This book provides students at every level with a comprehensive introduction to corporate finance principles, the time value of money, including present value, amortization schedules, and more.
Subjects
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Book Details
Table of Contents
Acknowledgments
Introduction
Part 1: Introduction:
1: What is corporate finance?
What is finance?
Subfields of finance
Parts of corporate finance
So, why is this so complicated?
Why are we studying corporate finance?
Quiz
2: Setting the stage:
Basic forms of business organization
Goal of the financial manager
Agency relationships and conflicts
Quiz
3: Accounting statements and cash flows:
Balance Sheet: Assets versus liabilities
Balance Sheet: Short-term versus
Long-term accounts
Income statement
Taxes
Cash flow from assets
Quiz
4: Common-size, common-base year, and ratio analysis:
General goal of ratio analysis: summarization
Good and bad values for ratios
Additional effect of ratio analysis: standardization
Common-size statement analysis
Common-base year analysis
Liquidity ratios
Leverage ratios
Asset utilization ratios
Profitability ratios
Quiz
Part 2: I Will Gladly Pay You $2 Tomorrow For $1 Today: The Time Value Of Money:
5: Present and future value
Using a financial calculator or a spreadsheet program
Time lines
TVM formulas
Calculator setup and notational conventions
Using the TVM formulas
Example-car loan with delayed first payment
Example-retirement calculation
What about annuities due?
Quiz
6: Compounding and interest rate conversion: when what you've got isn't what you need:
Interest rate flavors
APRs explained
Just because you have a new toy doesn't mean you have to use it!
Dealing with other nominal rates
Caution on using calculators or textbook formulas to convert rates
Quiz.
7: Payment composition and amortization schedules:
Calculating payment components for pure discount loans
Calculating payment components for interest-only loans
Amortized Loans: Constant-payment loans
Amortized Loans: Constant-principal loans
Final note on amortized loans
Quiz
Part 3: Valuation:
8: Valuing bonds:
Conventions of bond quotations
Mathematics of a bond
There are rates, and then there are rates that aren't really rates
Solving for bond price
Solving for anything but bond price
Parts of YTM
Quiz
9: Valuing stocks:
Conventions of stock quotations
Mathematics of a stock: Constant dividends
Mathematics of a stock: Constantly growing dividends
Mathematics of a stock: Constantly shrinking dividends
What g>r really means
Mathematics of a stock: Nonconstant dividends
Dividend yield and expected capital
Gains yields on stocks
Quiz
10: Valuing projects: the capital-budgeting decision rules:
Why cash flow signs matter now
Notational conventions, part 2
Net present value
Intuition behind NPV
Payback
Discounted payback
Comparison on the intuitions in payback and discounted payback
Average Accounting Return (AAR)
Internal Rate of Return (IRR)
Modified IRR (MIRR)
Profitability Index (PI)
Quiz
Part 4: Where Do Interest Rates Come From? Risk, Return, And The Cost Of Capital:
11: Measuring risk and return:
Using the past to predict the future: computing the average and standard deviation of historic returns
Explicit guessing: calculating the expected return and standard deviation across expected states of nature
Choosing which method to use for average and standard deviation
Portfolio averages and standard deviations
Quiz
12: Calculating beta:
Beta estimation methodology
Choosing and gathering the necessary data
Calculating the beta
Portfolio betas
Quiz
13: Analyzing the security market line:
Relationship between the security market line and the CAPM equation
Estimating the intercept of the SML
Estimating the slope of the SML
Estimating the X variable, beta
Bringing it all together
Quiz
14: Weighted average cost of capital:
WACC formula
Calculating the component cost of equity, RE
Calculating the component cost of preferred stock, RP
Calculating the before-tax cost of debt, RD
Calculating the WACC
Note on nominal versus effective rates
Quiz
Part 5: Advanced Topics In Corporate Finance:
15: Estimating future cash flows:
Sample project
Calculating total cash flow: the formula
Guiding principles for calculating total cash flow
Calculating depreciation
Operating Cash Flow (OCF)
Net capital spending
Changes in NWC
Bringing it all together: total cash flow
Quiz
16: Scenario analysis and sensitivity analysis:
Sample project
Scenario analysis
Sensitivity analysis
When to use which
Quiz
17: Option valuation:
Options: the basics
Values of options at expiration
Valuing a call option before expiration: the binomial option pricing model
Valuing a call option before expiration: the Black-Scholes option pricing model
Put-call parity
Quiz
Final exam
Answers to quizzes and final exam
Appendix A: Depreciation charts
Appendix B: Values for the standard normal cumulative distribution function
Index.
Edition Notes
Includes index.
Classifications
The Physical Object
Edition Identifiers
Work Identifiers
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