出版说明
前言
第一部分　公司理财导论
第1章　公司理财概论 / 1
1.1　公司理财与财务经理 / 2
1.2　企业组织形态 / 4
1.3　财务管理的目标 / 7
1.4　代理问题与公司控制 / 10
1.5　金融市场与公司 / 13
概要与总结 / 16
概念复习和重要思考题 / 16
章末案例：McGee Cake公司 / 18
第2章　财务报表、税与现金流量 / 17
2.1　资产负债表 / 18
2.2　利润表 / 22
2.3　税 / 25
2.4　现金流量 / 28
概要与总结 / 34
章节复习和自测题 / 35
概念复习和重要思考题 / 35
思考和练习题 / 35
章末案例：Sunset Boards公司现金流量和财务报表 / 36
第二部分　财务报表与长期
　　财务计划
第3章　运用财务报表 / 37
3.1　现金流量和财务报表：进一步观察 / 38
3.2　标准财务报表 / 42
3.3　比率分析 / 45
3.4　杜邦恒等式 / 57
3.5　利用财务报表信息 / 61
概要与总结 / 67
章节复习和自测题 / 68
概念复习和重要思考题 / 69
思考和练习题 / 69
章末案例：在S&S飞机公司的比率分析 / 71
第4章　长期财务计划与增长 / 72
4.1　什么是财务计划 / 74
4.2　财务计划制订模型：初步探讨 / 76
4.3　销售收入百分比法 / 79
4.4　外部融资与增长 / 85
4.5　关于财务计划制订模型的一些
警示 / 92
概要与总结 / 93
章节复习和自测题 / 93
概念复习和重要思考题 / 94
思考和练习题 / 94
章末案例：S&S飞机公司的增长计划 / 98
第三部分　未来现金流量估价
第5章　估值导言：货币时间价值 / 99
5.1　终值和复利 / 100
5.2　现值和贴现 / 107
5.3　终值和现值的进一步讲解 / 111
概要与总结 / 118
章节复习和自测题 / 119
概念复习和重要思考题 / 119
思考和练习题 / 119
第6章　贴现现金流量估价 / 123
6.1　多期现金流量的现值和终值 / 124
6.2　评估均衡现金流量：年金和永续年金 / 131
6.3　比较利率：复利的影响 / 141
6.4　贷款种类和分期偿还贷款 / 146
概要与总结 / 151
章节复习和自测题 / 151
概念复习和重要思考题 / 152
思考和练习题 / 152
章末案例：MBA的决策 / 155
第7章　利率和债券估值 / 156
7.1　债券和债券估值 / 157
7.2　债券的其他特征 / 167
7.3　债券评级 / 172
7.4　一些不同类型的债券 / 173
7.5　债券市场 / 179
7.6　通货膨胀和利率 / 183
7.7　债券收益率的决定因素 / 186
概要与总结 / 190
章节复习和自测题 / 191
概念复习和重要思考题 / 191
思考和练习题 / 191
章末案例：S&S飞机公司的债券发行扩张计划 / 193
第8章　股票估价 / 194
8.1　普通股估价 / 195
8.2　普通股和优先股的一些特点 / 206
8.3　股票市场 / 210
概要与总结 / 215
章节复习和自测题 / 216
概念复习和重要思考题 / 216
思考和练习题 / 216
章末案例：Ragan公司的股票估值 / 217
第四部分　资本预算
第9章　净现值和其他投资准则 / 218
9.1　净现值 / 219
9.2　回收期法则 / 223
9.3　贴现回收期 / 227
9.4　平均会计报酬率 / 229
9.5　内部报酬率 / 231
9.6　获利能力指数 / 242
9.7　资本预算实务 / 243
概要与总结 / 246
章节复习和自测题 / 246
概念复习和重要思考题 / 247
思考和练习题 / 248
章末案例：布洛克黄金矿业 / 252
第10章　资本投资决策 / 253
10.1　项目现金流量：初步考察 / 254
10.2　增量现金流量 / 255
10.3　预计财务报表与项目现金流量 / 257
10.4　项目现金流量的深入讲解 / 260
10.5　经营现金流量的其他定义 / 270
10.6　贴现现金流量分析的一些特殊情况 / 272
概要与总结 / 278
章节复习和自测题 / 279
概念复习和重要思考题 / 279
思考和练习题 / 280
章末案例：贝壳共和电子公司（一） / 283
第11章　项目分析与评估 / 284
11.1　评估NPV估计值 / 285
11.2　情境分析与其他假设性分析 / 287
11.3　盈亏平衡分析 / 292
11.4　经营现金流量、销售量和盈亏平衡 / 298
11.5　经营杠杆 / 303
11.6　资本限额 / 306
概要与总结 / 307
章节复习和自测题 / 308
概念复习和重要思考题 / 308
思考和练习题 / 308
章末案例：贝壳共和电子公司（二） / 310
第五部分　风险与报酬
第12章　资本市场历史的一些启示 / 311
12.1　报酬 / 312
12.2　历史纪录 / 316
12.3　平均报酬率：第一个启示 / 322
12.4　报酬率的变动性：第二个启示 / 324
12.5　平均报酬率的进一步讲述 / 332
12.6　资本市场效率 / 336
概要与总结 / 340
章节复习和自测题 / 341
概念复习和重要思考题 / 341
思考和练习题 / 341
章末案例：S&S飞机公司的职位 / 343
第13章　报酬、风险与证券市场线 / 344
13.1　期望报酬率和方差 / 345
13.2　投资组合 / 348
13.3　宣告、意外事项和期望报酬率 / 352
13.4　风险：系统的和非系统的 / 354
13.5　分散化与投资组合风险 / 355
13.6　系统风险与贝塔系数 / 358
13.7　证券市场线 / 361
13.8　证券市场线与资本成本：预习 / 369
概要与总结 / 370
章节复习和自测题 / 370
概念复习和重要思考题 / 371
思考和练习题 / 372
章末案例：高露洁棕榄公司的贝塔值 / 374
第六部分　资本成本与长期财务政策
第14章　资本成本 / 375
14.1　资本成本：一些预备知识 / 376
14.2　权益成本 / 377
14.3　债务成本和优先股成本 / 381
14.4　加权平均资本成本 / 382
14.5　部门和项目资本成本 / 392
14.6　加权平均资本成本与企业价值估值 / 395
14.7　发行成本和加权平均资本成本 / 398
概要与总结 / 401
章节复习和自测题 / 401
概念复习和重要思考题 / 402
思考和练习题 / 402
章末案例：Swan Motors公司的资本成本 / 406
第15章　筹集资本 / 407
15.1　企业的筹资生命周期：早期融资和风险投资 / 408
15.2　公开发售证券：基本程序 / 410
15.3　其他发行方法 / 413
15.4　承销商 / 414
15.5　IPO和抑价 / 417
15.6　新权益发售和公司价值 / 424
15.7　发行证券的成本 / 425
15.8　认股权 / 430
15.9　稀释 / 436
15.10　发行长期债务 / 438
15.11　暂搁注册 / 439
概要与总结 / 440
章节复习和自测题 / 440
概念复习和重要思考题 / 440
思考和练习题 / 441
章末案例：S&S飞机公司上市 / 443
第16章　财务杠杆和资本结构政策 / 444
16.1　资本结构问题 / 445
16.2　财务杠杆效应 / 447
16.3　资本结构和权益资本成本 / 451
16.4　考虑公司税的MM第一定理和MM第二定理 / 455
16.5　破产成本 / 460
16.6　最优资本结构 / 462
16.7　重谈饼图 / 466
16.8　啄食顺序理论 / 468
16.9　观察到的资本结构 / 470
16.10　破产程序概览 / 471
概要与总结 / 475
章节复习和自测题 / 475
概念复习和重要思考题 / 476
思考和练习题 / 476
章末案例：斯蒂芬森房地产公司的资产重组 / 479
第17章　股利和股利派发政策 / 480
17.1　现金股利和股利派发 / 481
17.2　股利政策有影响吗 / 484
17.3　偏爱低股利的真实世界因素 / 487
