Fundamentals of Corporate Finance, 2nd edition, reflects the reality that finance, as an intellectual discipline, continues to be challenged by the experiences and events of market activity. Following the global financial crisis, managers are operating in relatively uncertain times.
The text helps you develop the intuition and analytical skills necessary to effectively apply financial tools in real–world decision–making situations. It provides a fully integrated framework for understanding how value creation relates to all aspects of corporate finance: whether it be evaluating an investment opportunity, determining the appropriate financing for a business, or managing working capital. This unique and integrated framework also enables you to develop problem–solving and decision–making skills.
This text has three core objectives:
1. Provide you with an intuitive framework for understanding fundamental finance concepts,
2. Show you how to analyse and solve finance problems and
3. Develop a skill set where you can apply the results of analysis to make good financial decisions.
In addition to these key objectives, students will obtain a greater understanding of finance
concepts through the following features:
- Demonstration problems examples that will provide opportunities to develop and refine
problem solving skills.
- Decision–making examples based on a range of business experiences with a focus on the decision–making process of the financial manager.
- Worked examples that support key concepts and student learning.
Wiley wishes you success in your finance studies.
About the authors xi
Organisation and coverage xv
Applications at a glance xviii
How to use this book xx
Student and lecturer resources xxiv
Selected abbreviations and notation xxv
PART 1. Introduction
CHAPTER 1. The financial manager and the company 2
PART 2. Foundations
CHAPTER 2. The financial system and the level of interest rates 30
CHAPTER 3. Financial statements, cash flows and tax 56
CHAPTER 4. Analysing financial statements 88
PART 3. Valuation of future cash flows and risk
CHAPTER 5. The time value of money 138
CHAPTER 6. Discounted cash flows and valuation 178
CHAPTER 7. Risk and return 222
CHAPTER 8. Bond valuation and the structure of interest rates 266
CHAPTER 9. Share valuation 302
PART 4. Capital budgeting decisions
CHAPTER 10. The fundamentals of capital budgeting 334
CHAPTER 11. Cash flows and capital budgeting 380
CHAPTER 12. Evaluating project economics and capital rationing 416
CHAPTER 13. The cost of capital 448
PART 5. Working capital management and financing decisions
CHAPTER 14. Working capital management 486
CHAPTER 15. How companies raise capital 520
CHAPTER 16. Capital structure policy 548
CHAPTER 17. Dividends and dividend policy 584
PART 6. Business formation, valuation and financial planning
CHAPTER 18. Business formation, growth and valuation 608
CHAPTER 19. Strategic financial planning and forecasting 646
PART 7. Options and corporate finance and international decisions
CHAPTER 20. Options and corporate finance 684
CHAPTER 21. International financial management 714
Appendix A: Present value and future value tables 746
Appendix B: Solutions to self–study problems 754