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PART I Overview

Chapter 1: Introduction to Corporate Finance
1.1??What Is Corporate Finance?
The Balance Sheet Model of the firm
The Financial Manager
1.2??The Corporate Firm
The Sole Proprietorship
The Partnership
The Corporation
A Corporation by Another Name . . .
1.3??The Importance of Cash Flows
Identification of Cash Flows
Timing of Cash Flows
Risk of Cash Flows
1.4??The Goal of Financial Management
Possible Goals
The Goal of the Financial Manager
A More General Goal
1.5??The Agency Problem and Control of the Corporation
Agency Relationships
Management Goals
Do Managers Act in the Stockholders’ Interests?
Stakeholders
1.6??Regulation
The Securities Act of 1933 and the Securities Exchange Act of 1934
Sarbanes-Oxley
Summary and Conclusions
Concept Questions

Chapter 2: Financial Statements and Cash Flow
2.1??The Balance Sheet
Liquidity
Debt versus Equity
Value versus Cost
2.2??The Income Statement
Generally Accepted Accounting Principles
Noncash Items
Time and Costs
2.3??Taxes
Corporate and Personal Tax Rates
Average versus Marginal Tax Rates
2.4??Net Working Capital
2.5??Cash Flow of the Firm
2.6??The Accounting Statement of Cash Flows
Cash Flow from Operating Activities
Cash Flow from Investing Activities
Cash Flow from Financing Activities
2.7??Cash Flow Management
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Cash Flows at Warf Computers, Inc.

Chapter 3: Financial Statements Analysis and Financial Models
3.1??Financial Statements Analysis
Standardizing Statements
Common-Size Balance Sheets
Common-Size Income Statements
3.2??Ratio Analysis
Short-Term Solvency or Liquidity Measures
Long-Term Solvency Measures
Asset Management or Turnover Measures
Profitability Measures
Market Value Measures
3.3??The DuPont Identity
A Closer Look at ROE
Problems with Financial Statement Analysis
3.4??Financial Models
A Simple Financial Planning Model
The Percentage of Sales Approach
3.5??External Financing and Growth
The Relationship between EFN and Growth
Financial Policy and Growth
A Note about Sustainable Growth Rate Calculations
3.6??Some Caveats Regarding Financial Planning Models
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Ratios and Financial Planning at East Coast Yachts

PART II Valuation and Capital Budgeting

Chapter 4: Discounted Cash Flow Valuation
4.1??Valuation: The One-Period Case
4.2??The Multiperiod Case
Future Value and Compounding
The Power of Compounding: A Digression
Present Value and Discounting
Finding the Number of Periods
The Algebraic Formula
4.3??Compounding Periods
Distinction between Annual Percentage Rate and Effective Annual Rate
Compounding over Many Years
Continuous Compounding
4.4??Simplifications
Perpetuity
Growing Perpetuity
Annuity
Growing Annuity
4.5??Loan Amortization
4.6??What Is a Firm Worth?
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: The MBA Decision
Appendix 4A: Net Present Value: First Principles of Finance
Appendix 4B: Using Financial Calculators

Chapter 5: Net Present Value and Other Investment Rules
5.1??Why Use Net Present Value?
5.2??The Payback Period Method
Defining the Rule
Problems with the Payback Method
Managerial Perspective
Summary of Payback
5.3??The Discounted Payback Period Method
5.4??The Internal Rate of Return
5.5??Problems with the IRR Approach
Definition of Independent and Mutually Exclusive Projects
Two General Problems Affecting both Independent and Mutually Exclusive Projects
The Modified Internal Rate of Return (MIRR)
Problems Specific to Mutually Exclusive Projects
Redeeming Qualities of IRR
A Test
5.6??The Profitability Index
Calculation of Profitability Index
5.7??The Practice of Capital Budgeting
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Bullock Gold Mining

