Principles of Corporate Finance

Title
Contents
Part One Value
	1 Goals and Governance of the Firm
		1-1 Corporate Investment and Financing Decisions
		1-3 Goals of the Corporation
		1-2 The Role of the Financial Manager and the Opportunity Cost of Capital
		1-4 Agency Problems and Corporate Governance
	2 How to Calculate Present Values
		2-1 Future Values and Present Values
		2-2 Looking for Shortcuts—Perpetuities and Annuities
		2-3 More Shortcuts—Growing Perpetuities and Annuities
		2-4 How Interest Is Paid and Quoted
	3 Valuing Bonds
		3-1 Using the Present Value Formula to Value Bonds
		3-2 How Bond Prices Vary with Interest Rates
		3-3 The Term Structure of Interest Rates
		3-4 Explaining the Term Structure
		3-5 Real and Nominal Rates of Interest
		3-6 Corporate Bonds and the Risk of Default
	4 The Value of Common Stocks
		4-1 How Common Stocks Are Traded
		4-2 How Common Stocks Are Valued
		4-3 Estimating the Cost of Equity Capital
		4-4 The Link between Stock Price and Earnings per Share
		4-5 Valuing a Business by Discounted Cash Flow
	5 Net Present Value and Other Investment Criteria
		5-1 A Review of the Basics
		5-2 Payback
		5-3 Internal (or Discounted-Cash-Flow) Rate of Return
		5-4 Choosing Capital Investments When Resources Are Limited
	6 Making Investment Decisions with the Net Present Value Rule
		6-1 Applying the Net Present Value Rule
		6-2 Example—IM&C’S Fertilizer Project
		6-3 Investment Timing
		6-4 Equivalent Annual Cash Flows
Part Two Risk
	7 Introduction to Risk and Return
		7-1 Over a Century of Capital Market History in One Easy Lesson
		7-2 Measuring Portfolio Risk
		7-3 Calculating Portfolio Risk
		7-4 How Individual Securities Affect Portfolio Risk
		7-5 Diversification and Value Additivity
	8 Portfolio Theory and the Capital Asset Model Pricing
		8-1 Harry Markowitz and the Birth of Portfolio Theory
		8-2 The Relationship between Risk and Return
		8-4 Some Alternative Theories
	9 Risk and the Cost of Capital
		9-1 Company and Project Costs of Capital
		9-2 Measuring the Cost of Equity
		9-3 Analyzing Project Risk
		9-4 Certainty Equivalents—Another Way to Adjust for Risk
Part Three Best Practices in Capital Budgeting
	10 Project Analysis
		10-1 The Capital Investment Process
		10-2 Sensitivity Analysis
		10-3 Monte Carlo Simulation
		10-4 Real Options and Decision Trees
	11 Investment, Strategy, and Economic Rents
		11-1 Look First to Market Values
		11-2 Economic Rents and Competitive Advantage
		11-3 Marvin Enterprises Decides to Exploit a New Technology: an Example
	12 Agency Problems, Compensation, and Performance Measurement
		12-1 Incentives and Compensation
		12-2 Measuring and Rewarding Performance: Residual Income and EVA
		12-3 Biases in Accounting Measures of Performance
Part Four Financing Decisions and Market Efficiency
	13 Efficient Markets and Behavioral Finance
		13-1 We Always Come Back to NPV
		13-2 What Is an Efficient Market?
		13-3 The Evidence against Market Efficiency
		13-4 Behavioral Finance
		13-5 The Six Lessons of Market Efficiency
	14 An Overview of Corporate Financing
		14-1 Patterns of Corporate Financing
		14-2 Common Stock
		14-3 Debt
		14-4 Financial Markets and Institutions
	15 How Corporations Issue Securities
		15-1 Venture Capital
		15-2 The Initial Public Offering
		15-3 Alternative Issue Procedures for IPOs
		15-4 Security Sales by Public Companies
		15-5 Private Placements and Public Issues
Part Five Payout Policy and Capital Structure
	16 Payout Policy
		16-1 Facts about Payout
		16-2 How Firms Pay Dividends and Repurchase Stock
		16-3 How Do Companies Decide on Payouts?