17.4　偏爱高股利的真实世界因素 / 488
17.5　真实世界因素的一个解答 / 489
17.6　股票回购：现金股利的替代方案 / 491
17.7　股利与股利派发政策：已知的与未知的 / 495
17.8　股票股利和股票分拆 / 502
概要与总结 / 505
概念复习和重要思考题 / 506
思考和练习题 / 506
章末案例：Electronic Timing，Inc.公司 / 509
第七部分　短期财务计划与管理
第18章　短期财务与计划 / 510
18.1　现金和净营运资本的追溯 / 511
18.2　经营周期和现金周期 / 512
18.3　短期财务政策的某些方面 / 518
18.4　现金预算 / 525
18.5　短期借款 / 527
18.6　短期财务计划 / 531
概要与总结 / 532
章节复习和自测题 / 532
概念复习和重要思考题 / 534
思考和练习题 / 534
章末案例：Piepkorn制造厂的营运资本管理 / 538
第19章　现金和流动性管理 / 539
19.1　持有现金的原因 / 540
19.2　了解浮游量 / 541
19.3　现金收账和集中 / 548
19.4　现金支付管理 / 552
19.5　闲置现金投资 / 554
概要与总结 / 557
章节复习和自测题 / 557
概念复习和重要思考题 / 557
思考和练习题 / 558
章末案例：韦布公司的现金管理 / 560
附录19A：确定目标现金余额 / 560
第20章　信用和存货管理 / 561
20.1　信用和应收账款 / 562
20.2　销售条件 / 563
20.3　分析信用政策 / 567
20.4　最优信用政策 / 570
20.5　信用分析 / 572
20.6　收账政策 / 575
20.7　存货管理 / 576
20.8　存货管理技术 / 578
概要与总结 / 585
章节复习和自测题 / 586
概念复习和重要思考题 / 587
思考和练习题 / 587
章末案例：Howlett公司的信用政策 / 589
附录20A：再谈信用政策分析 / 590
第八部分　公司理财专题
第21章　国际公司理财 / 591
21.1　术语 / 592
21.2　外汇市场和汇率 / 593
21.3　购买力平价 / 598
21.4　利率平价、无偏远期汇率和国际费雪效应 / 602
21.5　国际资本预算 / 606
21.6　汇率风险 / 608
21.7　政治风险 / 611
概要与总结 / 613
章节复习和自测题 / 614
概念复习和重要思考题 / 614
思考和练习题 / 614
章末案例：S&S 飞机公司的国际化 / 617
第22章　行为财务：对财务管理的启示 / 618
22.1　行为财务学导论 / 619
22.2　偏见 / 619
22.3　框架效应 / 621
22.4　启发法 / 624
22.5　行为财务学与市场有效性 / 627
22.6　市场有效性与专业基金经理的表现 / 635
概要与总结 / 638
概念复习和重要思考题 / 639
章末案例：你在S&S飞机公司的401（k）账户 / 640
第23章　期权与公司理财 / 641
23.1　期权：基本原理 / 642
23.2　期权估值基础 / 646
23.3　看涨期权的价值 / 651
23.4　员工股票期权 / 654
23.5　股权是公司资产的看涨期权 / 657
23.6　期权和资本预算 / 659
23.7　期权与公司证券 / 664
概要与总结 / 670
章节复习和自测题 / 670
概念复习和重要思考题 / 671
思考和练习题 / 671
章末案例：S&S飞机公司的可转换债券 / 674
第24章　期权定价 / 675
24.1　买卖平价理论 / 676
24.2　布莱克-斯科尔斯期权定价模型 / 681
24.3　进一步探讨：布莱克-斯科尔斯期权定价模型 / 686
24.4　杠杆公司的股权和负债估值 / 693
24.5　期权和公司决策：一些应用 / 695
概要与总结 / 699
概念复习和重要思考题 / 700
思考和练习题 / 700
章末案例：Exotic Cuisines的员工股票期权 / 701
第25章　兼并和收购 / 702
25.1　收购的法律形式 / 703
25.2　税收与收购 / 706
25.3　收购的会计处理 / 707
25.4　收购的收益 / 709
25.5　收购的一些财务副作用 / 715
25.6　收购的成本 / 716
25.7　防御性策略 / 719
25.8　关于收购的一些证据：并购可以创造价值吗 / 722
25.9　资产剥离和重组 / 723
概要与总结 / 724
章节复习和自测题 / 726
概念复习和重要思考题 / 726
思考和练习题 / 727
章末案例：Birdie Golf和Hybrid Golf并购案 / 729
附录A　数学用表 / 730
附录B　部分思考和练习题答案 / 730
附录C　HP 10B金融计算器和TI BA II PLUS金融计算器的使用 / 730


Contents
PART 1 Overview of Corporate Finance
CHAPTER 1 INTRODUCTION TO CORPORATE FINANCE 1
1.1 Corporate Finance and the Financial Manager 2
What Is Corporate Finance? 2
The Financial Manager 2
Financial Management Decisions 2
1.2 Forms of Business Organization 4
Sole Proprietorship 4
Partnership 5
Corporation 5
A Corporation by Another Name . . . 7
1.3 The Goal of Financial Management 7
Possible Goals 8
The Goal of Financial Management 8
A More General Goal 9
Sarbanes-Oxley 9
1.4 The Agency Problem and Control of the Corporation 10
Agency Relationships 10
Management Goals 10
Do Managers Act in the Stockholders’ Interests? 11
Stakeholders 13
1.5 Financial Markets and the Corporation 13
Cash Flows to and from the Firm 13
Primary versus Secondary Markets 13
1.6 Summary and Conclusions 16
CHAPTER 2 FINANCIAL STATEMENTS, TAXES, AND CASH FLOW 17
2.1 The Balance Sheet 18
Assets: The Left Side 18
Liabilities and Owners’ Equity: The Right Side 18
Net Working Capital 19
Liquidity 20
Debt versus Equity 21
Market Value versus Book Value 21
2.2 The Income Statement 22
GAAP and the Income Statement 23
Noncash Items 24
Time and Costs 24
2.3 Taxes 25Corporate Tax Rates 25
Average versus Marginal Tax Rates 26
2.4 Cash Flow 28
Cash Flow from Assets 28
Cash Flow to Creditors and Stockholders 31
An Example: Cash Flows for Dole Cola 31
2.5 Summary and Conclusions 34
