Corporate Finance: Theory and Practice

Cover
Brief Contents
Contents
About the Authors
Preface
Publisher's Acknowledgements
Walk-Through Tour
Part 1: Introduction
	Chapter 1: Financial Decision-Making
		The Nature of Financial Decisions
		The Decision Process
		Financial Decision-Making
		Summary
		Notes
		Quiz Questions
	Chapter 2: Decision Objectives
		Value Maximization and the Company
		Ownership and Control
		Regulation of the Relationship between Directors and Shareholders
		Incentive Scheme Criteria
		Conclusion
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
Part 2: Investment Decisions
	Chapter 3: Traditional Methods of Investment Appraisal
		Introduction
		The Payback Method
		Return on Capital Employed
		Conclusions
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 4: Investment-Consumption Decision Model
		Introduction to the Model
		The Time Value of Money
		The Basic Graphical Analysis
		Introduction of Capital Markets
		The Separation Theorem
		The Conclusions of the Basic Model
		Payback and ROCE
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 5: The Discounted Cash Flow Approach
		Net Present Value
		Alternative Interpretations of NPV
		Internal Rate of Return
		Discounted Payback
		Truncated NPV
		Summary
		Appendix: Compounding and Discounting
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 6: Net Present Value and Internal Rate of Return
		NPV and Project Interdependence
		IRR Rule and Interdependent Projects
		Extending the Time Horizon
		Multiple IRRs
		Extended Yield Method
		Other Problems with the IRR Rule
		The Modified IRR: MIRR
		NPV versus IRR: Conclusion
		The Replacement Cycle Problem
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 7: Project Cash Flows
		Investment Appraisal and Inflation
		Inflation and the IRR Technique
		Investment Appraisal and Taxation
		The Relevant Cash Flows
		Summary
		Appendix: A Typical Corporate Tax System
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 8: Capital Rationing
		Introduction
		Hard and Soft Capital Rationing
		Single-Period Capital Rationing
		Multi-Period Capital Rationing
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
Part 3: Risk Analysis
	Chapter 9: Simple Risk Techniques
		Risk and Return
		Expected Net Present Value
		The Abandonment Decision
		Sensitivity Analysis
		The Risk-Adjusted Discount Rate
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 10: Risk and Return
		Introduction to Uncertainty
		The Expected Utility Model
		The Approach to Portfolio Theory
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 11: Portfolio Theory
		Two-Asset Portfolios
		Multi-Asset Portfolios
		Introduction of a Risk-Free Investment
		The Capital Market Line
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 12: The Capital Asset Pricing Model
		The Security Market Line
		The CAPM Expression
		The Beta Value
		The Validity of the CAPM
		Arbitrage Pricing Theory
		Betas and Project Investment Appraisal
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 13: Option Valuation
		Introduction
		The Basic Characteristics of Options
		Option Terminology
		The Valuation of Options
		The Black and Scholes Model
		The Building Blocks of Investment
		Put-Call Parity Theorem
		Using Share Options
		The Option 'Greeks'
		The Binomial Model
		Real Options
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 14: Interest Rate Risk
		Introduction
		The Money Markets
		Forward Forward Loans
		Forward Rate Agreements
		Interest Rate Guarantees
		Option Contract Markets
		Interest Rate Futures
		Caps, Collars and Floors
		Interest Rate Swaps
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
Part 4: Financing Decisions
	Chapter 15: Financial Markets
		Introduction
		Market Efficiency
		Market Efficiency and Share Dealing
		The Empirical Evidence of EMH
		The Term Structure of Interest Rates
		Pure Expectations Hypothesis
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 16: The Cost of Capital
		The Financing Decision
		The Cost of Equity Capital
		Expected Return, Dividends and Market Price
		Applying the Dividend Valuation Model
		CAPM and the Cost of Equity Capital
		CAPM versus the DVM
		The Cost of Debt Capital
		Convertible Debt
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 17: Weighted Average Cost of Capital
		The Project Discount Rate
		The Calculation of WACC
		The WACC and Project Risk
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 18: Capital Structure in a Simple World
		An Optimal Capital Structure
		Business and Financial Risk
		The Arbitrage Proof
		Conclusions
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 19: Capital Structure in a Complex World
		Taxation and Capital Structure
		Using the M and M Equations
		M and M in the Real World
		Further Views on Capital Structure
		Conclusion
		Capital Structure in Practice
		Real World Considerations
		Earnings Per Share and Gearing
		Degree of Operating Gearing
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 20: Investment and Financing Interactions
		Company Valuation and Investment Appraisal
		1. The Dividend and Interest Valuation Model
		2. Adjusted Present Value Model
		3. The M and M Valuation Model
		4. The Traditional Valuation Model
		Approaches to Investment Appraisal
		Asset Betas and Gearing
		Risk-Adjusted WACC
		Lease or Purchase Decision
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 21: The Dividend Decision
		Dividend Policy in Perfect Capital Markets
		Traditional View of the Dividend Decision
		Dividend Policy in an Imperfect Market
		The Empirical Evidence
		Conclusion
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
Part 5: International Issues
	Chapter 22: Foreign Exchange
		Introduction
		Exchange Rates
		Foreign Exchange Markets
		Exchange Rate Systems
		Determinants of FX Rates
		Summary
		Note
		Further Reading
		Quiz Questions
		Problems
	Chapter 23: Foreign Exchange Hedging
		Foreign Exchange Risk Definitions
		Transaction Risk Hedging
		Foreign Exchange Futures Contracts
		Forward versus Futures
		Foreign Exchange Options Contracts
		Setting Up an Option Hedge
		Early Exercise
		Contingent Exposure to Foreign Exchange Risk
		Traded Options versus OTC Options
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
	Chapter 24: Foreign Direct Investment
		Introduction
		Project Cash Flows
		Project Discount Rate
		Translation Risk
		Economic Risk
		Country/Political Risk
		Summary
		Notes
		Further Reading
		Quiz Questions
		Problems
Tables
Answers to Quiz Questions
References for Real World Views
Index