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Financial Management Theory and Practice (with Thomson ONE)

by: BRIGHAM/EHRHARDT

Financial Management Theory and Practice (with Thomson ONE)

by: BRIGHAM/EHRHARDT

ISBN 13:
9780324259681
ISBN 10:
0324259689
Edition: 11th
Format: Hardcover
Copyright: 03/12/2004
Publisher: South-Western College Pub
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Summary

This text remains the only text in the market that presents a balance of financial theory and applications. The authors maintain the same four goals as with the first edition: helping learners to make good financial decisions, providing a solid text for the introductory MBA course, motivating learners by demonstrating finance is relevant and interesting, and presenting the material clearly.

Preface

iii

PART 1 Fundamental Concepts of Financial Management

(208)

An Overview of Financial Management and the Financial Environment

(44)

The Five-Minute MBA

(1)

The Corporate Life Cycle

(3)

The Primary Objective of the Corporation: Value Maximization

(4)

Box: Corporate Scandals and Maximizing Stock Price

(1)

The Financial Markets

(4)

Financial Institutions

(3)

Box: Online Trading Systems

(2)

Secondary Markets

(1)

The Stock Market

(1)

Box: Measuring the Market

(1)

The Cost of Money and Interest Rate Levels

(2)

The Determinants of Market Interest Rates

(5)

The Term Structure of Interest Rates

(2)

What Determines the Shape of the Yield Curve?

(2)

International Risk Factors

(1)

Economic Factors That Influence Interest Rate Levels

(2)

A Preview of What Is Ahead

(1)

e-Resources

(1)

Summary

(7)

Web Extension: The Pure Expectations Theory and Estimation of Forward Rates

Time Value of Money

(45)

Time Lines

(1)

Box: Corporate Valuation and the Time Value of Money

(1)

Future Value

(5)

Box: The Power of Compound Interest

(1)

Present Value

(2)

Solving for Interest Rate and Time

(3)

Future Value of an Annuity

(3)

Present Value of an Annuity

(4)

Annuities: Solving for Interest Rate, Number of Periods, or Payment

(1)

Perpetuities

(1)

Uneven Cash Flow Streams

(3)

Growing Annuities

(1)

Semiannual and Other Compounding Periods

(4)

Fractional Time Periods

(1)

Box: Using the Internet for Personal Financial Planning

(1)

Amortized Loans

(2)

Summary

(12)

Web Extension: The Tabular Approach and Continuous Compounding

Financial Statements, Cash Flow, and Taxes

(35)

Financial Statements and Reports

(1)

Box: Corporate Valuation and Financial Statements

(1)

The Balance Sheet

(3)

The Income Statement

(1)

Statement of Retained Earnings

(1)

Net Cash Flow

(1)

Box: Financial Analysis on the Internet

(1)

Statement of Cash Flows

100

(2)

Modifying Accounting Data for Managerial Decisions

102

(4)

Box: Financial Bamboozling: How to Spot It

106

(3)

MVA and EVA

109

(3)

The Federal Income Tax System

112

(5)

Summary

117

(9)

Web Extension: Individual Taxes

Risk and Return: The Basics

126

(46)

Investment Returns

127

(1)

Box: Corporate Valuation and Risk

128

(1)

Stand-Alone Risk

129

(10)

Box: The Trade-Off Between Risk and Return

139

(1)

Risk in a Portfolio Context

139

(9)

Box: The Benefits of Diversifying Overseas

148

(4)

Calculating Beta Coefficients

152

(3)

The Relationship between Risk and Rates of Return

155

(6)

Projects versus Securities

161

(1)

Some Concerns about Beta and the CAPM

161

(1)

Volatility versus Risk

162

(1)

Summary

163

(9)

Web Extension: Continuous Distributions and Estimating Beta with a Calculator

Risk and Return: Portfolio Theory and Asset Pricing Models

172

(37)

Measuring Portfolio Risk

173

(1)

Box: Corporate Valuation and Risk

174

(2)

Efficient Portfolios

176

(3)

Choosing the Optimal Portfolio

179

(3)

The Basic Assumptions of the Capital Asset Pricing Model

182

(1)

The Capital Market Line and the Security Market Line

183

(4)

Calculating Beta Coefficients

187

(8)

Empirical Tests of the CAPM

195

(2)

Arbitrage Pricing Theory

197

(3)

The Fama-French Three-Factor Model

200

(2)

An Alternative Theory of Risk and Return: Behavioral Finance

202

(1)

Summary

203

(6)

PART 2 Securities and Their Valuation

209

(96)

Bonds and Their Valuation

210

(38)

Box: Corporate Valuation and Risk

212

(1)

Who Issues Bonds?

