive Summary
		21.1 LONG-TERM DEBT: A REVIEW
		21.2 THE PUBLIC ISSUE OF BONDS
			The Basic Terms
			Security
			Seniority
			Protective Covenants
			The Sinking Fund
			The Call Provision
				Concept Questions
		21.3 BOND REFUNDING
			Should Firms Issue Callable Bonds?
			Calling Bonds: When Does It Make Sense?
				Concept Questions
		21.4 BOND RATINGS
			Junk Bonds
				Concept Questions
		21.5 SOME DIFFERENT TYPES OF BONDS
			Zero-Coupon Bonds
			Floating-Rate Bonds
			Financial Engineering and Bonds
				Concept Questions
		21.6 DIRECT PLACEMENT COMPARED TO PUBLIC ISSUES
			Concept Questions
		21.7 LONG-TERM SYNDICATED BANK LOANS
			Concept Question
		21.8 SUMMARY AND CONCLUSIONS
			Minicase: Financing the Expansion of East Coast Yachts With a Bond Issue
	CHAPTER 22 Leasing
		Executive Summary
		22.1 TYPES OF LEASES
			The Basics
			Operating Leases
			Financial Leases
				Concept Questions
		22.2 ACCOUNTING AND LEASING
			Concept Questions
		22.3 TAXES AND LEASES
			Concept Questions
		22.4 THE CASH FLOWS OF FINANCIAL LEASING
			The Incremental Cash Flows
				Concept Questions
		22.5 A DETOUR ON DISCOUNTINGAND DEBT CAPACITY WITH CORPORATE TAXES
			Present Value of Risk-Free Cash Flows
			Optimal Debt Level and Risk-Free Cash Flows (Advanced)
				Concept Question
		22.6 NET PRESENT VALUE ANALYSISOF THE LEASE- VERSUS- BUY DECISION
			The Discount Rate
			Asset Pool and Salvage Value
		22.7 DEBT DISPLACEMENT AND LEASE VALUATION
			The Basic Concept of Debt Displacement (Advanced)
			Optimal Debt Level in the TransCanada Taxis Example (Advanced)
		22.8 DOES LEASING EVER PAY? THE BASE CASE
		22.9 REASONS FOR LEASING
			Good Reasons for Leasing
			Bad Reasons for Leasing
			Leasing Decisions in Practice
				Concept Question
		22.10 SOME UNANSWERED QUESTIONS
			Are the Uses of Leases and of Debt Complementary?
				Why Are Leases Offered by Both Manufacturers and Third-Party Lessors?
				Why Are Some Assets Leased More Commonly Than Others?
		22.11 SUMMARY AND CONCLUSIONS
			Minicase: The Decision to Lease or Buy at Warf Computers Ltd.
Part 6 Options, Futures, and Corporate Finance
	CHAPTER 23 Options, Futures, and Corporate Finance
		Options and Corporate Finance: Basic Concepts
		Executive Summary
		23.1 OPTIONS
		23.2 CALL OPTIONS
			The Value of a Call Option at Expiration
				Concept Questions
		23.3 PUT OPTIONS
			The Value of a Put Option at Expiration
				Concept Questions
		23.4 SELLING OPTIONS
		23.5 STOCK OPTION QUOTATIONS
			Long-Term Equity Anticipation Securities
		23.6 COMBINATIONS OF OPTIONS
			Concept Questions
		23.7 VALUING OPTIONS
			Bounding the Value of an American Call
				The Factors Determining Call Option Values
				A Quick Discussion of Factors Determining Put Option Values
					Concept Questions
		23.8 AN OPTION PRICING FORMULA
			A Two-State Option Model
				The Black–Scholes Model
					Concept Questions
		23.9 STOCKS AND BONDS AS OPTIONS
			The Firm Expressed in Terms of Call Options
				The Firm Expressed in Terms of Put Options
				A Resolution of the Two Views
				A Note on Loan Guarantees
					Concept Questions
			23.10 INVESTMENT IN REAL PROJECTS AND OPTIONS
				Concept Question
		23.11 CONTINGENT VALUE RIGHTS,MERGERS, AND CORPORATE DECISIONS
			Concept Question
			23.12 SUMMARY AND CONCLUSIONS
				Minicase: Clissold Industries Options
	CHAPTER 24 Options and Corporate Finance: Extensions and Applications
		Executive Summary
		24.1 EXECUTIVE STOCK OPTIONS
			Why Options?
			Executive Compensation: Where Are We Now?
