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Fundamentals of Corporate Finance, 3rd Edition International Student Version

Fundamentals of Corporate Finance, 3rd Edition International Student Version

Robert Parrino, David S. Kidwell, Thomas Bates, Peter Moles (Contributions by)

ISBN: 978-1-118-95927-5

Apr 2015

832 pages

Select type: E-Book

$96.00

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Description

Fundamentals of Corporate Finance, 3rd Edition by Robert Parrino, David Kidwell, and Thomas Bates develops the fundamental concepts underlying corporate finance in an intuitive manner while maintaining a strong emphasis on developing computational skills.

The authors believe that students who understand the intuition underlying the basic concepts of finance are better able to develop the critical judgments necessary to apply financial tools in real decision-making situations. The Third Edition offers a level of rigor that is appropriate for both business and finance majors and presents the content in a manner that all students find accessible and engaging.

Related Resources

1 The Financial Manager and the Firm 1

1.1 The Role of the Financial Manager 2

1.2 Forms of Business Organisation 7

1.3 Managing the Financial Function 10

1.4 The Goal of the Firm 13

1.5 Agency Conflicts: Separation of Ownership and Control 16

1.6 The Importance of Ethics in Business 23

2 The Financial Environment and the Level of Interest Rates 31

2.1 The Financial System 33

2.2 Direct Financing 35

2.3 Types of Financial Markets 38

2.4 Market Efficiency 42

2.5 The Stock Market 44

2.6 Financial Institutions and Indirect Financing 46

2.7 The Determinants of Interest Rate Levels 50

3 Financial Statements, Cash Flows and Taxes 61

3.1 Financial Statements and Accounting Principles 62

3.2 The Statement of Financial Position (Balance Sheet) 66

3.3 Market Value versus Book Value 73

3.4 The Income Statement and the Statement of Retained Earnings 76

3.5 Cash Flows 80

3.6 Tying the Financial Statements Together 85

3.7 International Accounting Issues 87

3.8 Corporate Income Tax 90

4 Analysing Financial Statements 101

4.1 Background for Financial Statement Analysis 102

4.2 Common-Size Financial Statements 104

4.3 Financial Statement Analysis 108

4.4 The DuPont System: A Diagnostic Tool 125

4.5 Selecting a Benchmark 131

4.6 Using Financial Ratios 134

5 The Time Value of Money 147

5.1 The Time Value of Money 148

5.2 Future Value and Compounding 151

5.3 Present Value and Discounting 163

5.4 Additional Concepts and Applications 170

6 Discounted Cash Flows and Valuation 179

6.1 Multiple Cash Flows 180

6.2 Level Cash Flows: Annuities and Perpetuities 186

6.3 Cash Flows That Grow at a Constant Rate 204

6.4 The Effective Annual Interest Rate 206

7 Risk and Return 219

7.1 Risk and Return 220

7.2 Quantitative Measures of Return 221

7.3 The Variance and Standard Deviation as Measures of Risk 227

7.4 Risk and Diversification 236

7.5 Systematic Risk 246

7.6 Compensation for Bearing Systematic Risk 250

7.7 The Capital Asset Pricing Model 251

8 Bond Valuation and the Structure of Interest Rates 261

8.1 Corporate Bonds 262

8.2 Bond Valuation 265

8.3 Bond Yields 273

8.4 Interest Rate Risk 278

8.5 The Structure of Interest Rates 281

9 Share Valuation 293

9.1 The Market for Shares 294

9.2 Valuing Ordinary Shares 299

9.3 Share Valuation: Some Simplifying Assumptions 304

9.4 Valuing Preference Shares 314

10 The Fundamentals of Capital Budgeting 323

10.1 An Introduction to Capital Budgeting 324

10.2 Net Present Value 328

10.3 The Payback Period 336

10.4 The Accounting Rate of Return 341

10.5 Internal Rate of Return 342

10.6 Capital Budgeting in Practice 353

11 Cash Flows and Capital Budgeting 363

11.1 Calculating Project Cash Flows 364

11.2 Estimating Cash Flows in Practice 373

11.3 Forecasting Free Cash Flows 389

11.4 Special Cases 391

12 Evaluating Project Economics and Capital Rationing 403

12.1 Variable Costs, Fixed Costs and Project Risk 404

12.2 Calculating Operating Leverage 412

12.3 Break-Even Analysis 415

12.4 Risk Analysis 419

12.5 Investment Decisions with Capital Rationing 423

13 The Cost of Capital 433

13.1 The Firm’s Overall Cost of Capital 434

