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Chapter 1: Introduction of Corporate Finance

Introduction of corporate finance

A the law of one price

Investments projects and firms

Firms versus individuals

Chapter 2: The Time Value of Money and Net Present Value

The time value of money and net present value

Basic scenario perfect markets certainty constant interest rates

Loans and bonds

Returns net returns and rates of return

The time value of money future value and compounding

Present values discounting and capital budgeting

Net present value

Chapter 3: Stock and Bond Valuation: Annuities and Perpetuities

Stock and bond valuation annuities and perpetuities

Perpetuities

Annuities

The four formulas summarized

Projects with different lives and rental equivalents

Perpetuity and annuity derivations

Comparing different multiyear contracts

Chapter 4: A First Encounter with Capital Budgeting Rules

A first encounter with capital budgeting rules

Net present value chapter 4

The internal rate of return irr

The profitability index

The payback capital budgeting rule

How do chief financial officers CFOS decide

Chapter 5: Time-Varying Rates of Return and the Yield Curve

Working with time varying rates of return

Inflation

Study of treasury bills and yield curve in time varying interest rates

Why is the slope of yield curve upward

Corporate insights about time varying costs of capital obtained from the yield curve

Extracting forward interest rates

Shorting and locking in forward interest rate

Bond duration

Duration stability

Duration hedging

Continuous compounding

Institutional knowledge about compounding and price quotes

Chapter 6: Uncertainty, Default, and Risk

Uncertainty default and risk

Interest rates and credit risk default risk

Uncertainty in capital budgeting

Splitting uncertain project payoffs into debt and equity

Exercise

Chapter 7: A First Look at Investments

Risk and return risk aversion in a perfect market

Cash bonds and stocks 1970 to 2007

Market institutions related to equity an overview

Anecdote

Problems

Summary

Chapter 8: Investor Choice Risk and Reward

Investor choice risk and reward

Portfolios diversification and investor preferences

How to measure risk contribution

Expected rates of return and market betas for weighted portfolios and firms

Spreadsheet calculations for risk and reward

An investors specific trade off between risk and reward

A shortcut formula for the risk of a portfolio

Graphing the mean variance efficient frontier

Adding a risk free asset

Chapter 9: The Capital Asset Pricing Model

The capital asset pricing model

What you already know and what you want to know

The capital asset pricing model capm a cookbook recipe approach

The capm cost of capital in the present value formula

Estimating the capm inputs

Empirical evidence is the capm the right model

Application certainty equivalence

Theory the capm basis

Theory capm alternatives

Chapter 10: Market Imperfections

Market imperfections

Causes and consequences of imperfect markets

Opinions disagreements and insider information

Market depth and transaction costs

Taxes

Entrepreneurial finance

Deconstructing quoted rates of return liquidity and tax premiums

Multiple effects how to work novel problems

Chapter 11: Perfect and Efficient Markets, and Classical and Behavioral Finance

Perfect and efficient markets and classical and behavioral finance

Relation to perfect market

The fundamentals based classification and behavioral finance

The noise

Investment consequences

Chapter 12: Capital Budgeting Applications and Pitfalls

Capital budgeting applications and pitfalls

Promised expected typical or most likely

Badly blended costs of capital

The economics of project interactions

Evaluating projects incrementally

Real options

Behavioral biases

Incentive agency biases

An npv checklist

Decision trees one set of parameters

Projects with different parameters

Appendix valuing some more real options

Chapter 13: from Financial Statements to Economic Cash Flows

From financial statements to economic cash flows

Financial statements

A bottom up example long term accruals depreciation

Bottom up example deferred taxes

Bottom up example short term accruals and working capital

Earnings management

Extracting economic cash flow from pepsico financials

Summary in from financial statements to economic cash flows

Chapter 14: Valuation from Comparables and Some Financial Ratios

Valuation comparables financial ratios

Capital structure payout policy

Comparables and net present value

The price or earnings p or e ratio

Problems with price or earnings ratios

Other financial ratios

Chapter 15: Corporate Claims

Corporate claims

The basic building blocks

Liabilities corporate claims

Equity stock

Tracking ibms capital structure from 2001 to 2003

Chapter 16: Capital Structure and Capital Budgeting In a Perfect Market

Capital structure and capital budgeting in a perfect market

Conceptual basics maximization of equity value or firm value

Modigliani and miller the informal way

Modigliani and miller the formal way

The weighted average cost of capital wacc

The big picture how to think of debt and equity

Non financial and operational liabilities and the marginal cost of capital

Chapter 17: the Weighted Cost of Capital and Adjusted Present Value in an Imperfect Market with Taxes

The weighted cost of capital and adjusted present value in an imperfect market with taxes

Relative taxation of debt and equity

Firm value under different capital structures

Formulaic valuation methods apv and wacc

A sample application of tax adjusted valuation techniques

The tax subsidy on pepsicos financial statement

Contemplating corporate taxes

The discount factor on tax obligations and tax shelters

Chapter 18: What Matters?

What matters

The role of personal income taxes and clientele effects

Operating policy behavior in bad times financial distress

Operating policy agency issues and behaviour in good times

Bondholder expropriation

Inside information and adverse selection

Transaction costs and behavioural issues

Static capital structure summary

The effect of leverage on costs of capital and quoted bond yields

Valuation formulas with many market imperfections

Capital structure dynamics

Chapter 19: Equity Payouts

Equity payouts

Perfect market irrelevance

Dividends and share repurchases

Empirical evidence

Survey evidence

Summary in equity payouts

Chapter 20: for Value, Financial Structure and Corporate Strategy Analysis

For value financial structure and corporate strategy analysis

The goal and logic

The template

The length of the detailed projection period

The detailed projection phase

The terminal value

Some pro formas

Alternative assumptions and sensitivity and scenario analyses

Proposing capital structure change

Our pro forma in hindsight

Caution the emperors new clothes

Chapter 20 appendix

Chapter 21: Capital Structure Dynamics

Capital structure dynamics firm scale

Theories of capital structure levels changes and issuing activity

Capital market pressures toward the optimal capital structure

Working capital management and financial flexibility

Debt and debt hybrid offerings

Seasoned equity offerings

Initial public offerings ipos

Raising funds through other claims and means

The capital market response to issue and dividend announcements

Chapter 22: Capital Structure Patterns In the United States

Capital structure patterns in the united states

Empirical capital structure patterns

Mechanisms versus causes

What are the underlying rationales for capital structure changes

Survey evidence from cfos

Chapter 22 appendix

Chapter 23: Investment Banking and Mergers and Acquisitions

Investment banking and mergers and acquisitions

Underwriting services from the firms perspective

Mergers and acquisitions m and a from the firms perspective

Chapter 24: Corporate Governance        

Corporate governance

Separation of ownership and control

Managerial temptations

The role of social institutions

Debt the right of creditors to force default

Equity the right of shareholders to vote

The design and effectiveness of corporate governance systems

Chapter 25: International Finance

International finance

Currencies and exchange rates

Investments in foreign financial markets

Capital budgeting with foreign cash flows

Corporate currency hedging

Who are you working for

Chapter 26: Options and Risk Management

Options and risk management

A call and put options on stock

Put call parity

Valuing options from underlying stock prices

The black scholes inputs