Chapter 6: Making Capital Investment Decisions
6.1??Incremental Cash Flows: The Key to Capital Budgeting
Cash Flows?Not Accounting Income
Sunk Costs
Opportunity Costs
Side Effects
Allocated Costs
6.2??The Baldwin Company: An Example
An Analysis of the Project
Which Set of Books?
A Note about Net Working Capital
A Note about Depreciation
Financing Costs
6.3??Alternative Definitions of Operating Cash Flow
The Top-Down Approach
The Bottom-Up Approach
The Tax Shield Approach
Conclusion
6.4??Some Special Cases of Discounted Cash Flow Analysis
Evaluating Cost-Cutting Proposals
Setting the Bid Price
Investments of Unequal Lives: The Equivalent Annual Cost Method
6.5??Inflation and Capital Budgeting
Interest Rates and Inflation
Cash Flow and Inflation
Discounting: Nominal or Real?
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problems
Mini Cases: Bethesda Mining Company 203 Goodweek Tires, Inc.

Chapter 7: Risk Analysis, Real Options, and Capital Budgeting
7.1??Sensitivity Analysis, Scenario Analysis, and Break ?Even Analysis
Sensitivity Analysis and Scenario Analysis
Break-Even Analysis
7.2??Monte Carlo Simulation
Step 1: Specify the Basic Model
Step 2: Specify a Distribution for Each Variable in the Model
Step 3: The Computer Draws One Outcome
Step 4: Repeat the Procedure
Step 5: Calculate NPV
7.3??Real Options
The Option to Expand
The Option to Abandon
Timing Options
7.4??Decision Trees
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Bunyan Lumber, LLC

Chapter 8: Interest Rates and Bond Valuation
8.1??Bonds and Bond Valuation
Bond Features and Prices
Bond Values and Yields
Interest Rate Risk
Finding the Yield to Maturity: More Trial and Error
Zero Coupon Bonds
8.2??Government and Corporate Bonds
Government Bonds
Corporate Bonds
Bond Ratings
8.3??Bond Markets
How Bonds Are Bought and Sold
Bond Price Reporting
A Note on Bond Price Quotes
8.4??Inflation and Interest Rates
Real versus Nominal Rates
Inflation Risk and Inflation-Linked Bonds
The Fisher Effect
8.5??Determinants of Bond Yields
The Term Structure of Interest Rates
Bond Yields and the Yield Curve: Putting It All Together
Conclusion
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Financing East Coast Yachts’ Expansion Plans with a Bond Issue

Chapter 9: Stock Valuation
9.1??The Present Value of Common Stocks
Dividends versus Capital Gains
Valuation of Different Types of Stocks
9.2??Estimates of Parameters in the Dividend Discount Model
Where Does g Come From?
Where Does R Come From?
A Healthy Sense of Skepticism
Dividends or Earnings: Which to Discount?
The No-Dividend Firm
9.3??Comparables
Price-Earnings Ratio
Enterprise Value Ratios
9.4??Valuing Stocks Using Free Cash Flows
9.5??The Stock Markets
Dealers and Brokers
Organization of the NYSE
Types of Orders
Nasdaq Operations
Stock Market Reporting
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Stock Valuation at Ragan Engines

PART III Risk

Chapter 10: Lessons from Market History
10.1?Returns
Dollar Returns
Percentage Returns
10.2?Holding Period Returns
10.3?Return Statistics
10.4?Average Stock Returns and Risk-Free Returns
10.5?Risk Statistics
Variance
Normal Distribution and Its Implications for Standard Deviation
10.6?More on Average Returns
Arithmetic versus Geometric Averages
Calculating Geometric Average Returns
Arithmetic Average Return or Geometric Average Return?
10.7?The U.S. Equity Risk Premium: Historical and International Perspectives
10.8?2008: A Year of Financial Crisis
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: A Job at East Coast Yachts