		16-4 The Information in Dividends and Stock Repurchases
		16-5 The Payout Controversy
		16-6 The Rightists
		16-7 Taxes and the Radical Left
		16-8 The Middle-of-the-Roaders
	17 Does Debt Policy Matter?
		17-1 The Effect of Financial Leverage in a Competitive Tax-free Economy
		17-2 Financial Risk and Expected Returns
		17-3 The Weighted-Average Cost of Capital
		17-4 A Final Word on the After-Tax Weighted- Average Cost of Capital
	18 How Much Should a Corporation Borrow?
		18-1 Corporate Taxes
		18-2 Corporate and Personal Taxes
		18-3 Costs of Financial Distress
		18-4 The Pecking Order of Financing Choices
	19 Financing and Valuation
		19-1 The After-Tax Weighted-Average Cost of Capital
		19-2 Valuing Businesses
		19-3 Using WACC in Practice
		19-4 Adjusted Present Value
		19-5 Your Questions Answered
Part Six Options
	20 Understanding Options
		20-1 Calls, Puts, and Shares
		20-2 Financial Alchemy with Options
		20-3 What Determines Option Values?
	21 Valuing Options
		21-1 A Simple Option-Valuation Model
		21-2 The Binomial Method for Valuing Options
		21-3 The Black–Scholes Formula
		21-4 Black–Scholes in Action
		21-5 Option Values at a Glance
		21-6 The Option Menagerie
	22 Real Options
		22-1 The Value of Follow-on Investment Opportunities
		22-2 The Timing Option
		22-3 The Abandonment Option
		22-4 Flexible Production
		22-5 Aircraft Purchase Options
		22-6 A Conceptual Problem?
Part Seven Debt Financing
	23 Credit Risk and the Value of Corporate Debt
		23-1 Yields on Corporate Debt
		23-2 The Option to Default
		23-3 Bond Ratings and the Probability of Default
		23-4 Predicting the Probability of Default
		23-5 Value at Risk
	24 The Many Different Kinds of Debt
		24-1 Domestic Bonds, Foreign Bonds, and Eurobonds
		24-2 The Bond Contract
		24-3 Security and Seniority
		24-4 Repayment Provisions
		24-5 Debt Covenants
		24-6 Convertible Bonds and Warrants
		24-7 Private Placements and Project Finance
		24-8 Innovation in the Bond Market
	25 Leasing
		25-1 What Is a Lease?
		25-2 Why Lease?
		25-3 Operating Leases
		25-4 Valuing Financial Leases
		25-5 When Do Financial Leases Pay?
		25-6 Leveraged Leases
Part Eight Risk Management
	26 Managing Risk
		26-1 Why Manage Risk?
		26-2 Insurance
		26-3 Reducing Risk with Options
		26-4 Forward and Futures Contracts
		26-5 Swaps
		26-6 How to Set Up a Hedge
		26-7 Is “Derivative” a Four-Letter Word?
	27 Managing International Risks
		27-1 The Foreign Exchange Market
		27-2 Some Basic Relationships
		27-3 Hedging Currency Risk
		27-4 Exchange Risk and International Investment Decisions
		27-5 Political Risk
Part Nine Financial Planning and Working Capital Management
	28 Financial Analysis
		28-1 Financial Statements
		28-2 Lowe’s Financial Statements
		28-3 Measuring Lowe’s Performance
		28-4 Measuring Efficiency
		28-5 Analyzing the Return on Assets: the Du Pont System
		28-6 Measuring Leverage
		28-7 Measuring Liquidity
		28-8 Interpreting Financial Ratios
	29 Financial Planning
		29-1 Links between Long-Term and Short-Term Financing Decisions
		29-2 Tracing Changes in Cash
		29-3 Cash Budgeting
		29-4 The Short-Term Financing Plan
		29-5 Long-term Financial Planning
		29-6 Growth and External Financing
	30 Working Capital Management
		30-1 Inventories
		30-2 Credit Management
		30-3 Cash
		30-4 Marketable Securities
		30-5 Sources of Short-Term Borrowing
Part Ten Mergers, Corporate Control, and Governance
	31 Mergers
		31-1 Sensible Motives for Mergers
		31-2 Some Dubious Reasons for Mergers
		31-3 Estimating Merger Gains and Costs
		31-4 The Mechanics of a Merger
		31-5 Proxy Fights, Takeovers, and the Market for Corporate Control
		31-6 Mergers and the Economy
	32 Corporate Restructuring
		32-1 Leveraged Buyouts
		32-2 Fusion and Fission in Corporate Finance
		32-3 Private Equity
		32-4 Bankruptcy
	33 Governance and Corporate Control around the World
		33-1 Financial Markets and Institutions
		33-2 Ownership, Control, and Governance
		33-3 Do These Differences Matter?
	34 Conclusion: What We Do and Do not Know about Finance
		34-1 What We Do Know: The Seven Most Important Ideas in Finance
		34-2 What We Do Not Know: 10 Unsolved Problems in Finance
		34-3 A Final Word
Appendix: Answers to Select Basic Problems
Glossary
Index