Fundamentals of Corporate Finance (5^th Ed.)

Fundamentals of Corporate Finance, 5th Edition develops the key concepts of corporate finance with an intuitive approach while emphasizing computational skills. This course helps students develop an intuitive understanding of key financial concepts and provides them with problem-solving and decision-making skills. Using an intuitive approach, students develop a richer understanding of corporate finance concepts while also enabling them to develop the critical judgments necessary to apply financial tools in real-world decision-making situations. Corporate Finance, 5e offers a level of rigor that is appropriate for both business and finance majors and yet presents the content in a manner that students find accessible.

1 The Financial Manager and the Firm 1-1

1.1 The Role of the Financial Manager 1-2

1.2 Forms of Business Organization 1-7

1.3 Managing the Financial Function 1-10

1.4 The Goal of the Firm 1-13

1.5 Agency Conflicts: Separation of Ownership and Control 1-16

1.6 The Importance of Ethics in Business 1-22

Summary of Learning Objectives/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

Ethics Case: Incentives and Ethics: Cross-Selling at Wells Fargo1-28

2 The Financial System and the Level of Interest Rates2-1

2.1 The Financial System 2-2

2.2 Direct Financing 2-5

2.3 Types of Financial Markets 2-7

2.4 Market Efficiency 2-10

2.5 Financial Institutions and Indirect Financing 2-12

2.6 The Determinants of Interest Rate Levels 2-16

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

3 Financial Statements, Cash Flows, and Taxes3-1

3.1 Financial Statements and Accounting Principles 3-2

3.2 The Balance Sheet 3-5

3.4 The Income Statement and the Statement of Retained Earnings 3-14

3.5 The Statement of Cash Flows 3-17

3.6 Tying Together the Financial Statements 3-20

3.7 Cash Flow to Investors 3-22

3.8 Federal Income Tax 3-27

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

4 Analyzing Financial Statements4-1

4.1 Background for Financial Statement Analysis 4-2

4.2 Common-Size Financial Statements 4-4

4.3 Financial Ratios and Firm Performance 4-7

4.4 The Dupont System: A Diagnostic Tool 4-22

4.5 Selecting a Benchmark 4-27

4.6 Using Financial Ratios 4-30

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

Ethics Case: A Sad Tale: The Demise of Arthur Andersen4-45

5 The Time Value of Money5-1

5.1 The Time Value of Money 5-2

5.2 Future Value and Compounding 5-4

5.3 Present Value and Discounting 5-16

5.4 Additional Concepts and Applications 5-22

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

6 Discounted Cash Flows and Valuation6-1

6.1 Multiple Cash Flows 6-2

6.2 Level Cash Flows: Annuities 6-9

6.3 Level Cash Flows: Perpetuities 6-22

6.4 Cash Flows That Grow at a Constant Rate 6-24

6.5 The Effective Annual Interest Rate 6-26

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems/Appendix: Deriving the Formula for the Present Value of an Ordinary Annuity/Problem

Ethics Case: America’s Ailing Drug Prices 6-38

7 Risk and Return7-1

7.1 Risk and Return 7-2

7.2 Holding Period Returns 7-3

7.3 Expected Returns 7-4

7.4 Variance and Standard Deviation as Measures of Risk 7-8

7.5 Arithmetic Average and Geometric (Compounded) Average Returns 7-15

7.6 Risk and Diversification 7-17

7.7 Systematic Risk 7-26

7.8 The Capital Asset Pricing Model 7-31

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

Ethics Case: Pay for Performance or Just More Pay? The Conflicting Case for CEO Pay7-41