Chapter 11: Return, Risk, and the Capital Asset Pricing Model
11.1?Individual Securities
11.2?Expected Return, Variance, and Covariance
Expected Return and Variance
Covariance and Correlation
11.3?The Return and Risk for Portfolios
The Expected Return on a Portfolio
Variance and Standard Deviation of a Portfolio
11.4?The Efficient Set for Two Assets
11.5?The Efficient Set for Many Securities
Variance and Standard Deviation in a Portfolio of Many Assets
11.6?Diversification
The Anticipated and Unanticipated Components of News
Risk: Systematic and Unsystematic
The Essence of Diversification
The Effect of Diversification: Another Lesson from Market History
11.7?Riskless Borrowing and Lending
The Optimal Portfolio
11.8?Market Equilibrium
Definition of the Market Equilibrium Portfolio
Definition of Risk When Investors Hold the Market Portfolio
The Formula for Beta
A Test
11.9?Relationship between Risk and Expected Return (CAPM)
Expected Return on the Market
Expected Return on an Individual Security
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: A Job at East Coast Yachts, Part 2
Appendix 11A: Is Beta Dead?

Chapter 12: An Alternative View of Risk and Return
12.1?Systematic Risk and Betas
12.2?Portfolios and Factor Models
Portfolios and Diversification
12.3?Betas, Arbitrage, and Expected Returns
The Linear Relationship
The Market Portfolio and the Single Factor
12.4?The Capital Asset Pricing Model and the Arbitrage Pricing Theory
Differences in Pedagogy
Differences in Application
12.5?Empirical Approaches to Asset Pricing
Empirical Models
Style Portfolios
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: The Fama-French Multifactor Model and Mutual Fund Returns

Chapter 13: Risk, Cost of Capital, and Valuation
13.1?The Cost of Capital
13.2?Estimating the Cost of Equity Capital with the CAPM
The Risk-Free Rate
Market Risk Premium
13.3?Estimation of Beta
Real-World Betas
Stability of Beta
13.4?Determinants of Beta
Cyclicality of Revenues
Operating Leverage
Financial Leverage and Beta
Beta in a World with Taxes
13.5?The Dividend Discount Model Approach
Comparison pf DDM and CAPM
13.6?Cost of Capital for Projects
The Comparables Method
Using Industry Comparables
13.7?Cost of Fixed Income Securities
Cost of Debt
Cost of Preferred Stock
13.8?The Weighted Average Cost of Capital
Cost of Levered Equity
Financing with a Mix of Debt and Equity
Applying the WACC
13.9?Valuation with WACC
Valuing a Finite-Horizon Project
Terminal Value and the WACC
13.10?Estimating Eastman Chemical’s Cost of Capital
13.11?Flotation Costs and the Weighted Average Cost of Capital
The Basic Approach
Flotation Costs and NPV
Internal Equity and Flotation Costs
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Cost of Capital for Master Tools
Appendix 13A: Economic Value Added and the Measurement of Financial Performance

PART IV Capital Structure and Dividend Policy

Chapter 14: Efficient Capital Markets and Behavioral Challenges
14.1?Can Financing Decisions Create Value?
14.2?A Description of Efficient Capital Markets
Foundations of Market Efficiency
14.3?The Different Types of Efficiency
The Weak Form
The Semistrong and Strong Forms
Some Common Misconceptions about the Efficient Market Hypothesis
14.4?The Evidence
The Weak Form
The Semistrong Form
The Strong Form
14.5?The Behavioral Challenge to Market Efficiency
Rationality
Independent Deviations from Rationality
Arbitrage
14.6?Empirical Challenges to Market Efficiency
14.7?Reviewing the Differences
14.8?Implications for Corporate Finance
1. Accounting Choices, Financial Choices, and Market Efficiency
2. The Timing Decision
3. Speculation and Efficient Markets
4. Information in Market Prices
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: Your 401(K) Account at East Coast Yachts