212

(1)

Key Characteristics of Bonds

213

(5)

Bond Valuation

218

(6)

Bond Yields

224

(2)

Bonds with Semiannual Coupons

226

(1)

Box: Drinking Your Coupons

227

(1)

Assessing the Risk of a Bond

228

(2)

Default Risk

230

(8)

Box: Santa Fe Bonds Finally Mature After 114 Years

238

(1)

Bond Markets

239

(2)

Summary

241

(7)

Stocks and Their Valuation

248

(36)

Legal Rights and Privileges of Common Stockholders

249

(1)

Box: Corporate Valuation and Risk

250

(1)

Types of Common Stock

251

(1)

The Market for Common Stock

252

(2)

Common Stock Valuation

254

(1)

Box: Australian Bordello's IPO: First Day Performance Is Up

255

(3)

Constant Growth Stocks

258

(3)

Expected Rate of Return on a Constant Growth Stock

261

(2)

Valuing Stocks That Have a Nonconstant Growth Rate

263

(3)

Market Multiple Analysis

266

(1)

Stock Market Equilibrium

266

(6)

Actual Stock Prices and Returns

272

(3)

Preferred Stock

275

(1)

Box: A Nation of Traders

276

(1)

Summary

277

(7)

Web Extension: Derivation of Valuation Equations

Financial Options and Their Valuation

284

(21)

Financial Options

285

(1)

Box: Corporate Valuation and Financial Options

286

(5)

Box: Using Options in Compensation Plans

291

(1)

Introduction to Option Pricing Models: The Binomial Approach

291

(4)

The Black-Scholes Option Pricing Model (OPM)

295

(4)

The Valuation of Put Options

299

(1)

Summary

300

(5)

Web Extension: The Binomial Approach

PART 3 Projects and Their Valuation

305

(136)

The Cost of Capital

306

(37)

The Weighted Average Cost of Capital

307

(1)

Box: Corporate Valuation and the Cost of Capital

308

(1)

Cost of Debt, rd(1 -- T)

308

(2)

Cost of Preferred Stock, rps

310

(1)

Cost of Common Stock, rs

310

(2)

The CAPM Approach

312

(5)

Dividend-Yield-plus-Growth-Rate, or Discounted Cash Flow (DCF), Approach

317

(2)

Bond-Yield-plus-Risk-Premium Approach

319

(1)

Comparison of the CAPM, DCF, and Bond-Yield-plus-Risk-Premium Methods

320

(1)

Composite, or Weighted Average, Cost of Capital, WACC

320

(1)

Box: Stern Stewart's WACC Estimates for Some Large U.S. Corporations

321

(2)

Factors That Affect the Weighted Average Cost of Capital

323

(1)

Box: Global Variations in the Cost of Capital

324

(1)

Adjusting the Cost of Capital for Risk

324

(3)

Techniques for Measuring Divisional Betas

327

(1)

Estimating the Cost of Capital for Individual Projects

328

(1)

Adjusting the Cost of Capital for Flotation Costs

329

(2)

Some Problem Areas in Cost of Capital

331

(1)

Four Mistakes to Avoid

332

(1)

Summary

333

(10)

Web Extension: Estimation Issues: Growth Rates and the Nonconstant Growth Model

The Basics of Capital Budgeting: Evaluating Cash Flows

343

(36)

Box: Corporate Valuation and Capital Budgeting

344

(1)

Overview of Capital Budgeting

344

(1)

Project Classifications

345

(1)

Capital Budgeting Decision Rules

346

(7)

Comparison of the NPV and IRR Methods

353

(4)

Modified Internal Rate of Return (MIRR)

357

(2)

Profitability Index

359

(1)

Conclusions on Capital Budgeting Methods

359

(2)

Business Practices

361

(1)

The Post-Audit

362

(1)

Box: How Does Industry Evaluate Projects?

