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Table of Contents

    • About the Authors
    • Acknowledgments
    • Dedication
    • Preface
    • 1Introduction to Modern Corporate Finance
      • 1.1Modern Corporate Finance
      • 1.2The Meaning of Modern Corporate Finance
      • 1.3What is Finance?
      • 1.4Defining the Corporation
      • 1.5What Is Meant by Modern?
      • 1.6The Goal or Purpose of the Corporation
      • 1.7Economic Foundations of Finance
      • 1.8Time and Risk
      • 1.9End-of-Chapter Material
    • 2Markets and Contracts

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      • 2.1Market Efficiency

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      • 2.2Inefficient Markets

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      • 2.3Acquiring Assets in the Financial System

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      • 2.4Real Versus Financial Assets

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      • 2.5Asset Ownership Through Financial Intermediation

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      • 2.6Markets

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      • 2.7Contracting

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      • 2.8End-of-Chapter Material

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    • 3Corporate Ethics and Shareholder Wealth Maximization

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      • 3.1Corporate Ethics Introduced

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      • 3.2Can Corporations Act Ethically?

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      • 3.3Two Approaches to Corporate Ethics

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      • 3.4The Contractual-Rights Approach to Corporate Ethics

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      • 3.5The Societal-Good Approach to Corporate Ethics

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      • 3.6Debating the Two Approaches to Corporate Ethics

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      • 3.7Unrequired Behavior Versus Required Behavior: Oughttas Versus Gottas

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      • 3.8Personal Versus Public-Policy Debates

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      • 3.9Public-Policy Ethical Decisions

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      • 3.10Corporate Ethics and Shareholder Wealth Maximization

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      • 3.11Corporate Ethics and Market Values

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      • 3.12End-of-Chapter Material

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      • 3.13Appendix 3.1: Overview in the History of the Philosophy of Ethics and Economics

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      • 3.14Appendix 3.2: The Origin of Individual Rights

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    • 4The Time Value of Money

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      • 4.1Time Value

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      • 4.2Dollars Through Time as Different Commodities

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      • 4.3Discounting Cash Flows

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      • 4.4Compounding Cash Flows

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      • 4.5The Techniques of Discounting and Compounding

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      • 4.6The Time Value for More Than One Cash Flow

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      • 4.7The Present Value of Annuities

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      • 4.8Beginning and Ending Payments

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      • 4.9The Future Value of an Annuity

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      • 4.10Solving for the Interest Rate

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      • 4.11Solving for the Time Period

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      • 4.12End-of-Chapter Material

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    • 5The Valuation of Financial Securities

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      • 5.1Review of Discounting Annuities

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      • 5.2Financial Securities

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      • 5.3The Valuation of Common Stock

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      • 5.4End-of-Chapter Material

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    • 6Introduction to Options

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      • 6.1The Importance of Option Theory

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      • 6.2The Mechanics of Options

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      • 6.3Who Pays the Profits to Call Option Buyers?

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      • 6.4The Black-Scholes Option Pricing Model

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      • 6.5Option Pricing—A Two-State Example

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      • 6.6An Application of Option Theory to the Equity of a Firm

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      • 6.7End-of-Chapter Material

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      • 6.8Appendix: The Black-Scholes Option Pricing Model

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    • 7The Techniques of Capital Budgeting

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      • 7.1Creating Value

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      • 7.2Net Present Value

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      • 7.3Competitors of NPV

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      • 7.4NPV Versus IRR—Which Method is Better?

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      • 7.5Project Selection and the Required Rate of Returns

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      • 7.6End of Chapter Material

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    • 8Estimating Project Cash Flows

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      • 8.1Estimating Project Cash Flows

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      • 8.2Estimating Cash Flow and NPV for Project Wivo

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      • 8.3Errors in Project Cash Flow Estimation

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      • 8.4Sensitivity Analysis

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      • 8.5End-of-Chapter Material

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    • 9Real Options

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      • 9.1Real Options

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      • 9.2Decision Trees

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      • 9.3Why a Traditional NPV Can Fail

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      • 9.4End-of-Chapter Material

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    • 10Advanced Topics in Capital Budgeting