Chapter 15: Long-Term Financing
15.1?Some Features of Common and Preferred Stocks
Common Stock Features
Preferred Stock Features
15.2?Corporate Long-Term Debt
Is it Debt or Equity?
Long-Term Debt: The Basics
The Indenture
15.3?Some Different Types of Bonds
Floating-Rate Bonds
Other Types of Bonds
15.4?Bank Loans
15.5?International Bonds
15.6?Patterns of Financing
15.7?Recent Trends in Capital Structure
Which Are Best: Book or Market Values?
Summary and Conclusions
Concept Questions
Questions and Problems

Chapter 16: Capital Structure: Basic Concepts
16.1?The Capital Structure Question and the Pie Theory
16.2?Maximizing Firm Value versus Maximizing Stockholder Interests
16.3?Financial Leverage and Firm Value: An Example
Leverage and Returns to Shareholders
The Choice between Debt and Equity
A Key Assumption
16.4?Modigliani and Miller: Proposition II (No Taxes)
Risk to Equityholders Rises with Leverage
Proposition II: Required Return to Equityholders Rises with Leverage
MM: An Interpretation
16.5?Taxes
The Basic Insight
Present Value of the Tax Shield
Value of the Levered Firm
Expected Return and Leverage under Corporate Taxes
The Weighted Average Cost of Capital, WACC, and Corporate Taxes
Stock Price and Leverage under Corporate Taxes
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Stephenson Real Estate Recapitalization

Chapter 17: Capital Structure: Limits to the Use of Debt
17.1?Costs of Financial Distress
Bankruptcy Risk or Bankruptcy Cost?
17.2?Description of Financial Distress Costs
Direct Costs of Financial Distress: Legal and Administrative Costs of Liquidation or Reorganization
Indirect Costs of Financial Distress
Agency Costs
17.3?Can Costs of Debt Be Reduced?
Protective Covenants
Consolidation of Debt
17.4?Integration of Tax Effects and Financial Distress Costs
PIE Again
17.5?Signaling
17.6?Shirking, Perquisites, and Bad Investments: A Note on Agency Cost of Equity
Effect of Agency Costs of Equity on Debt-Equity Financing
Free Cash Flow
17.7?The Pecking-Order Theory
Rules of the Pecking Order
Implications
17.8?Personal Taxes
The Basics of Personal Taxes
The Effect of Personal Taxes on Capital Structure
17.9?How Firms Establish Capital Structure
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: McKenzie Corporation’s Capital Budgeting
Appendix 17A: Some Useful Formulas of Financial Structure
Appendix 17B: The Miller Model and the Graduated Income Tax

Chapter 18: Valuation and Capital Budgeting for the Levered Firm
18.1?Adjusted Present Value Approach
18.2?Flow to Equity Approach
Step 1: Calculating Levered Cash Flow (LCF)
Step 2: Calculating RS
Step 3: Valuation
18.3?Weighted Average Cost of Capital Method
18.4?A Comparison of the APV, FTE, and WACC Approaches
A Suggested Guideline
18.5?Valuation When the Discount Rate Must Be Estimated
18.6?APV Example
18.7?Beta and Leverage
The Project Is Not Scale Enhancing
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: The Leveraged Buyout of Cheek Products, Inc.
Appendix 18A: The Adjusted Present Value Approach to Valuing Leveraged Buyouts

Chapter 19: Dividends and Other Payouts
19.1?Different Types of Payouts
19.2?Standard Method of Cash Dividend Payment
19.3?The Benchmark Case: An Illustration of the Irrelevance of Dividend Policy
Current Policy: Dividends Set Equal to Cash Flow
Alternative Policy: Initial Dividend Is Greater Than Cash Flow
The Indifference Proposition
Homemade Dividends
A Test
Dividends and Investment Policy
19.4?Repurchase of Stock
Dividend versus Repurchase: Conceptual Example
Dividends versus Repurchases: Real-World Considerations
19.5?Personal Taxes, Dividends, and Stock Repurchases
Firms without Sufficient Cash To Pay a Dividend
Firms with Sufficient Cash to Pay a Dividend
Summary of Personal Taxes
19.6?Real-World Factors Favoring a High-Dividend Policy
Desire for Current Income
Behavioral Finance
Agency Costs
Information Content of Dividends and Dividend Signaling
19.7?The Clientele Effect: A Resolution of Real-World Factors?
19.8?What We Know and Do Not Know about Dividend Policy
Corporate Dividends Are Substantial
Fewer Companies Pay Dividends
Corporations Smooth Dividends
Some Survey Evidence about Dividends
19.9?Putting It All Together
19.10?Stock Dividends and Stock Splits
Some Details about Stock Splits and Stock Dividends
Value of Stock Splits and Stock Dividends
Reverse Splits
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: Electronic Timing, Inc.

