Instant download Corporate Finance A Focused Approach 6th Edition pdf, docx, kindle format all chapters after payment. 1305637100, 9781305637108
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ISBN 10: 1305637100
ISBN 13: 9781305637108
Author: Michael Ehrhardt
Focus on the financial concepts, skills, and technological applications that are critical for you in today’s workplace with Ehrhardt/Brigham’s CORPORATE FINANCE: A FOCUSED APPROACH 6E. With its relevant and engaging presentation and numerous examples, you will learn the latest financial developments as you also learn how to maximize a firm’s value in today’s changing business environment. You will master the features and functions of spreadsheets by using chapter Excel® Tool Kits, Build a Model problems, and Mini Cases that encourage “what-if” analysis on a real-time basis
Table of contents:
Part 1. The Company and Its Environment
Chapter 1. An Overview of Financial Management and the Financial Environment
1-1. The Five-Minute MBA
1-2. Finance from 40,000 Feet Above
1-3. The Corporate Life Cycle
1-3a. Starting Up as a Proprietorship
1-3b. More Than One Owner: A Partnership
1-3c. Many Owners: A Corporation
1-3d. Growing a Corporation: Going Public
1-3e. Managing a Corporation’s Value
1-4. Governing a Corporation
1-4a. The Primary Objective of a Corporation: Maximizing Stockholder Wealth
1-4b. Intrinsic Stock Value Maximization and Social Welfare
1-4c. Ethics and Intrinsic Stock Value Maximization
1-5. An Overview of Financial Markets
1-5a. The Net Providers and Users of Capital
1-5b. Getting Cash from Providers to Users: The Capital Allocation Process
1-6. Claims on Future Cash Flows: Types of Financial Securities
1-6a. Type of Claim on Future Cash Flows: Debt, Equity, or Derivatives
1-6b. Type of Claim on Future Cash Flows: Securitized Financial Assets
1-7. Claims on Future Cash Flows: The Required Rate of Return (The Cost of Money)
1-7a. Fundamental Factors That Affect the Required Rate of Return (The Cost of Money)
1-7b. Economic Conditions and Policies That Affect the Required Rate of Return (The Cost of Money)
1-8. The Functions of Financial Institutions
1-8a. Investment Banks and Brokerage Activities
1-8b. Deposit-Taking Financial Intermediaries
1-8c. Investment Funds
1-8d. Life Insurance Companies and Pension Funds
1-8e. Regulation of Financial Institutions
1-9. Financial Markets
1-9a. Types of Financial Markets
1-9b. Why Are Secondary Markets Important?
1-9c. Trading Procedures in the Secondary Markets
1-10. Overview of the U.S. Stock Markets
1-11. Trading in the Modern Stock Markets
1-11a. Reg NMS: Stock Transactions, Quotes, and the “Market Price”
1-11b. Where Is Stock Traded?
