eBook: Fundamentals of Corporate Finance 5e

Höfundar: David Hillier; Rama Seth; Stephen Ross; Randolph Westerfield; Bradford Jordan (Útgáfa: 5)
eBook: Fundamentals of Corporate Finance 5e

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Now in its fifth edition, Fundamentals of Corporate Finance continues to offer a clear, engaging introduction to the core principles of modern corporate finance. Blending accessible language with real-world European examples, the book equips students with the essential knowledge and tools needed to understand how financial decisions are made in a dynamic global environment. Drawing on the authors’ extensive academic and industry expertise, the text presents a solid conceptual framework supported by practical applications, integrated theory, and up-to-date case insights.

It’s an ideal resource for students seeking to grasp the fundamentals of corporate finance and the evolving strategies firms use to navigate today’s financial landscape. Key Features New and updated Sustainability in Finance boxes explore how environmental, social, and governance (ESG) issues intersect with corporate financial decision-making. Expanded coverage of emerging technologies, including AI and large language models, and their growing impact on financial strategy and business operations.

New Real-World Insight boxes on topics such as investing, the impact of technology (such as AI or the metaverse) on finance, stock markets and pricing models show how theory translates into real business practice. Enhanced focus on data analytics in financial statement analysis, as well as evolving topics like bitcoin, peer-to-peer lending, and regulatory technology. Curriculum alignment with key professional qualifications, including ACCA, CIMA, and ICAEW.

Fundamentals of Corporate Finance is available through McGraw Hill’s Connect® learning platform as an interactive, adaptive eBook alongside a wealth of ready-made course content for teaching, learning, practice and assessment. With a variety of tools to help with course management, insight and tracking, Connect helps faculty and institutions improve student outcomes and deliver courses more efficiently.

To learn more, visit mheducation.co.uk/connect. David Hillier is Associate Principal and Executive Dean of Strathclyde Business School and Professor of Finance at the University of Strathclyde. David was recognized as being in the top 3 per cent of the most prolific finance researchers in the world over the past 50 years (Heck and Cooley, 2009) and appears regularly in the media as a business commentator.

David teaches regularly in development programs for executives and has taught courses for a wide variety of professional clients, including the World Bank and the National Health Service in the UK. He is part of the editorial board of several international finance journals. Rama Seth is an Associate Professor of Finance at the Copenhagen Business School and Professor (on Leave) in the Finance and Control Department at the Indian Institute of Management Calcutta.

She earned her PhD at Columbia University in New York City and has served at leading international policy-making bodies such as the Federal Reserve Bank, The World Bank, the International Monetary Fund, the Bank for International Settlements, and the United Nations. She has been selected for the 2018 IP 50 Women in Education Leaders Award.

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Útgefandi
McGraw-Hill UK
ISBN
9781526850706
Print ISBN
9781526850690
Format
ePub
Útgáfa
5
Höfundar
David Hillier; Rama Seth; Stephen Ross; Randolph Westerfield; Bradford Jordan
Tungumál
English
Útgefið
2026-03-30
Prent takmörkun á líftíma
100
Prent takmörkun
2
Afritunar takmörkun
2

Kaflar

  • Table of Contents and Preface
  • Half Title
  • Title page
  • Copyright page
  • Dedication
  • Brief Table of Contents
  • Detailed Table of Contents
  • Preface
  • Guided Tour
  • UNDERSTANDING AND APPLICATION
  • MASTERY OF MATHEMATICS
  • PRACTICE AND PROFICIENCY
  • Transform learning with Connect®
  • The Three Pillars of Connect®
  • Connect® for Economics
  • Application-Based Activities
  • Graphing Tools
  • Smarter studying with Smartbook
  • The ReadAnywhere App
  • About the Authors
  • About the Digital Contributors
  • Acknowledgements
  • Create & Custom Publishing
  • Improve your Study, Research & Writing Skills
  • Special Offer!
