Additional Information
Book Details
Abstract
“Strikes the right balance between the theoretical concepts and their applications”
Ortenca Kume, University of Kent
“Written in a refreshing, crisp and precise manner”
Jan Schnitzler, VU University Amsterdam
In this new and fully updated Seventh Edition of Corporate Finance: Principles and Practice, the key principles and mathematical techniques are clearly explained step–by-step and put into practice through numerous vignettes which take a closer look at real-world and well-known companies.
What’s new?
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Chapter vignettes refreshed to reflect the current economic and financial climate,
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along with accompanying questions aiming to deepen student's knowledge of key
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contemporary issues
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All data and tables updated to reflect current trends in key economic variables and
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developments in corporate finance
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Chapter 1 revised to reflect recent developments in corporate governance
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Chapter 11 updated to take account of the changes in UK anti-trust regulation
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover | Cover | ||
| Title Page | iii | ||
| Copyright Page | iv | ||
| About the Authors | v | ||
| Contents | vii | ||
| Preface | xiii | ||
| Acknowledgements | xv | ||
| 1 The finance function | 1 | ||
| Learning objectives | 1 | ||
| Introduction | 2 | ||
| 1.1 Two key concepts in corporate finance | 2 | ||
| 1.2 The role of the financial manager | 5 | ||
| 1.3 Corporate objectives | 8 | ||
| 1.4 How is shareholder wealth maximised? | 11 | ||
| 1.5 Agency theory | 13 | ||
| 1.6 Corporate governance | 20 | ||
| 1.7 Conclusion | 26 | ||
| Key points | 28 | ||
| Self-test questions | 30 | ||
| Questions for review | 31 | ||
| Questions for discussion | 32 | ||
| References | 32 | ||
| Recommended reading | 33 | ||
| 2 Capital markets, market efficiency and ratio analysis | 34 | ||
| Learning objectives | 34 | ||
| Introduction | 35 | ||
| 2.1 Sources of business finance | 35 | ||
| 2.2 Capital markets | 38 | ||
| 2.3 Capital market efficiency | 42 | ||
| 2.4 Assessing financial performance | 54 | ||
| 2.5 Conclusion | 73 | ||
| Key points | 73 | ||
| Self-test questions | 75 | ||
| Questions for review | 76 | ||
| Questions for discussion | 77 | ||
| References | 78 | ||
| Recommended reading | 80 | ||
| 3 Short-term finance and the management of working capital | 81 | ||
| Learning objectives | 81 | ||
| Introduction | 82 | ||
| 3.1 The objectives of working capital management | 82 | ||
| 3.2 Working capital policies | 82 | ||
| 3.3 Working capital and the cash conversion cycle | 88 | ||
| 3.4 Overtrading | 90 | ||
| 3.5 Managing inventory | 91 | ||
| 3.6 Managing cash | 95 | ||
| 3.7 Managing receivables | 99 | ||
| 3.8 Conclusion | 105 | ||
| Key points | 105 | ||
| Self-test questions | 106 | ||
| Questions for review | 107 | ||
| Questions for discussion | 108 | ||
| References | 110 | ||
| Recommended reading | 110 | ||
| 4 Long-term finance: equity finance | 111 | ||
| Learning objectives | 111 | ||
| Introduction | 112 | ||
| 4.1 Equity finance | 112 | ||
| 4.2 The stock exchange | 114 | ||
| 4.3 Rights issues | 119 | ||
| 4.4 Scrip issues, share splits, scrip dividends and share repurchases | 126 | ||
| 4.5 Preference shares | 129 | ||
| 4.6 Conclusion | 132 | ||
| Key points | 133 | ||
| Self-test questions | 134 | ||
| Questions for review | 135 | ||
| Questions for discussion | 136 | ||
| References | 138 | ||
| Recommended reading | 138 | ||
| 5 Long-term finance: debt finance, hybrid finance and leasing | 139 | ||
| Learning objectives | 139 | ||
| Introduction | 140 | ||
| 5.1 Bonds, loan notes, loan stock and debentures | 140 | ||
| 5.2 Bank and institutional debt | 146 | ||
| 5.3 International debt finance | 149 | ||
| 5.4 Convertible bonds | 149 | ||
| 5.5 Warrants | 153 | ||
| 5.6 The valuation of fixed-interest bonds | 154 | ||
| 5.7 The valuation of convertible bonds | 156 | ||
| 5.8 Leasing | 158 | ||
| 5.9 Evaluating the financial effect of financing choices | 165 | ||
| 5.10 Conclusion | 167 | ||
| Key points | 167 | ||
| Self-test questions | 169 | ||
| Questions for review | 170 | ||
| Questions for discussion | 171 | ||
| References | 172 | ||
| Recommended reading | 172 | ||
| 6 An overview of investment appraisal methods | 174 | ||
| Learning objectives | 174 | ||
| Introduction | 175 | ||
| 6.1 The payback method | 175 | ||
| 6.2 The return on capital employed method | 177 | ||
| 6.3 The net present value method | 180 | ||
| 6.4 The internal rate of return method | 183 | ||
| 6.5 A comparison of the NPv and IRR methods | 187 | ||
| 6.6 The profitability index and capital rationing | 191 | ||