1-11c. High-Frequency Trading (HFT)
1-11d. Stock Market Returns
1-12. Finance and the Great Recession of 2007
1-12a. The Globalization of Mortgage Market Securitization
1-12b. The Dark Side of Securitization: The Sub-Prime Mortgage Meltdown
1-12c. From Sub-Prime Meltdown to Liquidity Crisis to Economic Crisis
1-12d. Responding to the Economic Crisis
1-12e. Preventing the Next Crisis
1-13. The Big Picture
e-Resources
Summary
Questions
Mini Case
Chapter 2. Financial Statements, Cash Flow, and Taxes
2-1. Financial Statements and Reports
2-2. The Balance Sheet
2-2a. Assets
2-2b. Liabilities and Equity
2-3. The Income Statement
2-4. Statement of Stockholders’ Equity
2-5. Statement of Cash Flows
2-5a. Operating Activities
2-5b. Investing Activities
2-5c. Financing Activities
2-5d. Putting the Pieces Together
2-6. Net Cash Flow
2-7. Free Cash Flow: The Cash Flow Available for Distribution to Investors
2-7a. Net Operating Profit after Taxes (NOPAT)
2-7b. Net Operating Working Capital
2-7c. Total Net Operating Capital
2-7d. Net Investment in Operating Capital
2-7e. Calculating Free Cash Flow
2-7f. The Uses of FCF
2-7g. FCF and Corporate Value
2-8. Performance Evaluation
2-8a. The Return on Invested Capital
2-8b. Market Value Added (MVA)
2-8c. Economic Value Added (EVA)
2-8d. Intrinsic Value, MVA, and EVA
2-9. The Federal Income Tax System
2-9a. Corporate Income Taxes
2-9b. Taxation of Small Businesses: S Corporations
2-9c. Personal Taxes
Summary
Questions
Self-Test Problem
Problems
Spreadsheet Problems
Mini Case
Chapter 3. Analysis of Financial Statements
3-1. Financial Analysis
3-1a. Gather Data
3-1b. Examine the Statement of Cash Flows
3-1c. Calculate and Examine the Return on Invested Capital and Free Cash Flow
3-1d. Begin Ratio Analysis
3-2. Liquidity Ratios
3-2a. The Current Ratio
3-2b. The Quick Ratio
3-3. Asset Management Ratios
3-3a. Evaluating Total Assets: The Total Assets Turnover Ratio
3-3b. Evaluating Fixed Assets: The Fixed Assets Turnover Ratio
3-3c. Evaluating Receivables: The Days Sales Outstanding
3-3d. Evaluating Inventories: The Inventory Turnover Ratio
3-4. Debt Management Ratios
3-4a. How the Firm Is Financed: Leverage Ratios
3-4b. Ability to Pay Interest: Times-Interest-Earned Ratio
3-4c. Ability to Service Debt: EBITDA Coverage Ratio
3-5. Profitability Ratios
3-5a. Net Profit Margin
3-5b. Basic Earning Power (BEP) Ratio
3-5c. Return on Total Assets
3-5d. Return on Common Equity
3-6. Market Value Ratios
3-6a. Price/Earnings Ratio
3-6b. Price/Cash Flow Ratio
3-6c. Market/Book Ratio
3-7. Trend Analysis, Common Size Analysis, and Percentage Change Analysis
3-8. Tying the Ratios Together: The DuPont Equation
3-9. Comparative Ratios and Benchmarking
3-10. Uses and Limitations of Ratio Analysis
3-11. Looking Beyond the Numbers
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases
Part 2. Fixed Income Securities
Chapter 4. Time Value of Money
4-1. Time Lines
4-2. Future Values
4-2a. Step-by-Step Approach
4-2b. Formula Approach
4-2c. Financial Calculators
4-2d. Spreadsheets
4-2e. Comparing the Procedures
4-2f. Graphic View of the Compounding Process
4-2g. Simple Interest versus Compound Interest
4-3. Present Values
4-3a. Discounting a Future Value to Find the Present Value
4-3b. Graphic View of the Discounting Process
4-4. Finding the Interest Rate, I
4-5. Finding the Number of Years, N
4-6. Perpetuities
4-7. Annuities
4-8. Future Value of an Ordinary Annuity
4-9. Future Value of an Annuity Due
4-10. Present Value of Ordinary Annuities and Annuities Due
4-10a. Present Value of an Ordinary Annuity
4-10b. Present Value of Annuities Due
4-11. Finding Annuity Payments, Periods, and Interest Rates
4-11a. Finding Annuity Payments, PMT
4-11b. Finding the Number of Periods, N
4-11c. Finding the Interest Rate, I
4-12. Uneven, or Irregular, Cash Flows
4-12a. Annuity Plus Additional Final Payment
4-12b. Irregular Cash Flow Stream
4-13. Future Value of an Uneven Cash Flow Stream
4-14. Solving for I with Irregular Cash Flows
4-15. Semiannual and Other Compounding Periods
4-15a. Types of Interest Rates
4-15b. The Result of Frequent Compounding
4-16. Fractional Time Periods
4-17. Amortized Loans
4-17a. Payments
4-17b. Amortization Schedules
4-17c. Mortgage Interest Payments
4-18. Growing Annuities
4-18a. Example 1: Finding a Constant Real Income
4-18b. Example 2: Initial Deposit to Accumulate a Future Sum
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problem
Mini Case
Chapter 5. Bonds, Bond Valuation, and Interest Rates
5-1. Who Issues Bonds?