  • Chapter 1: Introduction to Corporate Finance
  • Part 1 Overview of Corporate Finance
  • Introduction
  • 1.1 Corporate Finance and the Financial Manager
  • What Is Corporate Finance?
  • The Financial Manager
  • Financial Management Decisions
  • 1.2 The Goal of Financial Management
  • Possible Goals
  • An Appropriate Goal
  • A More General Goal
  • The Triple Bottom Line
  • 1.3 Financial Markets and the Corporation
  • Cash Flows To and From the Firm
  • Primary versus Secondary Markets
  • The Impact of technology on modern financial markets
  • 1.4 The Economic Environment
  • Macroeconomic Policy
  • TRade blocs: the case of European Monetary Union
  • 1.5 Corporate Finance in Action: The Case of Alphabet Inc.
  • Early Days
  • The Google Share Issue
  • Google becomes Alphabet
  • alphabet and generative ai
  • So What Is Corporate Finance?
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Corporate Finance Information on the Web
  • Additional Reading
  • Chapter 2: Corporate Governance
  • Introduction
  • 2.1 Forms of Business Organization
  • Sole Trader
  • Partnership
  • Corporation
  • A Corporation by Any Other Name …
  • Non-Profit Organizations
  • 2.2 The Agency Problem and Control of the Corporation
  • Type I Agency Relationships
  • Management Goals
  • Do Managers Act in the Shareholders’ Interests?
  • Type II Agency Relationships
  • Stakeholders
  • 2.3 International Corporate Governance
  • Investor Protection: The Legal Environment
  • The Financial System: Bank-Based and Market-Based Countries
  • Ownership Structure
  • Culture and Corporate Governance
  • 2.4 Environment, Social and Governance (ESG) Factors
  • Ethics and Corporate Governance
  • The UN Sustainable Development Goals and Corporate Governance
  • 2.5 Bringing It All Together
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Glyndebourne Wines Limited
  • Additional Reading
  • Chapter 3: Financial Statement Analysis
  • Introduction
  • 3.1 The Annual Report
  • The Statement of Financial Position
  • The Income Statement
  • A Digression: Taxes
  • Statement of Cash Flows
  • 3.2 Ratio Analysis
  • Short-Term Solvency, or Liquidity, Measures
  • Long-Term Solvency Measures
  • Asset Management, or Turnover Measures
  • Profitability Measures
  • Market Value Measures
  • Conclusion
  • 3.3 The DuPont Identity
  • A Closer Look at ROE
  • 3.4 Using Financial Statement Information
  • Why Evaluate Financial Statements?
  • Choosing a Benchmark
  • Problems with Financial Statement Analysis
  • 3.5 Data Analytics in Financial Statement Analysis
  • The rationale for using data analytics
  • Analytics tools
  • challenges and limitations
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Financial Statement Analysis at Friday Quantum Solutions (FQS)
  • Additional Reading
  • Chapter 4: Introduction to Valuation: The Time Value of Money
  • Part 2 Valuation of Future Cash Flows
  • Introduction
  • 4.1 Future Value and Compounding
  • Investing for a Single Period
  • Investing for More Than One Period
  • A Note about Compound Growth
  • 4.2 Present Value and Discounting
  • The Single-Period Case
  • Present Values for Multiple Periods
  • 4.3 More about Present and Future Values
  • Present versus Future Value
  • Determining the Discount Rate
  • Finding the Number of Periods
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Hreon SA
  • Additional Reading
  • Chapter 5: Discounted Cash Flow Valuation
  • Introduction
  • 5.1 Future and Present Values of Multiple Cash Flows
  • Future Value with Multiple Cash Flows
  • Present Value with Multiple Cash Flows
  • A Note about Cash Flow Timing
  • 5.2 Valuing Level Cash Flows: Annuities and Perpetuities
  • Present Value for Annuity Cash Flows
  • Future Value for Annuities
  • A Note about Annuities Due
  • Perpetuities
  • Growing Annuities and Perpetuities
  • 5.3 Comparing Rates: The Effect of Compounding
  • Effective Annual Percentage Rates and Compounding
  • Calculating and Comparing Effective Annual Rates
  • The Annual Percentage Rate
  • Taking It to the Limit: A Note about Continuous Compounding
  • 5.4 Loan Types and Loan Amortization
  • Pure Discount Loans
  • Interest-Only Loans
  • Amortized Loans
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • The SUSTAINABLE MBA Decision
  • Nordic Green Business School (NGBS)
  • EcoInnovate University (EIU)
  • Additional Considerations
  • Additional Reading
  • Appendix: Derivations of Selected Formulae
  • Present Value of a Perpetuity
  • Present Value of an Annuity
  • Chapter 6: Bond Valuation
  • Introduction
  • 6.1 Bonds and Bond Valuation
  • Bond Features and Prices
  • Bond Values and Yields
  • Interest Rate Risk
  • Finding the Yield to Maturity
  • 6.2 More about Bond Features
  • Is It Debt or Equity?