PART 2 Financial Statements and Long-Term Financial Planning
CHAPTER 3 WORKING WITH FINANCIAL STATEMENTS 37
3.1 Cash Flow and Financial Statements: A Closer Look 38
Sources and Uses of Cash 38
The Statement of Cash Flows 40
3.2 Standardized Financial Statements 42
Common-Size Statements 42
Common-Base Year Financial Statements: Trend Analysis 44
Combined Common-Size and Base Year Analysis 44
3.3 Ratio Analysis 45
Short-Term Solvency, or Liquidity, Measures 46
Long-Term Solvency Measures 48
Asset Management, or Turnover, Measures 50
Profitability Measures 52
Market Value Measures 54
Conclusion 56
3.4 The DuPont Identity 57
A Closer Look at ROE 57
An Expanded DuPont Analysis 59
3.5 Using Financial Statement Information 61
Why Evaluate Financial Statements? 61
Choosing a Benchmark 62
Problems with Financial Statement Analysis 66
3.6 Summary and Conclusions 67
CHAPTER 4LONG-TERM FINANCIAL PLANNING AND GROWTH 72
4.1 What Is Financial Planning? 74
Growth as a Financial Management Goal 74
Dimensions of Financial Planning 74
What Can Planning Accomplish? 75
4.2 Financial Planning Models: A First Look 76
A Financial Planning Model: The Ingredients 76
A Simple Financial Planning Model 78
4.3 The Percentage of Sales Approach 79
The Income Statement 79
The Balance Sheet 80
A Particular Scenario 82
An Alternative Scenario 83
4.4 External Financing and Growth 85
EFN and Growth 85
Financial Policy and Growth 87
A Note about Sustainable Growth Rate Calculations 91
4.5 Some Caveats Regarding Financial Planning Models 92
4.6 Summary and Conclusions 93
PART 3 Valuation of Future Cash Flows
CHAPTER 5INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY 99
5.1 Future Value and Compounding 100
Investing for a Single Period 100
Investing for More Than One Period 100
A Note about Compound Growth 106
5.2 Present Value and Discounting 107
The Single-Period Case 107
Present Values for Multiple Periods 108
5.3 More about Present and Future Values 111
Present versus Future Value 111
Determining the Discount Rate 112
Finding the Number of Periods 115
5.4 Summary and Conclusions 118

CHAPTER 6DISCOUNTED CASH FLOW VALUATION 123
6.1 Future and Present Values of Multiple Cash Flows 124
Future Value with Multiple Cash Flows 124
Present Value with Multiple Cash Flows 127
A Note about Cash Flow Timing 130
6.2 Valuing Level Cash Flows: Annuities and Perpetuities 131
Present Value for Annuity Cash Flows 131
Future Value for Annuities 137
A Note about Annuities Due 138
Perpetuities 139
Growing Annuities and Perpetuities 140
6.3 Comparing Rates: The Effect of Compounding 141
Effective Annual Rates and Compounding 141
Calculating and Comparing Effective Annual Rates 141
EARs and APRs 143
Taking It to the Limit: A Note about Continuous Compounding 145
6.4 Loan Types and Loan Amortization 146
Pure Discount Loans 146
Interest-Only Loans 147
Amortized Loans 147
6.5 Summary and Conclusions 151
CHAPTER 7INTEREST RATES AND BOND VALUATION 156
7.1 Bonds and Bond Valuation 157
Bond Features and Prices 157
Bond Values and Yields 157
Interest Rate Risk 161
Finding the Yield to Maturity: More Trial and Error 162
7.2 More about Bond Features 167
Is It Debt or Equity? 167
Long-Term Debt: The Basics 167
The Indenture 169
7.3 Bond Ratings 172
7.4 Some Different Types of Bonds 173
Government Bonds 173
Zero Coupon Bonds 174
Floating-Rate Bonds 175
Other Types of Bonds 176
Sukuk 177
7.5 Bond Markets 179
How Bonds Are Bought and Sold 180
Bond Price Reporting 180
A Note about Bond Price Quotes 183
7.6 Inflation and Interest Rates 183
Real versus Nominal Rates 183
The Fisher Effect 184