5-2. Key Characteristics of Bonds
5-2a. Par Value
5-2b. Coupon Interest Rate
5-2c. Maturity Date
5-2d. Provisions to Call or Redeem Bonds
5-2e. Sinking Funds
5-2f. Other Provisions and Features
5-2g. Bond Markets
5-3. Bond Valuation
5-3a. Time Line, Cash Flows, and Valuation Formulas for a Bond
5-3b. Solving for the Bond Price
5-3c. Interest Rate Changes and Bond Prices
5-4. Changes in Bond Values Over Time
5-5. Bonds with Semiannual Coupons
5-6. Bond Yields
5-6a. Yield to Maturity
5-6b. Yield to Call
5-6c. Current Yield
5-6d. The Cost of Debt and Intrinsic Value
5-7. The Pre-Tax Cost of Debt: Determinants of Market Interest Rates
5-8. The Risk-Free Interest Rate: Nominal ( r RF ) and Real ( r * )
5-9. The Inflation Premium (IP)
5-10. The Maturity Risk Premium (MRP)
5-10a. Interest Rate Risk
5-10b. Reinvestment Rate Risk
5-10c. Comparing Interest Rate Risk and Reinvestment Rate Risk: The Maturity Risk Premium
5-11. The Default Risk Premium (DRP)
5-11a. Bond Contract Provisions That Influence Default Risk
5-11b. Bond Ratings
5-11c. Bond Rating Criteria, Upgrades, and Downgrades
5-11d. Bond Ratings and the Default Risk Premium
5-12. The Liquidity Premium (LP)
5-13. The Term Structure of Interest Rates
5-14. Financing with Junk Bonds
5-15. Bankruptcy and Reorganization
Summary
Questions
Self-Test Problem
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases
Part 3. Stocks and Options
Chapter 6. Risk and Return
6-1. Investment Returns and Risk
6-1a. Returns on Investments
6-1b. Stand-Alone Risk versus Portfolio Risk
6-2. Measuring Risk for Discrete Distributions
6-2a. Probability Distributions for Discrete Outcomes
6-2b. Expected Rate of Return for Discrete Distributions
6-2c. Measuring Stand-Alone Risk: The Standard Deviation of a Discrete Distribution
6-3. Risk in a Continuous Distribution
6-4. Using Historical Data to Estimate Risk
6-4a. Calculating the Historical Average and Standard Deviation
6-4b. Calculating MicroDrive’s Historical Average and Standard Deviation
6-5. Risk in a Portfolio Context
6-5a. Creating a Portfolio
6-5b. Correlation and Risk for a Two-Stock Portfolio
6-5c. Diversification and Multi-Stock Portfolios
6-6. The Relevant Risk of a Stock: The Capital Asset Pricing Model (CAPM)
6-6a. Contribution to Market Risk: Beta
6-6b. Estimating Beta
6-6c. Interpreting the Estimated Beta
6-7. The Relationship between Risk and Return in the Capital Asset Pricing Model
6-7a. The Security Market Line (SML)
6-7b. The Impact on Required Return Due to Changes in the Risk-Free Rate, Risk Aversion, and Beta
6-7c. Portfolio Returns and Portfolio Performance Evaluation
6-7d. Required Returns versus Expected Returns: Market Equilibrium
6-8. The Efficient Markets Hypothesis
6-8a. Forms of the Efficient Markets Hypothesis
6-8b. Is the Stock Market Efficient? The Empirical Evidence
6-9. The Fama-French Three-Factor Model
6-10. Behavioral Finance
6-10a. Market Bubbles and Behavioral Finance
6-10b. Other Applications of Behavioral Finance