8 Bond Valuation and the Structure of Interest Rates 8-1

8.1 Corporate Bonds 8-2

8.2 Bond Valuation 8-4

8.3 Bond Yields 8-12

8.4 Interest Rate Risk 8-15

8.5 The Determinants of Corporate Borrowing Costs 8-18

8.6 The Term Structure of Interest Rates 8-21

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

Ethics Case: The Subprime Mortgage Market Meltdown:How Did It Happen?8-29

9 Stock Valuation9-1

9.1 The Market for Stocks 9-2

9.2 Common and Preferred Stock 9-7

9.3 Common Stock Valuation 9-8

9.4 The General Dividend-Valuation Model 9-11

9.5 Stock Valuation: Some Simplifying Assumptions 9-12

9.6 The Relation between R and g 9-17 Mixed (Supernormal) Growth Dividend Model 9-18

9.7 Valuing Preferred Stock 9-21

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

Ethics Case: Insider Trading: Have I Got a Stock Tip for You!9-29

10 The Fundamentals of Capital Budgeting 10-1

10.1 An Introduction to Capital Budgeting 10-2

10.2 Net Present Value 10-6

10.3 The Payback Period 10-14

10.4 The Accounting Rate of Return 10-18

10.5 Internal Rate of Return 10-19

10.6 Investment Decisions with Capital Rationing 10-29

10.7 Capital Budgeting in Practice 10-33

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

Ethics Case: Going Green: Can Automakers Invest in Environmental Solutions?10-45

11 Cash Flows and Capital Budgeting11-1

11.1 Calculating Project Cash Flows 11-2

11.2 Estimating Cash Flows in Practice 11-10

11.3 Forecasting Free Cash Flows 11-23

11.4 Special Cases 11-25

11.5 Harvesting an Asset 11-29

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

Ethics Case: Unilever’s Sustainable Living Plan11-37

12 Evaluating Project Economics12-1

12.1 Variable Costs, Fixed Costs, and Project Risk 12-2

12.2 Calculating Operating Leverage 12-9

12.3 Break-Even Analysis 12-11

12.4 The Economic Break-Even Point 12-15

12.5 Risk Analysis 12-19

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

13 The Cost of Capital13-1

13.1 The Firm’s Overall Cost of Capital 13-2

13.2 The Cost of Debt 13-7

13.3 The Cost of Equity 13-13

13.4 Using the WACC in Practice 13-21

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

14 Working Capital Management14-1

14.1 Working Capital Basics 14-2

14.2 The Operating and Cash Conversion Cycles 14-5

14.3 Working Capital Management Strategies 14-10

14.4 Accounts Receivable 14-13

14.5 Inventory Management 14-16

14.6 Cash Management and Budgeting 14-18

14.7 Financing Working Capital 14-20

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

15 How Firms Raise Capital15-1

15.1 Bootstrapping 15-2

15.2 Venture Capital 15-4

15.3 Initial Public Offering 15-9

15.4 IPO Pricing and Cost 15-15

15.5 General Cash Offer by a Public Company 15-19

15.6 Private Markets 15-22

15.7 Commercial Bank Loans 15-25

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

16 Capital Structure Policy16-1

16.1 Capital Structure and Firm Value 16-2

16.2 The Benefits and Costs of Using Debt 16-11

16.3 Two Theories of Capital Structure 16-24

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

Appendix: Leasing 16-33

Two Types of Leases 16-33

Motivations for Leasing 16-34

Conflicts between Lessees and Lessors 16-37

Evaluating a Leasing Opportunity 16-39

Summary of Learning Objective/Self-Study Problem/Solution to Self-Study Problem/Discussion Questions/Questions and Problems

17 Dividends, Stock Repurchases, and Payout Policy17-1

17.1 Dividends 17-2

17.2 Stock Repurchases 17-7

17.3 Dividends and Firm Value 17-10

17.4 Stock Dividends and Stock Splits 17-16

17.5 Setting a Dividend Payout 17-19

Summary of Learning Objectives/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

18 Business Formation, Growth, and Valuation18-1

18.1 Starting a Business 18-2

18.2 The Role of the Business Plan 18-10

18.3 Valuing a Business 18-11

18.4 Important Issues in Valuation 18-26

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

19 Financial Planning and Managing Growth19-1

19.1 Financial Planning 19-2

19.2 Financial Planning Models 19-5

19.3 A Better Financial Planning Model 19-11

19.4 Beyond the Basic Planning Models 19-18

19.5 Managing and Financing Growth 19-20

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

20 Options and Corporate Finance20-1

20.1 Financial Options 20-2

20.2 Option Valuation 20-6

20.3 Real Options 20-15

20.4 Agency Costs 20-19

20.5 Options and Risk Management 20-22

Summary of Learning Objectives/Summary of Key Equations/Self-Study Problems/Solutions to Self-Study Problems/Discussion Questions/Questions and Problems/Sample Test Problems

21 International Financial Management21-1

21.1 Introduction to International Financial Management 21-2

21.2 Foreign Exchange Markets 21-7

21.3 International Capital Budgeting 21-16

21.4 Global Money and Capital Markets 21-21

21.5 International Banking 21-24

Appendix A Future Value and Present Value Tables A-1

Appendix B Solutions to Odd Problems B-1

AppendixC The 2017 Tax Cuts and Jobs Act: Implications for Cash Flow to Investors, the Cost of Capital, and Capital Structure C-1

Glossary G-1

Subject Index I-1

Company Index I-19