This book describes the theory and practice of corporate finance. We hardly need to explain why financial managers should master the practical aspects of their job, but we should spell out why down-to-earth, redblooded managers need to bother with theory. Managers learn from experience how to cope with routine problems. But the best managers are also able to respond to change. To do this you need more than time-honored rules of thumb; you must understand why companies and financial markets behave the way they do. In other words, you need a theory of finance.
This book describes the theory and practice of corporate finance. We hardly need to explain why financial managers should master the practical aspects of their job, but we should spell out why down-to-earth, redblooded managers need to bother with theory.
PRESENT VALUE A N D T H E OPPORTUNITY COST OF CAPITAL
These include tangible assets such as plant and machinery and intangible assets such as management contracts and patents. The object of the investment, or capital budgeting, decision is to find real assets that are worth more than they cost.
H O W T O C A L C U L A T E PRESENT VALUES
we learned how to work out the value of an asset that produces cash exactly one year from now. But we did not explain how to value assets that produce cash two years from now or in several future years. That is the first task for this chapter.
FINANCIAL ANALYSIS AND PLANNING
A camel look like an animal designed by a committee. If a firm made all its financial decisions piecemeal, it would end up with a financial camel. Therefore, smart financial managers consider the overall effect of financing and investment decisions
THE VALUE OF COMMON STOCKS
you that being a financial expert has its occupational hazards. One is being cornered at cocktail parties by people who are eager to explain their system for making creamy profits by investing in common stocks. Fortunately, these bores go into temporary hibernation whenever the market goes down.
Adair Excel Applications for Corporate Finance First Edition Benninga and Sarig Corporate Finance: A Valuation Approach Block and Hirt Foundations of Financial Management Twelfth Edition Brealey, Myers, and Allen Principles of Corporate Finance Eighth Edition Brealey, Myers, and Marcus Fundamentals of Corporate Finance Fifth Edition Brooks FinGame Online 4.
WHY NET PRESENT VALUE LEADS TO BETTER INVESTMENT DECISIONS THAN OTHER CRITERIA
Four chapters we introduced, at times surreptitiously, most of the basic principles of the investment decision. In this chapter we begin by consolidating that knowledge. We then take a look at three other measures that companies
CONCLUSION: WHAT WE DO AND DO NOT KNOW ABOUT FINANCE
It is time to sign off. Let us finish by thinking about some of the things that we do and do not know about finance.What would you say if you were asked to name the seven most important ideas in finance?
C A P I T A L B U D G E T I N G A N D R I S K
The development of modern theories linking risk and expected return, smart financial managers adjusted for risk in capital budgeting. They realized intuitively that, other things being equal, risky projects are less desirable than safe ones.
CORPORATE FINANCING AND THE SIX LESSONS OF MARKET EFFICIENCY
Up to this point we have concentrated almost exclusively on the left-hand side of the balance sheet the firm’s capital expenditure decision. Now we move to the right-hand side and to the problems involved in financing the capital
INTRODUCTION TO RISK, RETURN, AND THE OPPORTUNITY COST OF CAPITAL
WE HAVE MANAGED to go through six chapters without directly addressing the problem of risk, but now the jig is up. We can no longer be satisfied with vague statements
AN OVERVIEW OF CORPORATE FINANCING
We now begin our analysis of long-term financing decisions—an undertaking we will not complete until Chapter 26. This chapter provides an introduction to corporate financing.
CONTROL , GOVERNANCE, AND FINANCIAL ARCHITECTURE
Corporate control means the power to make investment and financing decisions. A hostile takeover bid is an attempt to force a change in corporate control. In popular usage, corporate governance refers to the role of the board
RISK AND RETURN
We began to come to grips with the problem of measuring risk. Here is the story so far. The stock market is risky because there is a spread of possible outcomes. The usual measure of this spread is the standard deviation or variance.
HOW CORPORATIONS ISSUE SECURITIES
We encountered Marvin Enterprises, one of the most remarkable growth companies of the twenty-first century. It was founded by George and Mildred Marvin, two high-school dropouts, together with their chum Charles P. (Chip) Norton.
L E A S I N G
Most of us occasionally rent a car, bicycle, or boat. Usually such personal rentals are short-lived; we may rent a car for a day or week. But in corporate finance longer-term rentals are common. A rental agreement that extends for a year or more and involves a series of fixed payments is called a lease.
THE DIVIDEND CONTROVERSY
We explain how companies set their dividend payments and we discuss the controversial question of how dividend policy affects the market value of the firm. The first step toward understanding dividend policy is to recognize