6-11. The CAPM and Market Efficiency: Implications for Corporate Managers and Investors
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problems
Mini Case
Selected Additional Cases
Chapter 7. Corporate Valuation and Stock Valuation
7-1. Legal Rights and Privileges of Common Stockholders
7-1a. Control of the Firm
7-1b. The Preemptive Right
7-2. Types of Common Stock
7-3. Stock Market Reporting
7-4. Valuing Common Stocks—Introducing the Free Cash Flow (FCF) Valuation Model
7-4a. Sources of Value and Claims on Value
7-4b. The Intrinsic Value per Share of Common Stock
7-5. The Constant Growth Model: Valuation When Expected Free Cash Flow Grows at a Constant Rate
7-5a. Estimating the Value of Operations when Expected Growth Is Constant
7-5b. How to Avoid Common Mistakes when Applying the Constant Growth Model
7-6. The Multistage Model: Valuation when Expected Short-Term Free Cash Flow Grows at a Nonconstant Rate
7-6a. The Forecast Period and the Horizon Value
7-6b. The Current Value of Operations
7-7. Application of the FCF Valuation Model to MicroDrive
7-7a. Forecasting MicroDrive’s Free Cash Flows
7-7b. MicroDrive’s Horizon Value
7-7c. MicroDrive’s Current Value of Operations
7-7d. MicroDrive’s Intrinsic Value per Share of Common Stock
7-8. Do Stock Values Reflect Long-Term or Short-Term Cash Flows?
7-9. Value-Based Management: Using the Free Cash Flow Valuation Model to Identify Value Drivers
7-10. Why Are Stock Prices So Volatile?
7-11. Valuing Common Stocks with the Dividend Growth Model
7-11a. Definitions of Terms Used in Stock Valuation Models
7-11b. Expected Dividends as the Basis for Stock Values
7-11c. Valuing a Constant Growth Stock
7-11d. Valuing Nonconstant Growth Stocks
7-12. The Market Multiple Method
7-13. Comparing the FCF Valuation Model, the Dividend Growth Model, and the Market Multiple Method
7-14. Preferred Stock
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problems
Mini Case
Selected Additional Cases
Chapter 8. Financial Options and Applications in Corporate Finance
8-1. Overview of Financial Options
8-2. The Single-Period Binomial Option Pricing Approach
8-2a. Payoffs in a Single-Period Binomial Model
8-2b. The Hedge Portfolio Approach
8-2c. Hedge Portfolios and Replicating Portfolios
8-3. The Single-Period Binomial Option Pricing Formula
8-3a. The Binomial Option Pricing Formula
8-3b. Primitive Securities and the Binomial Option Pricing Formula
8-4. The Multi-Period Binomial Option Pricing Model
8-5. The Black-Scholes Option Pricing Model (OPM)
8-5a. OPM Assumptions and Results
8-5b. Application of the Black-Scholes Option Pricing Model to a Call Option
8-5c. The Five Factors That Affect Call Option Prices
8-6. The Valuation of Put Options
8-6a. Put-Call Parity
8-6b. The Five Factors That Affect Put Option Prices
8-7. Applications of Option Pricing in Corporate Finance
8-7a. Real Options
8-7b. Risk Management
8-7c. Capital Structure Decisions
8-7d. Compensation Plans
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problem