Inflation and Present Values 185
7.7 Determinants of Bond Yields 186
The Term Structure of Interest Rates 186
Bond Yields and the Yield Curve: Putting It All Together 189
Conclusion 190
7.8 Summary and Conclusions 190
CHAPTER 8 STOCK VALUATION 194
8.1 Common Stock Valuation 195
Cash Flows 195
Some Special Cases 197
Components of the Required Return 203
Stock Valuation Using Multiples 204
8.2 Some Features of Common and Preferred Stocks 206
Common Stock Features 206
Preferred Stock Features 209
8.3 The Stock Markets 210
Dealers and Brokers 210
Organization of the NYSE 211
NASDAQ Operations 213
Stock Market Reporting 214
8.4 Summary and Conclusions 215
PART 4 Capital Budgeting
CHAPTER 9NET PRESENT VALUE AND OTHER INVESTMENT CRITERIA 218
9.1 Net Present Value 219
The Basic Idea 219
Estimating Net Present Value 220
9.2 The Payback Rule 223
Defining the Rule 223
Analyzing the Rule 225
Redeeming Qualities of the Rule 225
Summary of the Rule 226
9.3 The Discounted Payback 227
9.4 The Average Accounting Return 229
9.5 The Internal Rate of Return 231
Problems with the IRR 235
Redeeming Qualities of the IRR 240
The Modified Internal Rate of Return (MIRR) 241
9.6 The Profitability Index 242
9.7 The Practice of Capital Budgeting 243
9.8 Summary and Conclusions 246
CHAPTER 10MAKING CAPITAL INVESTMENT DECISIONS 253
10.1 Project Cash Flows: A First Look 254
Relevant Cash Flows 254
The Stand-Alone Principle 254
10.2 Incremental Cash Flows 255
Sunk Costs 255
Opportunity Costs 255
Side Effects 256
Net Working Capital 256
Financing Costs 256
Other Issues 257
10.3 Pro Forma Financial Statements and Project Cash Flows 257
Getting Started: Pro Forma Financial Statements 257
Project Cash Flows 258
Projected Total Cash Flow and Value 259
10.4 More about Project Cash Flow 260
A Closer Look at Net Working Capital 260
Depreciation 263
An Example: The Majestic Mulch and Compost Company (MMCC) 266
10.5 Alternative Definitions of Operating Cash Flow 270
The Bottom-Up Approach 271
The Top-Down Approach 271
The Tax Shield Approach 271
Conclusion 272
10.6 Some Special Cases of Discounted Cash Flow Analysis 272
Evaluating Cost-Cutting Proposals 272
Setting the Bid Price 274
Evaluating Equipment Options with Difierent Lives 276
10.7 Summary and Conclusions 278
CHAPTER 11PROJECT ANALYSIS AND EVALUATION 284
11.1 Evaluating NPV Estimates 285
The Basic Problem 285
Projected versus Actual Cash Flows 285
Forecasting Risk 285
Sources of Value 286
11.2 Scenario and Other What-If Analyses 287
Getting Started 287
Scenario Analysis 288
Sensitivity Analysis 290
Simulation Analysis 291
11.3 Break-Even Analysis 292
Fixed and Variable Costs 292
Accounting Break-Even 295
Accounting Break-Even: A Closer Look 297
Uses for the Accounting Break-Even 297
11.4 Operating Cash Flow, Sales Volume, and Break-Even 298
Accounting Break-Even and Cash Flow 298
Sales Volume and Operating Cash Flow 300
Cash Flow, Accounting, and Financial Break-Even Points 300
11.5 Operating Leverage 303
The Basic Idea 303
Implications of Operating Leverage 303
Measuring Operating Leverage 303
Operating Leverage and Break-Even 305
11.6 Capital Rationing 306
Soft Rationing 306
Hard Rationing 306
11.7 Summary and Conclusions 307
PART 5 Risk and Return
HAPTER 12SOME LESSONS FROM CAPITAL MARKET HISTORY 311
12.1 Returns 312
Dollar Returns 312
Percentage Returns 314
12.2 The Historical Record 316
A First Look 316
A Closer Look 318
12.3 Average Returns: The First Lesson 322
Calculating Average Returns 322
Average Returns: The Historical Record 322
Risk Premiums 323
The First Lesson 323
12.4 The Variability of Returns: The Second Lesson 324