  • Long-Term Debt: The Basics
  • The Indenture
  • 6.3 Bond Ratings
  • Determinants of Credit Ratings
  • 6.4 Some Different Types of Bonds
  • Government Bonds
  • Zero Coupon Bonds
  • Floating-Rate Bonds
  • Other Types of Bond
  • 6.5 Bond Markets
  • How Bonds Are Bought and Sold
  • Bond Price Reporting
  • A Note about Bond Price Quotes
  • 6.6 Inflation and Interest Rates
  • Real versus Nominal Rates
  • The Fisher Effect
  • Inflation and Present Values
  • 6.7 Determinants of Bond Yields
  • The Term Structure of Interest Rates
  • Bond Yields and the Yield Curve: Putting It All Together
  • Conclusion
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Financing Green energy Expansion with a sustainable Bond Issue
  • Additional Reading
  • Endnotes
  • Chapter 7: Equity Valuation
  • Introduction
  • 7.1 Share Valuation
  • Cash Flows
  • Some Special Cases
  • Components of the Required Return
  • The Price–Earnings Ratio
  • 7.2 Some Features of Ordinary and Preference Shares
  • Ordinary Equity Features
  • Preference Share Features
  • 7.3 The Stock Markets
  • Dealers and Brokers
  • Stock Market Reporting
  • 7.4 Firm Valuation
  • Free Cash Flow to the Firm
  • Valuation of a Firm’s Cash Flows
  • Market Multiples Valuation
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Share Valuation at Ecorenewable Energy
  • Additional Reading
  • Endnotes
  • Chapter 8: Net Present Value and Other Investment Criteria
  • Part 3 Capital Budgeting
  • Introduction
  • 8.1 Net Present Value
  • The Basic Idea
  • Estimating Net Present Value
  • 8.2 The Payback Rule
  • Defining the Rule
  • Analysing the Rule
  • Redeeming Qualities of the Rule
  • Summary of the Rule
  • 8.3 The Discounted Payback
  • 8.4 The Average Accounting Return
  • 8.5 The Internal Rate of Return
  • Problems with the IRR
  • Redeeming Qualities of the IRR
  • The Modified Internal Rate of Return (MIRR)
  • 8.6 The Profitability Index
  • 8.7 Net Present Social Value
  • 8.8 The Practice of Capital Budgeting
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Chen ai solutions
  • Additional Reading
  • Endnotes
  • Chapter 9: Making Capital Investment Decisions
  • Introduction
  • 9.1 Project Cash Flows: A First Look
  • Relevant Cash Flows
  • The Stand-Alone Principle
  • 9.2 Incremental Cash Flows
  • Sunk Costs
  • Opportunity Costs
  • Side Effects
  • Net Working Capital
  • Financing Costs
  • Other Issues
  • 9.3 Pro Forma Financial Statements and Project Cash Flows
  • Getting Started: Pro Forma Financial Statements
  • Project Cash Flows
  • Projected Total Cash Flow and Value
  • 9.4 More about Project Cash Flow
  • A Closer Look at Net Working Capital
  • Depreciation
  • An Example: Majestic Mulch and Compost Ltd (MMC)
  • 9.5 Alternative Definitions of Operating Cash Flow
  • The Bottom-Up Approach
  • The Top-Down Approach
  • The Tax Shield Approach
  • Conclusion
  • 9.6 Some Special Cases of Discounted Cash Flow Analysis
  • Evaluating Cost-Cutting Proposals
  • Setting the Bid Price
  • Evaluating Equipment Options with Different Lives
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Conchbit, Part 1
  • Additional Reading
  • Endnotes
  • Chapter 10: Project Analysis and Evaluation
  • Introduction
  • 10.1 Evaluating NPV Estimates
  • The Basic Problem
  • Projected versus Actual Cash Flows
  • Forecasting Risk
  • Sources of Value
  • 10.2 Scenario and Other What-If Analyses
  • Getting Started