Mini Case
Part 4. Projects and Their Valuation
Chapter 9. The Cost of Capital
9-1. The Weighted Average Cost of Capital
9-2. Choosing Weights for the Weighted Average Cost of Capital
9-3. After-Tax Cost of Debt: r d ( 1 – T ) and r std ( 1 – T )
9-3a. The Before-Tax Cost of Short-Term Debt: r std
9-3b. The Before-Tax Cost of Long-Term Debt: r d
9-3c. The After-Tax Cost of Debt: r d ( 1 – T ) and r std ( 1 – T )
9-3d. Flotation Costs and the Cost of Debt
9-4. Cost of Preferred Stock, r ps
9-5. Cost of Common Stock: The Market Risk Premium, RP M
9-5a. Historical Risk Premium
9-5b. Surveys of Experts
9-5c. Forward-Looking Risk Premiums
9-5d. Our View on the Market Risk Premium
9-6. Using the CAPM to Estimate the Cost of Common Stock, r s
9-6a. The Capital Asset Pricing Model
9-6b. Estimating the Risk-Free Rate, r RF
9-6c. Estimating the Market Risk Premium, RP M
9-6d. Estimating Beta, b i
9-6e. An Illustration of the CAPM Approach: MicroDrive’s Cost of Equity, r s
9-7. Using the Dividend Growth Approach to Estimate the Cost of Common Stock
9-7a. Estimating Inputs for the Dividend Growth Approach
9-7b. An Illustration of the Dividend Growth Approach
9-8. The Weighted Average Cost of Capital (WACC)
9-8a. Marginal Rates versus Historical Rates
9-8b. Target Weights versus Annual Financing Choices
9-8c. Weights for Component Costs: Book Values versus Market Values versus Targets
9-9. Adjusting the Cost of Equity for Flotation Costs
9-10. Privately Owned Firms and Small Businesses
9-10a. Estimating the Cost of Stock by the Comparison Approach
9-10b. Own-Bond-Yield-Plus-Judgmental-Risk-Premium Approach
9-10c. Adjusting for Lack of Liquidity
9-10d. Estimating the Actual Weights in a Privately Owned Company’s Capital Structure
9-11. The Divisional Cost of Capital
9-11a. Using the CAPM to Estimate Divisional Costs of Capital
9-11b. Techniques for Measuring Divisional Betas
9-12. Estimating the Cost of Capital for Individual Projects
9-13. Managerial Issues and the Cost of Capital
9-13a. How Managerial Decisions Affect the Cost of Capital
9-13b. Four Mistakes to Avoid
Summary
Questions
Self-Test Problem
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases
Chapter 10. The Basics of Capital Budgeting: Evaluating Cash Flows
10-1. An Overview of Capital Budgeting
10-2. The First Step in Project Analysis
10-3. Net Present Value (NPV)
10-3a. Calculating NPV
10-3b. Applying NPV as an Evaluation Measure
10-4. Internal Rate of Return (IRR)
10-4a. Calculating the IRR
10-4b. A Potential Problem with the IRR: Multiple Internal Rates of Return
10-4c. Potential Problems When Using the IRR to Evaluate Mutually Exclusive Projects
10-4d. Applying IRR as an Evaluation Measure
10-5. Modified Internal Rate of Return (MIRR)
10-6. Profitability Index (PI)
10-7. Payback Period
10-8. How to Use the Different Capital Budgeting Methods
10-8a. A Comparison of the Methods
10-8b. The Decision Process: What Is the Source of a Project’s NPV?