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      • 10.1Overview—Complexities in Capital Budgeting Analysis

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      • 10.2Projects with Unequal Lives

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      • 10.3Least-Cost Decisions

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      • 10.4Inflation and Investment Decisions

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      • 10.5Capital Rationing

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      • 10.6End-of-Chapter Material

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      • 10.7Appendix: Integer Linear Programming

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    • 11Risk and Diversification

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      • 11.1Return and Risk on Individual Assets

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      • 11.2Return and Risk on Portfolios

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      • 11.3The Normal Distribution

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      • 11.4Return and Risk on Portfolios

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      • 11.5A First Look at Porftolio Risk

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      • 11.6End-of-Chapter Material

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    • 12Modern Portfolio Theory and the Capital Asset Pricing Model

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      • 12.1Portfolio Management Theory

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      • 12.2Beta

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      • 12.3The CAPM and Capital Budgeting

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      • 12.4End-of-Chapter Material

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      • 12.5Appendix: Why Expected Returns Lie in a Straight Line Against Beta

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    • 13Financial Leverage

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      • 13.1An Introduction to Corporate Financing

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      • 13.2An Overview of Corporate Financing

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      • 13.3The Mechanics of Financial Leverage

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      • 13.4Capital Structure and Firm Value—The Traditionalists' View

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      • 13.5Capital Structure and Firm Value—The Modernists' View

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      • 13.6End-of-Chapter Material

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    • 14Financing: Why Might it Matter

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      • 14.1The Rationale for Capital Structure Relevance

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      • 14.2Capital Structure with Corporate Taxes

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      • 14.3The Miller Tax Model

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      • 14.4Bankruptcy and Capital Structure

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      • 14.5Transactions Costs, Agency Costs, and Information Signaling

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      • 14.6End-of-Chapter Material

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    • 15The Dividend Decision

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      • 15.1An Overview of the Firm's Dividend Decision

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      • 15.2The Traditionlists' View of Cash Dividends

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      • 15.3The Modernists' Viewpoint—The M&M Model without Taxes

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      • 15.4Market Imperfections and Dividend Policy

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      • 15.5The Miller Tax Model

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      • 15.6Summary of the Two Tax Models for Dividends

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      • 15.7Dividends and Bankruptcy

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      • 15.8Dividends and Information Signaling

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      • 15.9Stock Dividends and Stock Splits

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      • 15.10End-of-Chapter Material

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    • 16Financial Analysis

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      • 16.1Two Views of Financial Analysis

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      • 16.2Financial Statements

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      • 16.3Ratio Analysis

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      • 16.4Statement of Cash Flows

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      • 16.5End-of-Chapter Material

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    • 17Working Capital Management

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      • 17.1An Overview of Working Capital Management

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      • 17.2Current Asset Management

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      • 17.3Current Liability Management

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      • 17.4End-of-Chapter Material

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    • 18Corporate Financial Planning

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      • 18.1Short-Term Financial Planning and the Cash Budget

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      • 18.2Cash Forecasting

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      • 18.3Long-Range Financial Planning

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      • 18.4End-of-Chapter Material

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    • 19International Finance

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      • 19.1An Overview of International Finance

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      • 19.2The Economics of Multiple Currencies

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      • 19.3Multiple Currencies and the Passage of Time

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      • 19.4Multiple Currencies with Time and Risk

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      • 19.5Political Risk

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      • 19.6Practical Considerations of International Financial Managment

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      • 19.7End-of-Chapter Material

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    • 20Mergers and Other Reorganizations

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      • 20.1The Market for Corporate Control

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      • 20.2The Traditional View of Corporate Reorganizations

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      • 20.3The Modernists' View of Mergers

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      • 20.4Divestitures and Liquidations

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      • 20.5End-of-Chapter Material

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    • 21Financial Engineering

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      • 21.1An Overview of Financial Engineering

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      • 21.2Environmental Risk and Core Business Risk

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      • 21.3Risk Exposure Profiles

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      • 21.4Combining Risk Exposure Profiles: An Introduction

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      • 21.5The Use of Derivatives in Financial Engineering

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      • 21.6Financial Engineering and Financial Theory

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      • 21.7End-of-Chapter Material

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