Frequency Distributions and Variability 324
The Historical Variance and Standard Deviation 325
The Historical Record 326
Normal Distribution 327
The Second Lesson 328
2008: A Year to Remember 328
Using Capital Market History 330
More on the Stock Market Risk Premium 330
12.5 More about Average Returns 332
Arithmetic versus Geometric Averages 332
Calculating Geometric Average Returns 332
Arithmetic Average Return or Geometric Average Return? 335
12.6 Capital Market Effciency 336
Price Behavior in an Effcient Market 336
The Effcient Markets Hypothesis 337
Some Common Misconceptions about the EMH 338
The Forms of Market Effciency 339
12.7 Summary and Conclusions 340
CHAPTER 13RETURN, RISK, AND THE SECURITY MARKET LINE 344
13.1 Expected Returns and Variances 345
Expected Return 345
Calculating the Variance 347
13.2 Portfolios 348Portfolio Weights 349
Portfolio Expected Returns 349
Portfolio Variance 350
13.3 Announcements, Surprises, and Expected Returns 352
Expected and Unexpected Returns 352
Announcements and News 352
13.4 Risk: Systematic and Unsystematic 354
Systematic and Unsystematic Risk 354
Systematic and Unsystematic Components of Return 354
13.5 Diversification and Portfolio Risk 355
The Effect of Diversification: Another Lesson from Market History 355
The Principle of Diversification 356
Diversification and Unsystematic Risk 357
Diversification and Systematic Risk 358
13.6 Systematic Risk and Beta 358
The Systematic Risk Principle 359
Measuring Systematic Risk 359
Portfolio Betas 360
13.7 The Security Market Line 361
Beta and the Risk Premium 361
The Security Market Line 366
13.8 The SML and the Cost of Capital: A Preview 369
The Basic Idea 369
The Cost of Capital 369
13.9 Summary and Conclusions 370
PART 6 Cost of Capital and Long-Term Financial Policy
CHAPTER 14COST OF CAPITAL 375
14.1 The Cost of Capital: Some Preliminaries 376
Required Return versus Cost of Capital 376
Financial Policy and Cost of Capital 377
14.2 The Cost of Equity 377
The Dividend Growth Model Approach 377
The SML Approach 379
14.3 The Costs of Debt and Preferred Stock 381
The Cost of Debt 381
The Cost of Preferred Stock 381
14.4 The Weighted Average Cost of Capital 382
The Capital Structure Weights 382
Taxes and the Weighted Average Cost of Capital 383
Calculating the WACC for Eastman Chemical 384
Solving the Warehouse Problem and Similar Capital Budgeting Problems 389
Performance Evaluation: Another Use of the WACC 391
14.5 Divisional and Project Costs of Capital 392
The SML and the WACC 392
Divisional Cost of Capital 393
The Pure Play Approach 393
The Subjective Approach 394
14.6 Company Valuation with the WACC 395
14.7 Flotation Costs and the Average Cost of Capital 398
The Basic Approach 398
Flotation Costs and NPV 399
Internal Equity and Flotation Costs 401
14.8 Summary and Conclusions 401
CHAPTER 15RAISING CAPITAL 407
15.1 The Financing Life Cycle of a Firm: Early-Stage Financing and Venture Capital 408
Venture Capital 408
Some Venture Capital Realities 409
Choosing a Venture Capitalist 409
Conclusion 409
15.2 Selling Securities to the Public: The Basic Procedure 410
Crowdfunding 411
Initial Coin Offerings (ICOs) 412
15.3 Alternative Issue Methods 413
15.4 Underwriters 414
Choosing an Underwriter 414
Types of Underwriting 414
The Aftermarket 416
The Green Shoe Provision 416
Lockup Agreements 416
The Quiet Period 416
Direct Listing 417
15.5 IPOs and Underpricing 417
IPO Underpricing: The 1999–2000 Experience 417
Evidence on Underpricing 420
The Partial Adjustment Phenomenon 422
Why Does Underpricing Exist? 423