  • Scenario Analysis
  • Sensitivity Analysis
  • Case Study: easyJet plc
  • Simulation Analysis
  • 10.3 Break-Even Analysis
  • Fixed and Variable Costs
  • Accounting Break-Even
  • Uses for the Accounting Break-Even
  • 10.4 Operating Cash Flow, Sales Volume and Break-Even
  • Accounting Break-Even and Cash Flow
  • Sales Volume and Operating Cash Flow
  • Cash Flow, Accounting and Financial Break-Even Points
  • 10.5 Operating Leverage
  • The Basic Idea
  • Implications of Operating Leverage
  • Measuring Operating Leverage
  • Operating Leverage and Break-Even
  • 10.6 Capital Rationing
  • Soft Rationing
  • Hard Rationing
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • White Mountain Thyme Whisky Ltd
  • Additional Reading
  • Endnotes
  • Chapter 11: Some Lessons from Recent Capital Market History
  • Part 4 Risk and Return
  • Introduction
  • 11.1 Returns
  • Cash Returns
  • Percentage Returns
  • 11.2 The Historical Record
  • 11.3 Average Returns: The First Lesson
  • Calculating Average Returns
  • Average Returns: The Historical Record
  • Risk Premiums
  • The First Lesson
  • 11.4 The Variability of Returns: The Second Lesson
  • Return Variability
  • The Historical Variance and Standard Deviation
  • The Historical Record
  • Normal Distribution
  • The Second Lesson
  • Using Capital Market History
  • 11.5 More about Average Returns
  • Arithmetic versus Geometric Averages
  • Calculating Geometric Average Returns
  • Arithmetic Average Return or Geometric Average Return?
  • 11.6 Capital Market Efficiency
  • Price Behaviour in an Efficient Market
  • The Efficient Markets Hypothesis
  • Some Common Misconceptions about the EMH
  • The Forms of Market Efficiency
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Holdon Sustainable Investment Fund
  • Additional Reading
  • Endnotes
  • Chapter 12: Return, Risk and the Security Market Line
  • Introduction
  • 12.1 Expected Returns and Variances
  • Expected Return
  • Calculating the Variance
  • 12.2 Portfolios
  • Portfolio Weights
  • Portfolio Expected Returns
  • Portfolio Variance
  • 12.3 Announcements, Surprises and Expected Returns
  • Expected and Unexpected Returns
  • Announcements and News
  • 12.4 Risk: Systematic and Unsystematic
  • Systematic and Unsystematic Risk
  • Systematic and Unsystematic Components of Return
  • 12.5 Diversification and Portfolio Risk
  • The Effect of Diversification: Another Lesson from Market History
  • The Principle of Diversification
  • Diversification and Unsystematic Risk
  • Diversification and Systematic Risk
  • 12.6 Systematic Risk and Beta
  • The Systematic Risk Principle
  • Measuring Systematic Risk
  • Portfolio Betas
  • 12.7 The Security Market Line
  • Beta and the Risk Premium
  • The Security Market Line
  • Criticisms of the CAPM
  • Empirical Tests of the CAPM
  • 12.8 The SML and the Cost of Capital: A Preview
  • The Basic Idea
  • The Cost of Capital
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • The Beta for Ørsted A/S
  • Additional Reading
  • Endnotes
  • Chapter 13: Cost of Capital
  • Part 5 Cost of Capital and Long-term Financial Policy
  • Introduction
  • 13.1 The Cost of Capital: Some Preliminaries
  • Required Return versus Cost of Capital
  • Financial Policy and Cost of Capital
  • 13.2 The Cost of Equity
  • The Dividend Growth Model Approach
  • The SML Approach
  • How Do Corporations Estimate Cost of Capital in Practice?