10-8c. Decision Criteria Used in Practice
10-9. Other Issues in Capital Budgeting
10-9a. Mutually Exclusive Projects with Unequal Lives
10-9b. Economic Life versus Physical Life
10-9c. The Optimal Capital Budget
Summary
Questions
Self-Test Problem
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases
Chapter 11. Cash Flow Estimation and Risk Analysis
11-1. Identifying Relevant Cash Flows
11-1a. Cash Flow versus Accounting Income
11-1b. Timing of Cash Flows: Yearly versus Other Periods
11-1c. Expansion Projects and Replacement Projects
11-1d. Sunk Costs
11-1e. Opportunity Costs Associated with Assets the Firm Already Owns
11-1f. Externalities
11-2. Analysis of an Expansion Project
11-2a. Base Case Inputs and Key Results
11-2b. Cash Flow Projections: Intermediate Calculations
11-2c. Cash Flow Projections: Estimating Net Operating Profit after Taxes (NOPAT)
11-2d. Cash Flow Projections: Adjustments to NOPAT
11-2e. Evaluating Project Cash Flows
11-3. Risk Analysis in Capital Budgeting
11-4. Measuring Stand-Alone Risk
11-5. Sensitivity Analysis
11-5a. Sensitivity Graph
11-5b. Tornado Diagrams
11-5c. NPV Break-Even Analysis
11-5d. Extensions of Sensitivity Analysis
11-6. Scenario Analysis
11-7. Monte Carlo Simulation
11-8. Project Risk Conclusions
11-9. Replacement Analysis
11-10. Real Options
11-10a. Investment Timing Options
11-10b. Growth Options
11-10c. Abandonment Options
11-10d. Flexibility Options
11-10e. Valuing Real Options
11-11. Phased Decisions and Decision Trees
11-11a. The Basic Decision Tree
11-11b. Staged Decision Tree
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases
Appendix 11A. Tax Depreciation
Part 5. Corporate Valuation and Governance
Chapter 12. Corporate Valuation and Financial Planning
12-1. Overview of Financial Planning
12-1a. The Operating Plan
12-1b. The Financial Plan
12-2. Financial Planning at MicroDrive, Inc.
12-3. Forecasting Operations
12-3a. Sales Revenues
12-3b. Operating Assets
12-3c. Operating Liabilities
12-3d. Operating Income
12-3e. Free Cash Flow (FCF)
12-3f. Estimated Intrinsic Value
12-3g. Enhancements to the Basic Model
12-4. Evaluating MicroDrive’s Strategic Initiatives
12-5. Projecting MicroDrive’s Financial Statements
12-5a. Forecast the Accounts from the Operating Plan
12-5b. Forecast Items Determined by the Preliminary Short-Term Financial Policy
12-5c. Identify and Eliminate the Financing Deficit or Surplus in the Projected Balance Sheets
12-6. Analysis and Selection of a Strategic Plan
12-7. The CFO’s Model
12-7a. Financing Feedback
12-7b. Implementing the Target Capital Structure
12-8. Additional Funds Needed (AFN) Equation Method
12-8a. Required Increase in Assets
12-8b. Spontaneous Liabilities
12-8c. Addition to Retained Earnings
12-8d. Calculating Additional Funds Needed (AFN)
12-8e. Using MicroDrive’s Data to Implement the AFN Equation Method
12-8f. Key Factors in the AFN Equation
12-8g. The Self-Supporting Growth Rate
12-9. Forecasting When the Ratios Change
12-9a. Economies of Scale
12-9b. Nonlinear Relationships
12-9c. Lumpy Assets and Excess Capacity
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problems
Mini Case
Selected Additional Cases
Chapter 13. Corporate Governance
13-1. Agency Conflicts
13-1a. Conflicts between Stockholders and Creditors
13-1b. Conflicts between Inside Owner/Managers and Outside Owners
13-1c. Conflicts between Managers and Shareholders
13-2. Corporate Governance
13-2a. Monitoring and Discipline by the Board of Directors
13-2b. Charter Provisions and Bylaws That Affect the Likelihood of Hostile Takeovers
13-2c. Using Compensation to Align Managerial and Shareholder Interests
13-2d. Capital Structure and Internal Control Systems
13-2e. Environmental Factors Outside a Firm’s Control
13-3. Employee Stock Ownership Plans (ESOPs)
Summary
Questions