			In Their Own Words: Jim Middlemiss on options backdating
			Valuing Executive Compensation
				Concept Question
		24.2 VALUING A START- UP
			Concept Questions
		24.3 MORE ABOUT THE BINOMIAL MODEL
			Heating Oil
		24.4 SHUTDOWN AND REOPENING DECISIONS
			Valuing a Gold Mine
			The Abandonment and Opening Decisions
			Valuing the Simple Gold Mine
		24.5 SUMMARY AND CONCLUSIONS
			Minicase: Exotic Cuisines Employee Stock Options
	CHAPTER 25 Warrants and Convertibles
		Executive Summary
		25.1 WARRANTS
			Concept Question
		25.2 THE DIFFERENCE BETWEENWARRANTS AND CALL OPTIONS
			How the Firm Can Hurt Warrant Holders
				Concept Questions
		25.3 WARRANT PRICING AND THEBLACK–SCHOLES MODEL (ADVANCED)
			Concept Question
		25.4 CONVERTIBLE BONDS
			Concept Question
		25.5 THE VALUE OF CONVERTIBLE BONDS
			Straight Bond Value
			Conversion Value
			Option Value
				Concept Questions
		25.6 REASONS FOR ISSUINGWARRANTS AND CONVERTIBLES
			Convertible Debt Versus Straight Debt
			Convertible Debt Versus Common Stock
			The "Free Lunch" Story
			The "Expensive Lunch" Story
			A Reconciliation
				Concept Questions
		25.7 WHY ARE WARRANTS AND CONVERTIBLES ISSUED?
			Matching Cash Flows
			Risk Synergy
			Agency Costs
			Backdoor Equity
				Concept Question
		25.8 CONVERSION POLICY
			Concept Questions
		25.9 SUMMARY AND CONCLUSIONS
			Minicase: S&S Air's Convertible Bond
	CHAPTER 26 Derivatives and Hedging Risk
		Executive Summary
		26.1 DERIVATIVES, HEDGING, AND RISK
			The Impact of Financial Risk: The Credit Crisis of 2007–09
		26.2 FORWARD CONTRACTS
			Concept Questions
		26.3 FUTURES CONTRACTS
			Concept Questions
		26.4 HEDGING
			Hedging With Futures Versus Hedging With Options
				Concept Questions
		26.5 INTEREST RATE FUTURES CONTRACTS
			Pricing of Government of Canada Bonds
			Pricing of Forward Contracts
			Futures Contracts
			Hedging in Interest Rate Futures
				Concept Questions
		26.6 DURATION HEDGING
			The Case of Zero-Coupon Bonds
			The Case of Two Bonds With the Same Maturity but With Different Coupons
			Duration
			Matching Liabilities With Assets
			Duration in Practice
				Concept Questions
		26.7 SWAP CONTRACTS
			Interest Rate Swaps
			Currency Swaps
				Concept Question
			Credit Default Swaps
			Exotics
			Movement Toward Exchange Trading for Swaps
		26.8 ACTUAL USE OF DERIVATIVES
		26.9 SUMMARY AND CONCLUSIONS
			Minicase: Williamson Mortgage Inc.
Part 7 Financial Planning and Short-Term Finance
	CHAPTER 27 Short-Term Finance and Planning
		Executive Summary
		27.1 TRACING CASH AND NET WORKING CAPITAL
		27.2 DEFINING CASH IN TERMS OF OTHER ELEMENTS
			The Sources and Uses of Cash Statement
				Concept Questions
		27.3 THE OPERATING CYCLE AND THE CASH CYCLE
			Interpreting the Cash Cycle
				Concept Questions
		27.4 SOME ASPECTS OF SHORT-TERM FINANCIAL POLICY
			The Size of the Firm's Investment in Current Assets
			Alternative Financing Policies for Current Assets
			Current Assets and Liabilities in Practice
				Concept Questions
		27.5 CASH BUDGETING
			Cash Outflow
			The Cash Balance
				Concept Questions
		27.6 THE SHORT-TERM FINANCIAL PLAN
			Short-Term Planning and Risk
			Short-Term Borrowing
			In the Absence of Short-Term Borrowing
				Concept Questions
		27.7 SUMMARY AND CONCLUSIONS
			Minicase: Keafer Manufacturing Working Capital Management
	CHAPTER 28 Cash Management
		Executive Summary
		28.1 REASONS FOR HOLDING CASH
			The Speculative and Precautionary Motives
			The Transaction Motive
			Costs of Holding Cash
			Cash Management Versus Liquidity Management
				Concept Questions
		28.2 MANAGING THE COLLECTION AND DISBURSEMENT OF CASH
			Electronic Data Interchange: The End of Float?
			Accelerating Collections
			Controlling Disbursements
			Ethical and Legal Questions
				Concept Questions
		28.3 INVESTING IDLE CASH
			Seasonal or Cyclical Activities
			Planned Expenditures
			Characteristics of Short-Term Securities
			Some Different Types of Money Market Securities
			In Their Own Words: Credit crisis made in Canada
				Concept Questions
		28.4 SUMMARY AND CONCLUSIONS
			Minicase: Cash Management at Richmond Ltd.