  • 13.3 The Costs of Debt and Preference Shares
  • The Cost of Debt
  • The Cost of Preference Shares
  • 13.4 The Weighted Average Cost of Capital
  • The Capital Structure Weights
  • Taxes and the Weighted Average Cost of Capital
  • Calculating the WACC for RWE AG
  • Solving the Warehouse Problem and Similar Capital Budgeting Problems
  • Performance Evaluation: Another Use of the WACC
  • 13.5 Divisional and Project Costs of Capital
  • The SML and the WACC
  • Divisional Cost of Capital
  • The Pure Play Approach
  • The Subjective Approach
  • Online Supplement 13.6: Flotation Costs and the Weighted Average Cost of Capital
  • The Basic Approach
  • Flotation Costs and NPV
  • Internal Equity and Flotation Costs
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • The Cost of Capital for Pavegen
  • Additional Reading
  • Endnotes
  • Chapter 14: Raising Capital
  • Introduction
  • 14.1 The Financing Life Cycle of a Firm: Early-stage Financing and Venture Capital
  • The Private Equity Firm
  • Suppliers of Venture Capital
  • Stages of Financing
  • Some Venture Capital Realities
  • Conclusion
  • 14.2 Selling Securities to the Public: The Basic Procedure
  • 14.3 Alternative Issue Methods
  • 14.4 Underwriters
  • Choosing an Underwriter
  • Types of Underwriting
  • The Aftermarket
  • The Green Shoe Provision
  • Lock-Up Agreements
  • The Quiet Period
  • 14.5 IPOs and Underpricing
  • IPO Underpricing
  • Why Does Underpricing Exist?
  • 14.6 New Equity Sales and the Value of the Firm
  • 14.7 The Costs of Issuing Securities
  • The Costs of Selling Stock to the Public
  • 14.8 Rights
  • The Mechanics of a Rights Issue
  • The Underwriting Arrangements
  • 14.9 Dilution
  • Dilution of Proportionate Ownership
  • Dilution of Value: Book versus Market Values
  • 14.10 Issuing Long-term Debt
  • 14.11 Bank Loans
  • Types of Bank Loan
  • 14.12 Lease Financing
  • Operating Leases
  • Financial Leases
  • Accounting for Leases
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Financing Expansion with a Bond Issue
  • Additional Reading
  • Endnotes
  • Chapter 15: Financial Leverage and Capital Structure Policy
  • Introduction
  • 15.1 The Capital Structure Question
  • Firm Value and Equity Value: An Example
  • Capital Structure and the Cost of Capital
  • 15.2 The Effect of Financial Leverage
  • The Basics of Financial Leverage
  • Corporate Borrowing and Homemade Leverage
  • 15.3 Capital Structure and the Cost of Equity Capital
  • M&M Proposition I: The Pie Model
  • The Cost of Equity and Financial Leverage: M&M Proposition II
  • Business and Financial Risk
  • 15.4 M&M Propositions I and II with Corporate Taxes
  • The Interest Tax Shield
  • Taxes and M&M Proposition I
  • Taxes, the WACC and Proposition II
  • Conclusion
  • The Cost of Equity and the Value of the Firm
  • 15.5 Bankruptcy Costs
  • Direct Bankruptcy Costs
  • Indirect Bankruptcy Costs
  • Agency Costs
  • 15.6 Optimal Capital Structure
  • The Static Theory of Capital Structure
  • Optimal Capital Structure and the Cost of Capital
  • Optimal Capital Structure: A Recap
  • Capital Structure: Some Managerial Recommendations
  • 15.7 The Pie Again
  • The Extended Pie Model
  • Marketed Claims versus Non-Marketed Claims
  • 15.8 Signalling
  • 15.9 The Pecking-order Theory
  • Internal Financing and the Pecking Order
  • Implications of the Pecking Order
  • 15.10 Observed Capital Structures
  • 15.11 A Quick Look at the Bankruptcy Process
  • Liquidation and Reorganization
  • Bankruptcy Law
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Sustainable Lakes’ Recapitalization
  • Additional Reading
  • Endnotes
  • Chapter 16: Dividends and Payout Policy
  • Introduction
  • 16.1 Cash Dividends and Dividend Payment
  • Cash Dividends
  • Standard Method of Cash Dividend Payment
  • Dividend Payment: A Chronology
  • More About the Ex-Dividend Date
  • 16.2 Does Dividend Policy Matter?