PART V Long?Term Financing

Chapter 20: Raising Capital
20.1?Entrepreneurship: Early-Stage Financing and Venture Capital
Entreprenuership
Venture Capital
Stages of Financing
Some Venture Capital Realities
Venture Capital Firms
Crowdfunding
Initial Coin Offerings
20.2?The Public Issue
Direct Listing
Special-Purpose Acquisition Companies
Dual-Class Stock IPOs
20.3?Alternative Issue Methods
20.4?The Cash Offer
Investment Banks
The Offering Price
Underpricing: A Possible Explanation
Evidence on Underpricing
The Partial Adjustment Phenomenon
20.5?The Announcement of New Equity and the Value of the Firm
20.6?The Cost of New Issues
The Costs of Going Public: A Case Study
20.7?Rights
The Mechanics of a Rights Offering
Subscription Price
Number of Rights Needed to Purchase a Share
Effect of Rights Offering on Price of Stock
Effects on Shareholders
The Underwriting Arrangements
20.8?The Rights Puzzle
20.9?Dilution
Dilution of Percentage Ownership
Dilution of Stock Price
Dilution of Book Value
Dilution of Earnings per Share
Conclusion
20.10?Shelf Registration
20.11?Issuing Long-Term Debt
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: East Coast Yachts Goes Public

Chapter 21: Leasing
21.1?Types of Leases
The Basics
Operating Leases
Financial Leases
21.2?Accounting and Leasing
21.3?Taxes, the IRS, and Leases
21.4?The Cash Flows of Leasing
A Note about Taxes
21.5?A Detour for Discounting and Debt Capacity with Corporate Taxes
Present Value of Riskless Cash Flows
Optimal Debt Level and Riskless Cash Flows
21.6?NPV Analysis of the Lease-versus-Buy Decision
The Discount Rate
21.7?Debt Displacement and Lease Valuation
The Basic Concept of Debt Displacement
Optimal Debt Level in the Xomox Example
21.8?Does Leasing Ever Pay? The Base Case
21.9?Reasons for Leasing
Good Reasons for Leasing
Bad Reasons for Leasing
21.10?Some Unanswered Questions
Are the Uses of Leases and Debt Complementary?
Why Are Leases Offered by both Manufacturers and Third-Party Lessors?
Why Are Some Assets Leased More Than Others?
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: The Decision to Lease or Buy at Warf Computers
Appendix 21A: APV Approach to Leasing

PART VI Options, Futures, and Corporate Finance

Chapter 22: Options and Corporate Finance
22.1?Options
22.2?Call Options
The Value of a Call Option at Expiration
22.3?Put Options
The Value of a Put Option at Expiration
22.4?Selling Options
22.5?Option Quotes
22.6?Combinations of Options
22.7?Valuing Options
Bounding the Value of a Call
The Factors Determining Call Option Values
A Quick Discussion of Factors Determining Put Option Values
22.8?An Option Pricing Formula
A Two-State Option Model
The Black-Scholes Model
22.9?Stocks and Bonds as Options
The Firm Expressed in Terms of Call Options
The Firm Expressed in Terms of Put Options
A Resolution of the Two Views
A Note about Loan Guarantees
22.10?Options and Corporate Decisions: Some Applications
Mergers and Diversification
Options and Capital Budgeting
22.11?Investment in Real Projects and Options
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Clissold Industries Options