Mini Case
Part 6. Cash Distributions and Capital Structure
Chapter 14. Distributions to Shareholders: Dividends and Repurchases
14-1. An Overview of Cash Distributions
14-1a. Sources of Cash
14-1b. Uses of Cash
14-2. Procedures for Cash Distributions
14-2a. Dividend Payment Procedures
14-2b. Stock Repurchase Procedures
14-2c. Patterns of Cash Distributions
14-3. Cash Distributions and Firm Value
14-3a. Dividend Irrelevance Theory
14-3b. Dividend Preference (Bird-in-the-Hand) Theory
14-3c. Tax Effect Theory: Capital Gains Are Preferred
14-3d. Empirical Evidence on Distribution Policies
14-4. Clientele Effect
14-5. Signaling Hypothesis
14-6. Implications for Dividend Stability
14-7. Setting the Target Distribution Level: The Residual Distribution Model
14-8. The Residual Distribution Model in Practice
14-9. A Tale of Two Cash Distributions: Dividends versus Stock Repurchases
14-9a. The Impact on Financial Statements
14-9b. The Residual Distribution Model: Application to Full Financial Statements
14-9c. The Impact of Distributions on Intrinsic Value
14-10. The Pros and Cons of Dividends and Repurchases
14-11. Other Factors Influencing Distributions
14-11a. Constraints
14-11b. Alternative Sources of Capital
14-12. Summarizing the Distribution Policy Decision
14-13. Stock Splits and Stock Dividends
14-13a. Stock Splits
14-13b. Stock Dividends
14-13c. Effect on Stock Prices
14-14. Dividend Reinvestment Plans
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases
Chapter 15. Capital Structure Decisions
15-1. An Overview of Capital Structure
15-2. Business Risk and Financial Risk
15-2a. Business Risk and Operating Leverage
15-2b. Financial Risk and Financial Leverage
15-3. Capital Structure Theory: The Modigliani and Miller Models
15-3a. Modigliani and Miller: No Taxes
15-3b. Modigliani and Miller: The Effect of Corporate Taxes
15-3c. Miller: The Effect of Corporate and Personal Taxes
15-4. Capital Structure Theory: Beyond the Modigliani and Miller Models
15-4a. Trade-Off Theory
15-4b. Signaling Theory
15-4c. Reserve Borrowing Capacity
15-4d. The Pecking Order Hypothesis
15-4e. Using Debt Financing to Constrain Managers
15-4f. The Investment Opportunity Set and Reserve Borrowing Capacity
15-4g. The Market Timing Theory
15-5. Capital Structure Evidence and Implications
15-5a. Empirical Evidence
15-5b. Implications for Managers
15-6. Estimating the Optimal Capital Structure
15-6a. Strasburg’s Current Value and Capital Structure
15-6b. Estimating the Weighted Average Cost of Capital (WACC) for Different Levels of Debt
15-6c. Estimating the Firm’s Value
15-7. Anatomy of a Recapitalization
15-7a. Strasburg Issues New Debt but Has Not Yet Repurchased Stock
15-7b. Strasburg Repurchases Stock
15-7c. Recapitalization: A Post-Mortem
15-8. Risky Debt and Equity as an Option
15-8a. Using the Black-Scholes Option Pricing Model to Value Equity
15-8b. Managerial Risk Incentives
15-9. Managing the Maturity Structure of Debt
15-9a. Maturity Matching
15-9b. Effects of Interest Rate Levels and Forecasts
15-9c. Information Asymmetries
15-9d. Amount of Financing Required
15-9e. Availability of Collateral
15-9f. Evidence on Debt Maturity in Practice
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problems
Mini Case
Selected Additional Cases
Part 7. Managing Global Operations
Chapter 16. Supply Chains and Working Capital Management
16-1. Overview of Supply Chain Management
16-2. Using and Financing Operating Current Assets
16-2a. Efficient Investment in Operating Current Assets
16-2b. Financing Operating Current Assets
16-3. The Cash Conversion Cycle
16-3a. Calculating the Target CCC
16-3b. Calculating the Actual Cash Conversion Cycle from Financial Statements
16-3c. Benefits of Reducing the Cash Conversion Cycle
16-4. Inventory Management
16-5. Receivables Management