  • An Illustration of the Irrelevance of Dividend Policy
  • Homemade Dividends
  • A Test
  • 16.3 Real-world Factors Favouring a Low-dividend Payout
  • Taxes
  • Flotation Costs
  • Dividend Restrictions
  • 16.4 Real-world Factors Favouring a High-dividend Payout
  • A Desire for Current Income
  • Tax and Other Benefits from High Dividends
  • Conclusion
  • 16.5 A Resolution of Real-world Factors?
  • Information Content of Dividends
  • A Behavioural Finance Rationale for High Dividends
  • The Clientele Effect
  • The Catering Theory of Dividends
  • 16.6 Share Repurchases: An Alternative to Cash Dividends
  • Cash Dividends versus Repurchase
  • Real-World Considerations in a Repurchase
  • Share Repurchases and Earnings per Share
  • 16.7 What We Know and Do Not Know about Dividend and Payout Policies
  • Dividends and Dividend Payers
  • Corporations Smooth Dividends
  • Putting It All Together
  • Some Survey Evidence on Dividends
  • 16.8 Stock Dividends and Stock Splits
  • Some Details about Stock Splits and Stock Dividends
  • Value of Stock Splits and Stock Dividends
  • Reverse Splits
  • 16.9 ESG and Sustainability in Dividend Policy
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Homeware Sustainables
  • Additional Reading
  • Endnotes
  • Chapter 17: Short-term Financial Planning and Management
  • Part 6 Topics in Corporate Finance
  • Introduction
  • 17.1 Reasons for Holding Cash
  • The Speculative and Precautionary Motives
  • The Transaction Motive
  • Compensating Balances
  • Costs of Holding Cash
  • Cash Management versus Liquidity Management
  • 17.2 Managing Short-term Capital
  • Temporary Cash Surpluses
  • Sources of Short-Term Finance
  • Bank Overdrafts
  • Short-Term Loans
  • Short-Term Leases
  • Operating Leases
  • Financial Leases
  • 17.3 Investing Idle Cash
  • Interest-Bearing Instruments
  • Discount Instruments
  • Derivative Instruments
  • 17.4 Determining the Target Cash Balance
  • The Basic Idea
  • The BAT Model
  • The Miller–Orr Model: A More General Approach
  • Implications of the BAT and Miller–Orr Models
  • Other Factors Influencing the Target Cash Balance
  • 17.5 Credit and Receivables
  • Components of Credit Policy
  • The Investment in Receivables
  • 17.6 Terms of the Sale
  • The Basic Form
  • The Credit Period
  • Cash Discounts
  • Credit Instruments
  • 17.7 Analysing Credit Policy
  • Credit Policy Effects
  • Evaluating a Proposed Credit Policy
  • 17.8 Optimal Credit Policy
  • The Total Credit Cost Curve
  • 17.9 Credit Analysis
  • When Should Credit Be Granted?