| 6.7 The discounted payback method | 196 | ||
| 6.8 Conclusion | 197 | ||
| Key points | 197 | ||
| Self-test questions | 198 | ||
| Questions for review | 199 | ||
| Questions for discussion | 201 | ||
| References | 203 | ||
| Recommended reading | 203 | ||
| 7 Investment appraisal: applications and risk | 204 | ||
| Learning objectives | 204 | ||
| Introduction | 205 | ||
| 7.1 Relevant project cash flows | 205 | ||
| 7.2 Taxation and capital investment decisions | 207 | ||
| 7.3 Inflation and capital investment decisions | 212 | ||
| 7.4 Investment appraisal and risk | 215 | ||
| 7.5 Appraisal of foreign direct investment | 222 | ||
| 7.6 Empirical investigations of investment appraisal | 228 | ||
| 7.7 Conclusion | 231 | ||
| Key points | 232 | ||
| Self-test questions | 233 | ||
| Questions for review | 234 | ||
| Questions for discussion | 236 | ||
| References | 239 | ||
| Recommended reading | 240 | ||
| 8 Portfolio theory and the capital asset pricing model | 241 | ||
| Learning objectives | 241 | ||
| Introduction | 242 | ||
| 8.1 The measurement of risk | 242 | ||
| 8.2 The concept of diversification | 245 | ||
| 8.3 Investor attitudes to risk | 251 | ||
| 8.4 Markowitz’s portfolio theory | 253 | ||
| 8.5 Introduction to the capital asset pricing model | 258 | ||
| 8.6 Using the CAPM to value shares | 259 | ||
| 8.7 Empirical tests of the CAPM | 269 | ||
| 8.8 Conclusion | 271 | ||
| Key points | 272 | ||
| Self-test questions | 273 | ||
| Questions for review | 273 | ||
| Questions for discussion | 275 | ||
| References | 277 | ||
| Recommended reading | 278 | ||
| 9 The cost of capital and capital structure | 280 | ||
| Learning objectives | 280 | ||
| Introduction | 281 | ||
| 9.1 Calculating the cost of individual sources of finance | 281 | ||
| 9.2 Calculating weighted average cost of capital | 285 | ||
| 9.3 Average and marginal cost of capital | 288 | ||
| 9.4 The CAPM and investment appraisal | 289 | ||
| 9.5 Practical problems with calculating WACC | 294 | ||
| 9.6 WACC in the real world | 296 | ||
| 9.7 The cost of capital for foreign direct investment | 298 | ||
| 9.8 Gearing: its measurement and significance | 301 | ||
| 9.9 The concept of an optimal capital structure | 305 | ||
| 9.10 The traditional approach to capital structure | 306 | ||
| 9.11 Miller and modigliani (I): the net income approach | 308 | ||
| 9.12 Miller and modigliani (II): corporate tax | 310 | ||
| 9.13 Market imperfections | 311 | ||
| 9.14 Miller and personal taxation | 314 | ||
| 9.15 Pecking order theory | 315 | ||
| 9.16 Conclusion: does an optimal capital structure exist? | 316 | ||
| Key points | 317 | ||
| Self-test questions | 318 | ||
| Questions for review | 319 | ||
| Questions for discussion | 321 | ||
| References | 323 | ||
| Recommended reading | 324 | ||
| 10 Dividend policy | 325 | ||
| Learning objectives | 325 | ||
| Introduction | 326 | ||
| 10.1 Dividends: operational and practical issues | 326 | ||
| 10.2 The effect of dividends on shareholder wealth | 329 | ||
| 10.3 Dividend irrelevance | 329 | ||
| 10.4 Dividend relevance | 331 | ||
| 10.5 Dividend relevance or irrelevance? | 336 | ||
| 10.6 Dividend policies | 337 | ||
| 10.7 Alternatives to cash dividends | 343 | ||
| 10.8 Empirical evidence on dividend policy | 350 | ||
| 10.9 Conclusion | 351 | ||
| Key points | 352 | ||
| Self-test questions | 353 | ||
| Questions for review | 354 | ||
| Questions for discussion | 356 | ||
| References | 357 | ||
| Recommended reading | 358 | ||
| 11 Mergers and takeovers | 359 | ||
| Learning objectives | 359 | ||
| Introduction | 360 | ||
| 11.1 The terminology of mergers and takeovers | 360 | ||
| 11.2 Justifications for acquisitions | 361 | ||
| 11.3 Trends in takeover activity | 366 | ||
| 11.4 Target company valuation | 369 | ||
| 11.5 The financing of acquisitions | 377 | ||
| 11.6 Strategic and tactical issues | 381 | ||
| 11.7 Divestment | 390 | ||
| 11.8 Private equity | 396 | ||
| 11.9 Empirical research on acquisitions | 397 | ||
| 11.10 Conclusion | 401 | ||
| Key points | 402 | ||
| Self-test questions | 403 | ||
| Questions for review | 403 | ||
| Questions for discussion | 405 | ||
| References | 409 | ||
| Recommended reading | 410 | ||
| 12 Risk management | 411 | ||
| Learning objectives | 411 | ||
| Introduction | 412 | ||
| 12.1 Interest and exchange rate risk | 412 | ||
| 12.2 Internal risk management | 420 | ||
| 12.3 External risk management | 421 | ||
| 12.4 Futures contracts | 424 | ||
| 12.5 Options | 427 | ||
| 12.6 Swaps | 432 | ||
| 12.7 Issues in interest and exchange risk management | 437 | ||
| 12.8 Political risk | 445 | ||
| 12.9 Conclusion | 447 | ||
| Key points | 447 | ||
| Self-test questions | 448 | ||
| Questions for review | 450 | ||
| Questions for discussion | 451 | ||
| References | 452 | ||
| Recommended reading | 453 | ||
| Answers to self-test questions | 455 | ||
| Glossary | 474 | ||
| Present value tables | 482 | ||
| Index | 484 |