Chapter 23: Options and Corporate Finance: Extensions and Applications
23.1?Executive Stock Options
Why Options?
Valuing Executive Compensation
23.2?Valuing a Startup
23.3?More about the Binomial Model
Heating Oil
23.4?Shutdown and Reopening Decisions
Valuing a Gold Mine
The Abandonment and Opening Decisions
Valuing the Simple Gold Mine
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: Exotic Cuisine’s Employee Stock Options

Chapter 24: Warrants and Convertibles
24.1?Warrants
24.2?The Difference between Warrants and Call Options
How the Firm Can Hurt Warrant Holders
24.3?Warrant Pricing and the Black-Scholes Model
24.4?Convertible Bonds
24.5?The Value of Convertible Bonds
Straight Bond Value
Conversion Value
Option Value
24.6?Issuing Warrants and Convertibles in Efficient Markets
Convertible Debt versus Straight Debt
Convertible Debt versus Common Stock
The “Free Lunch” Story
The “Expensive Lunch” Story
A Reconciliation
24.7?Why Are Warrants and Convertibles Issued?
Matching Cash Flows
Risk Synergy
Agency Costs
Backdoor Equity
24.8?Conversion Policy
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: S&S Air’s Convertible Bond

Chapter 25: Derivatives and Hedging Risk
25.1?Derivatives, Hedging, and Risk
Should Firms Always Hedge Away Risks?
25.2?Forward Contracts
25.3?Futures Contracts
25.4?Hedging
25.5?Interest Rate Futures Contracts
Pricing of Treasury Bonds
Pricing of Forward Contracts
Futures Contracts
Hedging in Interest Rate Futures
25.6?Duration Hedging
The Case of Zero Coupon Bonds
The Case of Two Bonds with the Same Maturity but with Different Coupons
Duration
Matching Liabilities with Assets
25.7?Swap Contracts
Interest Rate Swaps
Currency Swaps
Credit Default Swaps
Exotics
25.8?Actual Use of Derivatives
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: Williamson Mortgage, Inc.

PART VII Short?Term Finance

Chapter 26: Short-Term Finance and Planning
26.1?Tracing Cash and Net Working Capital
26.2?The Operating Cycle and the Cash Cycle
Defining the Operating and Cash Cycles
The Operating Cycle and the Firm’s Organization Chart
Calculating the Operating and Cash Cycles
Interpreting the Cash Cycle
A Look at Operating and Cash Cycles
26.3?Some Aspects of Short-Term Financial Policy
The Size of the Firm’s Investment in Current Assets
Alternative Financing Policies for Current Assets
Which Is Best?
26.4?Cash Budgeting
Cash Outflow
The Cash Balance
26.5?The Short-Term Financial Plan
Unsecured Loans
Secured Loans
Other Sources
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: Keafer Manufacturing Working Capital Management

Chapter 27: Cash Management
27.1?Reasons for Holding Cash
The Speculative and Precautionary Motives
The Transaction Motive
Compensating Balances
Costs of Holding Cash
Cash Management versus Liquidity Management
27.2?Understanding Float
Disbursement Float
Collection Float and Net Float
Float Management
Electronic Data Interchange and Check 21: The End of Float?
27.3?Cash Collection and Concentration
Components of Collection Time
Cash Collection
Lockboxes
Cash Concentration
Accelerating Collections: An Example
27.4?Managing Cash Disbursements
Increasing Disbursement Float
Controlling Disbursements
27.5?Investing Idle Cash
Temporary Cash Surpluses
Characteristics of Short-Term Securities
Some Different Types of Money Market Securities
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: Cash Management at Richmond Corporation
Appendix 27A: Determining the Target Cash Balance
Appendix 27B: Adjustable Rate Preferred Stock, Auction Rate Preferred Stock, and Floating-Rate Certificates of Deposit