  • 17.10 Collection Policy
  • Monitoring Receivables
  • Collection Effort
  • 17.11 Inventory Management
  • The Financial Manager and Inventory Policy
  • Inventory Types
  • Inventory Costs
  • 17.12 Inventory Management Techniques
  • The ABC Approach
  • The Economic Order Quantity Model
  • Extensions to the EOQ Model
  • Managing Derived-Demand Inventories
  • 17.13 Technological Advances in Working Capital Management
  • Modern Payment Systems
  • Managing accounts receivable with software
  • digital inventory control systems
  • AI and machine learning trends
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Credit Policy at Schwarzwald AG
  • Additional Reading
  • Chapter 18: International Corporate Finance
  • Introduction
  • 18.1 Terminology
  • 18.2 Foreign Exchange Markets and Exchange Rates
  • Exchange Rates
  • 18.3 Purchasing Power Parity
  • Absolute Purchasing Power Parity
  • Relative Purchasing Power Parity
  • 18.4 Interest Rate Parity, Unbiased Forward Rates and the International Fisher Effect
  • Covered Interest Arbitrage
  • Interest Rate Parity
  • Forward Rates and Future Spot Rates
  • Putting It All Together
  • 18.5 International Capital Budgeting
  • Method 1: The Home Currency Approach
  • Method 2: The Foreign Currency Approach
  • Unremitted Cash Flows
  • 18.6 Exchange Rate Risk
  • Short-Run Exposure
  • Long-Run Exposure
  • Translation Exposure
  • Managing Exchange Rate Risk
  • 18.7 Political Risk
  • 18.8 Islamic Corporate Finance
  • Types of Islamic Financing Methods
  • 18.9 Brexit and International Corporate Finance
  • Trade in Goods
  • Trade in Services
  • Free Movement
  • Impact on Corporate Finance
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • West Coast Electronics Goes Carbon Neutral
  • Additional Reading
  • Endnotes
  • Chapter 19: Behavioural Finance
  • Introduction
  • 19.1 Introduction to Behavioural Finance
  • 19.2 Biases
  • Overconfidence
  • Over-Optimism
  • Confirmation Bias
  • Self-Attribution Bias
  • The Planning Fallacy
  • 19.3 Framing Effects
  • Loss Aversion
  • House Money
  • 19.4 Heuristics
  • The Affect Heuristic
  • The Representativeness Heuristic
  • Representativeness and Randomness
  • The Gambler’s Fallacy
  • 19.5 Behavioural Finance and Market Efficiency
  • Foundations of Market Efficiency
  • Limits to Arbitrage
  • Bubbles and Crashes
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • SuperCold Skis
  • Additional Reading
  • Chapter 20: Financial Risk Management
  • Introduction
  • 20.1 Hedging and Price Volatility
  • Interest Rate Volatility
  • Exchange Rate Volatility
  • Commodity Price Volatility
  • 20.2 Managing Financial Risk
  • The Risk Profile
  • Reducing Risk Exposure
  • Hedging Short-Run Exposure
  • Cash Flow Hedging: A Cautionary Note
  • Hedging Long-Term Exposure
  • Conclusion
  • 20.3 Hedging with Forward Contracts
  • Forward Contracts: The Basics
  • The PayOff Profile
  • Hedging with Forwards
  • 20.4 Hedging with Futures Contracts
  • Trading in Futures
  • Futures Exchanges
  • Hedging with Futures
  • 20.5 Hedging with Swap Contracts
  • Currency Swaps
  • Interest Rate Swaps
  • Commodity Swaps
  • The Swap Dealer
  • Interest Rate Swaps: An Example
  • 20.6 Hedging with Option Contracts
  • Option Terminology
  • Options versus Forwards
  • Option PayOff Profiles
  • Option Hedging
  • Hedging Commodity Price Risk with Options
  • Hedging Exchange Rate Risk with Options
  • Hedging Interest Rate Risk with Options
  • Financial Risk Management in Practice
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • McAfee Mortgages Ltd
  • Additional Reading
  • Endnotes
  • Chapter 21: Options and Corporate Finance
  • Introduction