16-5a. Credit Policy
16-5b. Credit Policy and the Accumulation of Receivables
16-5c. Monitoring the Receivables Position
16-6. Accruals and Accounts Payable (Trade Credit)
16-6a. Accruals
16-6b. Accounts Payable (Trade Credit)
16-6c. The Cost of Trade Credit
16-7. The Cash Budget
16-7a. Monthly Cash Budgets
16-7b. Cash Budgets versus Income Statements and Free Cash Flows
16-7c. Daily Cash Budgets
16-8. Cash Management and the Target Cash Balance
16-8a. Routine (but Uncertain) Operating Transactions
16-8b. Compensating Balances
16-9. Cash Management Techniques
16-9a. Payment, Clearing, and Settlement Systems
16-9b. Synchronizing Cash Flow
16-9c. Using Float
16-9d. Speeding Up Collections
16-10. Managing Short-Term Investments
16-11. Short-Term Financing
16-11a. Advantages of Short-Term Financing
16-11b. Disadvantages of Short-Term Debt
16-12. Short-Term Bank Loans
16-12a. Maturity
16-12b. Promissory Notes
16-12c. Compensating Balances
16-12d. Informal Line of Credit
16-12e. Revolving Credit Agreement
16-12f. Costs of Bank Loans
16-13. Commercial Paper
16-13a. Maturity and Cost
16-13b. Use of Commercial Paper
16-14. Use of Security in Short-Term Financing
Summary
Questions
Self-Test Problems
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases
Chapter 17. Multinational Financial Management
17-1. Multinational, or Global, Corporations
17-2. Multinational versus Domestic Financial Management
17-3. Exchange Rates
17-3a. Foreign Exchange Notation
17-3b. Converting Currencies
17-4. Exchange Rates and International Trade
17-5. The International Monetary System and Exchange Rate Policies
17-5a. A Short History Lesson: The Bretton Woods Fixed Exchange Rate System
17-5b. Floating Exchange Rates
17-5c. Pegged Exchange Rates
17-5d. Managed Floating Rates
17-5e. No Local Currency
17-6. Trading in Foreign Exchange
17-6a. Spot Rates and Forward Rates
17-7. Interest Rate Parity
17-8. Purchasing Power Parity
17-9. Inflation, Interest Rates, and Exchange Rates
17-10. International Money and Capital Markets
17-10a. Eurodollar Market
17-10b. International Bond Markets
17-10c. International Stock Markets
17-10d. Sovereign Debt
17-11. Multinational Capital Budgeting
17-11a. Risk Exposure
17-11b. Cash Flow Estimation
17-11c. Project Analysis
17-12. International Capital Structures
17-13. Multinational Working Capital Management
17-13a. Cash Management
17-13b. Credit Management
17-13c. Inventory Management
Summary
Questions
Self-Test Problem
Problems
Spreadsheet Problem
Mini Case
Selected Additional Case
Web Extension 1A. An Overview of Derivatives
Web Extension 2A. The Federal Income Tax System for Individuals
Web Extension 4A. The Tabular Approach
Web Extension 4B. Derivation of Annuity Formulas
Web Extension 4C. Continuous Compounding
Web Extension 5A. A Closer Look at Zero Coupon and Other OID Bonds
Web Extension 5B. A Closer Look at Tips: Treasury Inflation-Protected Securities
Web Extension 5C. A Closer Look at Bond Risk: Duration
Web Extension 5D. The Pure Expectations Theory and Estimation of Forward Rates
Web Extension 6A. Continuous Probability Distributions
Web Extension 6B. Estimating Beta with a Financial Calculator
Web Extension 7A. Derivation of Valuation Equations
Web Extension 9A. The Required Return Assuming Nonconstant Dividends and Stock Repurchases
Web Extension 10A. The Accounting Rate of Return (ARR)
Web Extension 11A. Certainty Equivalents and Risk-Adjusted Discount Rates
Web Extension 15A. Degree of Leverage
Web Extension 15B. Capital Structure Theory: Arbitrage Proofs of the Modigliani-Miller Theorems
Web Extension 16A. Secured Short-Term Financing
Appendix C. Selected Equations
Appendix D. Values of the Areas under the Standard Normal Distribution Function
Frequently Used Symbols
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