Chapter 28: Credit and Inventory Management
28.1?Credit and Receivables
Components of Credit Policy
The Cash Flows from Granting Credit
The Investment in Receivables
28.2?Terms of the Sale
The Basic Form
The Credit Period
Cash Discounts
Credit Instruments
28.3?Analyzing Credit Policy
Credit Policy Effects
Evaluating a Proposed Credit Policy
28.4?Optimal Credit Policy
The Total Credit Cost Curve
Organizing the Credit Function
28.5?Credit Analysis
When Should Credit Be Granted?
Credit Information
Credit Evaluation and Scoring
28.6?Collection Policy
Monitoring Receivables
Collection Effort
28.7?Inventory Management
The Financial Manager and Inventory Policy
Inventory Types
Inventory Costs
28.8?Inventory Management Techniques
The ABC Approach
The Economic Order Quantity Model
Extensions to the EOQ Model
Managing Derived-Demand Inventories
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: Credit Policy at Braam Industries
Appendix 28A: More about Credit Policy Analysis

PART VIII Special Topics

Chapter 29: Mergers, Acquisitions, and Divestitures
29.1?The Basic Forms of Acquisitions
Merger or Consolidation
Acquisition of Stock
Acquisition of Assets
A Classification Scheme
A Note about Takeovers
29.2?Synergy
29.3?Sources of Synergy
Revenue Enhancement
Cost Reduction
Tax Gains
Reduced Capital Requirements
29.4?Two Financial Side Effects of Acquisitions
Earnings Growth
Diversification
29.5?A Cost to Stockholders from Reduction in Risk
The Base Case
Both Firms Have Debt
How Can Shareholders Reduce Their Losses from the Coinsurance Effect?
29.6?The NPV of a Merger
Cash
Common Stock
Cash versus Common Stock
29.7?Friendly versus Hostile Takeovers
29.8?Defensive Tactics
Deterring Takeovers before Being in Play
Deterring a Takeover after the Company Is in Play
29.9?Have Mergers Added Value?
Returns to Bidders
Target Companies
The Managers versus the Stockholders
29.10?The Tax Forms of Acquisitions
29.11?Accounting for Acquisitions
29.12?Going Private and Leveraged Buyouts
29.13?Divestitures
Sale
Spin-Off
Carve-Out
Tracking Stocks
Summary and Conclusions
Concept Questions
Questions and Problems
Mini Case: The Birdie Golf?Hybrid Golf Merger

Chapter 30: Financial Distress
30.1?What Is Financial Distress?
30.2?What Happens in Financial Distress?
30.3?Bankruptcy Liquidation and Reorganization
Bankruptcy Liquidation
Bankruptcy Reorganization
30.4?Private Workout or Bankruptcy: Which Is Best?
The Marginal Firm
Holdouts
Complexity
Lack of Information
30.5?Prepackaged Bankruptcy
30.6?Predicting Corporate Bankruptcy: The Z-Score Model
Summary and Conclusions
Concept Questions
Questions and Problems

Chapter 31: International Corporate Finance
31.1?Terminology
31.2?Foreign Exchange Markets and Exchange Rates
Exchange Rates
31.3?Purchasing Power Parity
Absolute Purchasing Power Parity
Relative Purchasing Power Parity
31.4?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
31.5?International Capital Budgeting
Method 1: The Home Currency Approach
Method 2: The Foreign Currency Approach
Unremitted Cash Flows
The Cost of Capital for International Firms
31.6?Exchange Rate Risk
Short-Term Exposure
Long-Term Exposure
Translation Exposure
Managing Exchange Rate Risk
31.7?Political Risk
The Tax Cuts and Jobs Act of 2017
Managing Political Risk
Summary and Conclusions
Concept Questions
Questions and Problems
Excel Master It! Problem
Mini Case: East Coast Yachts Goes International
Appendix A: Mathematical Tables
Appendix B: Solutions to Selected End-of-Chapter Problems
Appendix C: Using the HP 10B and TI BA II Plus Financial