  • 21.1 Options: The Basics
  • Puts and Calls
  • Option Quotations
  • Option PayOffs
  • 21.2 Put–Call Parity
  • Protective Puts
  • An Alternative Strategy
  • The Result
  • 21.3 Fundamentals of Option Valuation
  • Valuation of a Call at Expiration
  • Bounding the Value of a Call
  • The Factors Determining Call Option Values
  • Summary
  • 21.4 An Option Pricing Model
  • A Closer Look
  • 21.5 The Black–Scholes Option Pricing Model
  • THE Black–Scholes Model
  • Put Option Valuation
  • A Cautionary Note
  • 21.6 Option Applications: Employee Share Options
  • ESO Features
  • Valuing Executive Compensation
  • 21.7 Option Applications: Equity as a Call Option on the Firm’s Assets
  • Case I: The Debt Is Risk-Free
  • Case II: The Debt Is Risky
  • 21.8 Option Applications: Capital Budgeting
  • The Investment Timing Decision
  • Managerial Options
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • Valuing Employee Share at Exotic Cuisines plc
  • Additional Reading
  • Online Supplement 21.9: Valuation of Equity and Debt in a Leveraged Firm
  • Valuing the Equity in a Leveraged Firm
  • Options and the Valuation of Risky Bonds
  • Endnote
  • Chapter 22: Mergers and Acquisitions
  • Introduction
  • 22.1 The Legal Forms of Acquisition
  • Merger or Consolidation
  • Acquisition of Shares
  • Acquisition of Assets
  • Acquisition Classification
  • A Note about Takeovers
  • Alternatives to Merger
  • 22.2 Accounting and Tax Considerations
  • 22.3 Gains from Acquisitions
  • Synergy
  • Revenue Enhancement
  • Cost Reductions
  • Lower Taxes
  • Reductions in Capital Needs
  • Avoiding Mistakes
  • A Note about Inefficient Management
  • 22.4 Some Financial Side-effects of Acquisitions
  • EPS Growth
  • Diversification
  • 22.5 The Cost of an Acquisition
  • Case I: Cash Acquisition
  • Case II: Equity Acquisition
  • Cash versus Shares
  • 22.6 Valuation of Mergers in Practice
  • Stage 1: Value the Target as a Stand-Alone Firm
  • Stage 2: Calibrate the Valuation
  • Stage 3: Value the Synergies
  • Stage 4: Value the Merger
  • 22.7 Defensive Tactics
  • The Corporate Charter
  • Repurchase and Standstill Agreements
  • Poison Pills and Share Rights Plans
  • Going Private and Leveraged Buyouts
  • Other Devices and Jargon of Corporate Takeovers
  • Case Study: Veolia environnement and Suez
  • 22.8 Some Evidence on Restructurings: Do Mergers and Acquisitions Pay?
  • 22.9 Divestitures and Restructurings
  • Summary and Conclusions
  • Questions and Problems
  • Mini Case
  • The Rural Wireless Services–Nuvola SA Merger
  • Additional Reading
  • Endnote
  • Backmatter
  • Appendix A: Mathematical Tables
  • Appendix B: Key Equations
  • Appendix 3A
  • Appendix 3A: Financial Planning
  • 3A.1 Financial Planning
  • Growth as a Financial Management Goal
  • What Can Planning Accomplish?
  • 3A.2 Financial Planning Models: A First Look
  • The Income Statement
  • The Statement of Financial Position
  • A Particular Scenario
  • An Alternative Scenario
  • 3A.3 External Financing and Growth
  • EFN AND GROWTH
  • Financial Policy and Growth
  • 3A.4 Some Caveats Regarding Financial Planning Models
  • Summary and Conclusions
  • Questions and Problems
  • BASIC
  • Intermediate
  • Challenge
  • Appendix 6A
  • Appendix 6A: The Term Structure of Interest Rates, Spot Rates and Yield to Maturity
  • Explanations of the Term Structure
  • The Relationship between Forward Rate over Second Year and Spot Rate Expected over Second Year
  • The Expectations Hypothesis
  • Liquidity Preference Hypothesis
  • Questions and Problems
  • BASIC
  • INTERMEDIATE
  • CHALLENGE
  • Endnotes
  • Index
  • Index
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