15.6 New Equity Sales and the Value of the Firm 424
15.7 The Costs of Issuing Securities 425
The Costs of Selling Stock to the Public 425
The Costs of Going Public: A Case Study 428
15.8 Rights 430
The Mechanics of a Rights Offering 430
Number of Rights Needed to Purchase a Share 431
The Value of a Right 432
Ex Rights 433
The Underwriting Arrangements 435
Effects on Shareholders 435
15.9 Dilution 436
Dilution of Proportionate Ownership 436
Dilution of Value: Book versus Market Values 436
15.10 Issuing Long-Term Debt 438
15.11 Shelf Registration 439
15.12 Summary and Conclusions 440
CHAPTER 16FINANCIAL LEVERAGE AND CAPITAL STRUCTURE POLICY 444
16.1 The Capital Structure Question 445
Firm Value and Stock Value: An Example 445
Capital Structure and the Cost of Capital 446
16.2 The Effect of Financial Leverage 447
The Basics of Financial Leverage 447
Corporate Borrowing and Homemade Leverage 450
16.3 Capital Structure and the Cost of Equity Capital 451
M&M Proposition I: The Pie Model 451
The Cost of Equity and Financial Leverage: M&M Proposition II 452
Business and Financial Risk 454
16.4 M&M Propositions I and II with Corporate Taxes 455
The Interest Tax Shield 456
Taxes and M&M Proposition I 456
Taxes, the WACC, and Proposition II 457
Conclusion 458
16.5 Bankruptcy Costs 460
Direct Bankruptcy Costs 461
Indirect Bankruptcy Costs 461
16.6 Optimal Capital Structure 462
The Static Theory of Capital Structure 462
Optimal Capital Structure and the Cost of Capital 463
Optimal Capital Structure: A Recap 464
Capital Structure: Some Managerial Recommendations 466
16.7 The Pie Again 466
The Extended Pie Model 467
Marketed Claims versus Nonmarketed Claims 468
16.8 The Pecking-Order Theory 468
Internal Financing and the Pecking Order 468
Implications of the Pecking Order 469
16.9 Observed Capital Structures 470
16.10 A Quick Look at the Bankruptcy Process 471
Liquidation and Reorganization 471
Financial Management and the Bankruptcy Process 474
Agreements to Avoid Bankruptcy 474
16.11 Summary and Conclusions 475
CHAPTER 17DIVIDENDS AND PAYOUT POLICY 480
17.1 Cash Dividends and Dividend Payment 481
Cash Dividends 481
Standard Method of Cash Dividend Payment 481
Dividend Payment: A Chronology 482
More about the Ex-Dividend Date 482
17.2 Does Dividend Policy Matter? 484
An Illustration of the Irrelevance of Dividend Policy 484
Homemade Dividends 485
A Test 486
17.3 Real-World Factors Favoring a Low Dividend Payout 487
Taxes 487
Flotation Costs 487
Dividend Restrictions 487
17.4 Real-World Factors Favoring a High Dividend Payout 488
Desire for Current Income 488
Tax and Other Benefits from High Dividends 489
Conclusion 489
17.5 A Resolution of Real-World Factors? 489
Information Content of Dividends 490
The Clientele Effect 491
17.6 Stock Repurchases: An Alternative to Cash Dividends 491
Cash Dividends versus Repurchase 492
Real-World Considerations in a Repurchase 494
Share Repurchase and EPS 494
17.7 What We Know and Do Not Know about Dividend and Payout Policies 495
Dividends and Dividend Payers 495
Corporations Smooth Dividends 497
Putting It All Together 498
Some Survey Evidence on Dividends 500
17.8 Stock Dividends and Stock Splits 502
Some Details about Stock Splits and Stock Dividends 502
Value of Stock Splits and Stock Dividends 503
Reverse Splits 504
17.9 Summary and Conclusions 505
PART 7 Short-Term Financial Planning and Management
CHAPTER 18SHORT-TERM FINANCE AND PLANNING 510
18.1 Tracing Cash and Net Working Capital 511
18.2 The Operating Cycle and the Cash Cycle 512
Defining the Operating and Cash Cycles 513