	CHAPTER 29 Credit Management
		Executive Summary
		29.1 TERMS OF THE SALE
			Why Trade Credit Exists
			The Basic Form
			Credit Period
			Cash Discounts
			Credit Instruments
				Concept Questions
		29.2 THE DECISION TO GRANT CREDIT: RISK AND INFORMATION
			The Value of New Information About Credit Risk
			Future Sales
				Concept Question
		29.3 OPTIMAL CREDIT POLICY
			Credit Insurance
				Concept Question
		29.4 CREDIT ANALYSIS
			Credit Information
			Credit Evaluation and Scoring
				Concept Questions
		29.5 COLLECTION POLICY
			Average Collection Period
			Aging Schedule
			Collection Effort
				Concept Question
		29.6 OTHER ASPECTS OF CREDIT POLICY
			Factoring
			How to Finance Trade Credit
				Concept Question
		29.7 SUMMARY AND CONCLUSIONS
			Minicase: Credit Policy at Braam Industries
Part 8 SPECIAL TOPICS
	CHAPTER 30 Mergers and Acquisitions
		Executive Summary
		30.1 THE BASIC FORMS OF ACQUISITIONS
			Merger or Consolidation
			Acquisition of Stock
			Acquisition of Assets
			A Classification Scheme
			A Note on Takeovers
				Concept Questions
		30.2 THE TAX FORMS OF ACQUISITIONS
			Determinants of Tax Status
			Taxable Versus Tax-Free Acquisitions
				Concept Questions
		30.3 ACCOUNTING FOR ACQUISITIONS
			The Acquisition Method
				Concept Questions
		30.4 DETERMINING THE SYNERGY FROM AN ACQUISITION
		30.5 SOURCES OF SYNERGY FROM ACQUISITIONS
			Revenue Enhancement
			Cost Reduction
			Tax Gains
			Lower Cost of Capital
				Concept Question
		30.6 CALCULATING THE VALUE OF THE FIRM AFTER AN ACQUISITION
			Avoiding Mistakes
		30.7 A COST TO SHAREHOLDERS FROM REDUCTION IN RISK
			The Base Case
			The Case Where One Firm Has Debt
			How Can Shareholders Reduce Their Losses From the Coinsurance Effect?
				Concept Question
		30.8 TWO "BAD" REASONS FOR MERGERS
			Earnings Growth
			Diversification
				Concept Questions
		30.9 THE NET PRESENT VALUE OF A MERGER
			Cash
			Common Stock
			Cash Versus Common Stock
				Concept Question
			Defensive Tactics
			Divestitures
			The Control Block and the Corporate Charter
			Standstill Agreements
			Exclusionary Offers and Non-Voting Stock
			Going Private and Leveraged Buyouts
			Other Defensive Devices
				Concept Question
		30.10 SOME EVIDENCE ON ACQUISITIONS
			Do Acquisitions Benefit Shareholders?
			The Managers Versus the Shareholders
			Real Productivity
				Concept Questions
		30.11 SUMMARY AND CONCLUSIONS
			Minicase: The Birdie Golf–Hybrid Golf Merger
	CHAPTER 31 Financial Distress
		Executive Summary
		31.1 WHAT IS FINANCIAL DISTRESS?
			Concept Questions
		31.2 WHAT HAPPENS IN FINANCIAL DISTRESS?
			Concept Questions
		31.3 BANKRUPTCY LIQUIDATION AND REORGANIZATION
			Bankruptcy Liquidation
			Bankruptcy Reorganization
			Agreements to Avoid Bankruptcy
				Concept Questions
		31.4 CURRENT ISSUES IN FINANCIAL DISTRESS
			Private Workout or Bankruptcy: Which Is Better?
			Holdouts
			Complexity
			Lack of Information
			Prepackaged Bankruptcy
				Concept Questions
		31.5 THE DECISION TO SEEK COURTPROTECTION: THE CASE OFCANWEST GLOBALCOMMUNICATIONS CORPORATION
			Concept Questions
		31.6 SUMMARY AND CONCLUSIONS
	CHAPTER 32 International Corporate Finance
		Executive Summary
		32.1 TERMINOLOGY
			Concept Question
		32.2 FOREIGN EXCHANGE MARKETS AND EXCHANGE RATES
			Exchange Rates
			Types of Transactions
				Concept Questions
		32.3 THE LAW OF ONE PRICE AND PURCHASING POWER PARITY
			Concept Questions
		32.4 INTEREST RATES AND EXCHANGE RATES
			The Dollar Investment
			The Euro Investment
			The Forward Discount and Expected Spot Rates
			Exchange Rate Risk
			More Advanced Short-Term Hedges
			The Hedging Decision in Practice
				Concept Questions
		32.5 INTERNATIONAL CAPITAL BUDGETING
			Foreign Exchange Conversion
			Unremitted Cash Flows
			The Cost of Capital for International Firms
				Concept Questions
		32.6 INTERNATIONAL FINANCING DECISIONS
			Short-Term and Medium-Term Financing
			International Bond Markets
			In Their Own Words: Merkel: Europe faces historic test in euro crisis
				Concept Questions
		32.7 REPORTING FOREIGN OPERATIONS
			Concept Question
		32.8 POLITICAL RISK
		32.9 SUMMARY AND CONCLUSIONS
			Minicase: East Coast Yachts Goes International
Glossary
	A
	B
	C
	D
	E
	F
	G
	H
	I
	J
	K
	M
	N
	O
	P
	R
	S
	T
	V
	W
	Z
Index
	A
	B
	C
	D
	E
	F
	G
	H
	I
	J
	K
	L
	M
	N
	O
	P
	Q
	R
	S
	T
	U
	V
	W
	Y
	Z