13.2 The Cost of Debt 439

13.3 The Cost of Equity 445

13.4 Using the WACC in Practice 454

14 Working Capital Management 467

14.1 Working Capital Basics 468

14.2 The Operating and Cash Conversion Cycles 472

14.3 Working Capital Investment Strategies 476

14.4 Accounts Receivable 480

14.5 Inventory Management 483

14.6 Cash Management and Budgeting 485

14.7 Financing Working Capital 487

15 How Firms Raise Capital 499

15.1 Bootstrapping 500

15.2 Venture Capital 502

15.3 Initial Public Offering 508

15.4 IPO Pricing and Cost 515

15.5 Seasoned Offerings by a Public Company 520

15.6 Private Markets and Bank Loans 526

16 Capital Structure Policy 539

16.1 Capital Structure and Firm Value 540

16.2 The Benefits and Costs of Using Debt 550

16.3 Two Theories of Capital Structure 563

16.4 Practical Considerations in Choosing a Capital Structure 565

17 Dividends, Share Repurchases and Payout Policy 573

17.1 Dividends 574

17.2 Share Repurchases 580

17.3 Dividends and Firm Value 582

17.4 Share Dividends and Share Splits 587

17.5 Setting a Dividend Policy 590

18 Business Formation, Growth and Valuation 595

18.1 Starting a Business 596

18.2 The Role of the Business Plan 606

18.3 Valuing a Business 608

18.4 Important Issues in Valuation 624

19 Financial Planning and Forecasting 633

19.1 Financial Planning 634

19.2 Financial Planning Models 637

19.3 A Better Financial Planning Model 643

19.4 Beyond the Basic Planning Models 651

19.5 Managing and Financing Growth 653

20 Corporate Risk Management 671

20.1 Why Companies Manage Corporate Risks 673

20.2 Managing Operational, Business and Financial Risks 676

20.3 Forwards and Futures 678

20.4 Swaps 685

20.5 Financial Options 694

20.6 Option Valuation 698

20.7 Real Options 709

20.8 Agency Costs 712

21 International Financial Management 723

21.1 Introduction to International Finance Management 724

21.2 Foreign Exchange Markets 732

21.3 Country Risk 741

21.4 Cost of Capital for International Projects 746

21.5 International Capital Budgeting 752

21.6 Islamic Finance 758

Glossary 767

Subject Index 781

Company Index 789

Appendices – Available online at www.wiley.com/college/parrino

Appendix A: Present Value and Future Value Tables

Appendix B: Solutions to Selected Questions and Problems

  • ORION: Based on cognitive science, WileyPLUS with ORION helps students learn by learning about them.
  • An Intuitive Approach: Finance concepts are explained in an intuitive context to help students develop a richer understanding of those concepts and gain better insights into how finance problems can be approached.
  • Analysis and Problem Solving: In addition to the many numerical examples that are solved in the text of each chapter, this book has almost 1,200 end-of-chapter homework and review problems that have been written with Bloom’s Taxonomy in mind.
  • Decision Making: In the end, we want to prepare students to make sound financial decisions. To help students develop these skills, we illustrate throughout the texthow the results from financial analyses are used in decision making.
  • An Intuitive Approach: Explaining finance concepts in an intuitive context helps students develop a richer understanding of those concepts and gain better insights into how finance problems can be approached. Building Intuition boxes provide a statement of an important finance concept along with an intuitive example or explanation to help the student “get” the concept.
  • Learning by Doing applications contain quantitative problems with step-by-step solutions to help students better understand how to apply their intuition and analytical skills to solve problems.
  • Decision-Making Examples emphasize the decision-making process along with computation and provide students at all levels with experience in financial decision-making.
  • Adaptive Learning: WileyPLUS is equipped with an adaptive learning module called ORION. It provides students with a personal, adaptive learning experience so they can build their proficiency on topics and use their study time most effectively.
  • Finance Weekly Updates: www.wileyfinanceupdates.com. Every week brings you the latest news relevant to your Finance course. Password only available to current users.