The Operating Cycle and the Firm’s Organizational Chart 515
Calculating the Operating and Cash Cycles 515
Interpreting the Cash Cycle 518
18.3 Some Aspects of Short-Term Financial Policy 518
The Size of the Firm’s Investment in Current Assets 519
Alternative Financing Policies for Current Assets 520
Which Financing Policy Is Best? 523
Current Assets and Liabilities in Practice 524
18.4 The Cash Budget 525
Sales and Cash Collections 525
Cash Outflows 526
The Cash Balance 526
18.5 Short-Term Borrowing 527
Unsecured Loans 528
Secured Loans 529
Other Sources 530
18.6 A Short-Term Financial Plan 531
18.7 Summary and Conclusions 532
CHAPTER 19CASH AND LIQUIDITY MANAGEMENT 539
9.1 Reasons for Holding Cash 540
The Speculative and Precautionary Motives 540
The Transaction Motive 540
Compensating Balances 540
Costs of Holding Cash 540
Cash Management versus Liquidity Management 541
19.2 Understanding Float 541
Disbursement Float 541
Collection Float and Net Float 542
Float Management 543
Electronic Data Interchange and Check 21: The End of Float? 547
19.3 Cash Collection and Concentration 548
Components of Collection Time 548
Cash Collection 548
Lockboxes 548
Cash Concentration 550
Accelerating Collections: An Example 551
19.4 Managing Cash Disbursements 552
Increasing Disbursement Float 552
Controlling Disbursements 553
19.5 Investing Idle Cash 554
Temporary Cash Surpluses 554
Characteristics of Short-Term Securities 555
Some Difierent Types of Money Market Securities 556
19.6 Summary and Conclusions 557
19A Determining the Target Cash Balance 560
CHAPTER 20CREDIT AND INVENTORY MANAGEMENT 561
20.1 Credit and Receivables 562
Components of Credit Policy 562
The Cash Flows from Granting Credit 562
The Investment in Receivables 563
20.2 Terms of the Sale 563
The Basic Form 564
The Credit Period 564
Cash Discounts 565
Credit Instruments 567
20.3 Analyzing Credit Policy 567
Credit Policy Effects 567
Evaluating a Proposed Credit Policy 568
20.4 Optimal Credit Policy 570
The Total Credit Cost Curve 570
Organizing the Credit Function 571
20.5 Credit Analysis 572
When Should Credit Be Granted? 572
Credit Information 574
Credit Evaluation and Scoring 574
20.6 Collection Policy 575
Monitoring Receivables 575
Collection Effort 576
20.7 Inventory Management 576
The Financial Manager and Inventory Policy 576
Inventory Types 577
Inventory Costs 577
20.8 Inventory Management Techniques 578
The ABC Approach 578
The Economic Order Quantity Model 578
Extensions to the EOQ Model 583
Managing Derived-Demand Inventories 583
20.9 Summary and Conclusions 585
20A More about Credit Policy Analysis 590
PART 8 Topics in Corporate Finance
CHAPTER 21INTERNATIONAL CORPORATE FINANCE 591
21.1 Terminology 592
21.2 Foreign Exchange Markets and Exchange Rates 593
Exchange Rates 594
21.3 Purchasing Power Parity 598
Absolute Purchasing Power Parity 598
Relative Purchasing Power Parity 600
21.4 Interest Rate Parity, Unbiased Forward Rates, and the International Fisher Effect 602
Covered Interest Arbitrage 602
Interest Rate Parity 603
Forward Rates and Future Spot Rates 604
Putting It All Together 604
21.5 International Capital Budgeting 606
Method 1: The Home Currency Approach 606
Method 2: The Foreign Currency Approach 607
Unremitted Cash Flows 608
21.6 Exchange Rate Risk 608
Short-Run Exposure 608
Long-Run Exposure 609
Translation Exposure 610
Managing Exchange Rate Risk 611
21.7 Political Risk 611
The Tax Cuts and Jobs Act of 2017 611
Managing Political Risk 612
21.8 Summary and Conclusions 613
CHAPTER 22BEHAVIORAL FINANCE: IMPLICATIONS FOR FINANCIAL MANAGEMENT 618
22.1 Introduction to Behavioral Finance 6192
2.2 Biases 619
Overconfidence 619
Overoptimism 620
Confirmation Bias 620
22.3 Framing Effects 621
Loss Aversion 621
House Money 622
22.4 Heuristics 624
The Affect Heuristic 624
The Representativeness Heuristic 625
Representativeness and Randomness 625
The Gambler’s Fallacy 626
22.5 Behavioral Finance and Market Efficiency 627
Limits to Arbitrage628
Bubbles and Crashes 630
22.6 Market Efficiency and the Performance of Professional Money Managers 635
22.7 Summary and Conclusions 638
CHAPTER 23OPTIONS AND CORPORATE FINANCE 641
23.1 Options: The Basics 642
Puts and Calls 642
Stock Option Quotations 643
Option Payoffs 644
23.2 Fundamentals of Option Valuation 646
Value of a Call Option at Expiration 646
The Upper and Lower Bounds on a Call Option’s Value 647
A Simple Model: Part I 649
Four Factors Determining Option Values 650
23.3 Valuing a Call Option 651
A Simple Model: Part II 651
The Fifth Factor 652
A Closer Look 653
23.4 Employee Stock Options 654
ESO Features 655
ESO Repricing 655
ESO Backdating 656
23.5 Equity as a Call Option on the Firm’s Assets 657
Case I: The Debt Is Risk-Free 657
Case II: The Debt Is Risky 658
23.6 Options and Capital Budgeting 659
The Investment Timing Decision 660
Managerial Options 661
23.7 Options and Corporate Securities 664
Warrants665
Convertible Bonds 666
Other Options 668
23.8 Summary and Conclusions 670
CHAPTER 24OPTION VALUATION 675
24.1 Put-Call Parity 676
Protective Puts 676
An Alternative Strategy 676
The Result 677
Continuous Compounding: A Refresher Course 678
24.2 The Black-Scholes Option Pricing Model 681
The Call Option Pricing Formula 681
Put Option Valuation 684
A Cautionary Note 685
24.3 More about Black-Scholes 686
Varying the Stock Price 686
Varying the Time to Expiration 688
Varying the Standard Deviation 690
Varying the Risk-Free Rate 690
Implied Standard Deviations 691
24.4 Valuation of Equity and Debt in a Leveraged Firm 693
Valuing the Equity in a Leveraged Firm 693
Options and the Valuation of Risky Bonds 694
24.5 Options and Corporate Decisions: Some Applications 695
Mergers and Diversification 696
Options and Capital Budgeting 697
24.6 Summary and Conclusions 699
CHAPTER 25MERGERS AND ACQUISITIONS 702
25.1 The Legal Forms of Acquisitions 703
Merger or Consolidation 703
Acquisition of Stock 704
Acquisition of Assets 704
Acquisition Classifications 705
A Note about Takeovers 705
Alternatives to Merger 706
25.2 Taxes and Acquisitions 706
Determinants of Tax Status 706
Taxable versus Tax-Free Acquisitions 707
25.3 Accounting for Acquisitions 707
The Purchase Method 707
More about Goodwill 708
25.4 Gains from Acquisitions 709
Synergy 709
Revenue Enhancement 710
Cost Reductions 711
Lower Taxes 712
Reductions in Capital Needs 713
Avoiding Mistakes 714
A Note about Inefficient Management 714
25.5 Some Financial Side Effiects of Acquisitions 715
EPS Growth 715
Diversification 716
25.6 The Cost of an Acquisition 716
Case I: Cash Acquisition 717
Case II: Stock Acquisition 717
Cash versus Common Stock 718
25.7 Defensive Tactics 719
The Corporate Charter 719
Repurchase and Standstill Agreements 719
Poison Pills and Share Rights Plans 720
Going Private and Leveraged Buyouts 721
Other Devices and Jargon of Corporate Takeovers 721
25.8 Some Evidence on Acquisitions: Does M&A Pay? 722
25.9 Divestitures and Restructurings 723
25.10 Summary and Conclusions 724
APPENDIX A MATHEMATICAL TABLES 730
APPENDIX B ANSWERS TO SELECTED END-OF-CHAPTER PROBLEMS 730
APPENDIX C USING THE HP 10B AND TI BA II PLUS FINANCIAL CALCULATORS 730