363

(1)

Special Applications of Cash Flow Evaluation

364

(3)

The Optimal Capital Budget

367

(1)

Summary

368

(11)

Web Extension: The AAR Method, the EAA Approach, and the Marginal WACC

Cash Flow Estimation and Risk Analysis

379

(40)

Box: Corporate Valuation, Cash Flows, and Risk Analysis

380

(1)

Estimating Cash Flows

380

(1)

Identifying the Relevant Cash Flows

381

(4)

Tax Effects

385

(4)

Evaluating Capital Budgeting Projects

389

(6)

Adjusting for Inflation

395

(2)

Project Risk Analysis: Techniques for Measuring Stand-Alone Risk

397

(4)

Box: Capital Budgeting Practices in the Asia/Pacific Region

401

(1)

Box: High-Tech CFOs

402

(4)

Project Risk Conclusions

406

(1)

Incorporating Project Risk into Capital Budgeting

406

(1)

Managing Risk through Phased Decisions: Decision Trees

407

(2)

Summary

409

(10)

Web Extension: Replacement Project Analysis

Real Options

419

(22)

Box: Corporate Valuation and Real Options

420

(1)

Introduction to Real Options

421

(2)

Valuing Real Options

423

(1)

The Investment Timing Option: An Illustration

423

(10)

Concluding Thoughts on Real Options

433

(1)

Box: Growth Options at Dot-Com Companies

434

(1)

Summary

435

(6)

Web Extension: Growth Options, Abandonment Options, and Risk-Neutral Valuation

PART 4 Corporate Valuation

441

(104)

Analysis of Financial Statements

442

(34)

Box: Corporate Valuation and Analysis of Financial Statements

443

(1)

Ratio Analysis

443

(1)

Liquidity Ratios

444

(3)

Asset Management Ratios

447

(2)

Debt Management Ratios

449

(3)

Profitability Ratios

452

(1)

Box: International Accounting Differences Create Headaches for Investors

453

(1)

Market Value Ratios

454

(2)

Trend Analysis, Common Size Analysis, and Percent Change Analysis

456

(4)

Tying the Ratios Together: The Du Pont Chart and Equation

460

(2)

Comparative Ratios and ``Benchmarking''

462

(1)

Uses and Limitations of Ratio Analysis

463

(2)

Box: Ratio Analysis in the Internet Age

465

(1)

Problems with ROE

466

(1)

Looking Beyond the Numbers

466

(1)

Summary

467

(9)

Financial Planning and Forecasting Pro Forma Financial Statements

476

(30)

Overview of Financial Planning

477

(1)

Box: Corporate Valuation and Financial Planning

478

(2)

Sales Forecast

480

(2)

Financial Statement Forecasting: The Percent of Sales Method

482

(11)

The AFN Formula

493

(1)

Forecasting Financial Requirements When the Balance Sheet Ratios Are Subject to Change

494

(3)

Summary

497

(9)

Web Extension: Financing Feedbacks and Alternative Forecasting Techniques

Corporate Valuation, Value-Based Management, and Corporate Governance

506

(39)

Overview of Corporate Valuation

507

(1)

Box: Corporate Valuation: Putting the Pieces Together

508

(1)

The Corporate Valuation Model

509

(7)

Value-Based Management

516

(7)

Box: Who Is Creating Wealth?

523

(1)

Box: Value-Based Management in Practice

524

(1)

Corporate Governance and Shareholder Wealth

525

(5)

Box: International Corporate Governance

530

(4)

Summary

534

(11)

PART 5 Strategic Financing Decisions

545

(102)

Capital Structure Decisions: The Basics

546

(36)

Preview of Capital Structure Issues

547

(1)

Box: Corporate Valuation and the Cost of Capital

548

(1)

Business and Financial Risk

549

(7)

Capital Structure Theory

556

(2)

Box: Yogi Berra on the MM Proposition

558

(6)

Estimating the Optimal Capital Structure

564

(1)

Box: Taking a Look at Global Capital Structures

565

(7)

Checklist for Capital Structure Decisions

572

(3)

Summary

575

(7)

Web Extension: Degree of Leverage

Capital Structure Decisions: Extensions

582

(31)

Box: Corporate Valuation: Capital Structure Decisions

583

(1)

Capital Structure Theory: Arbitrage Proofs of the Modigliani-Miller Models

583

(9)

Introducing Personal Taxes: The Miller Model

592

(3)

Criticisms of the MM and Miller Models

595

(2)

An Extension to the MM Model

597

(3)

Risky Debt and Equity as an Option

600

(4)

Capital Structure Theory: Our View

604

(2)

Summary

606

(7)

Distributions to Shareholders: Dividends and Repurchases

613

(34)

The Level of Distributions and Firm Value

614

(1)

Box: Corporate Valuation and Distributions to Shareholders

615

(3)

Clientele Effect

618

(1)

Box: Dividend Yields Around the World

619

(1)

Information Content, or Signaling, Hypothesis

619

(2)

Implications for Dividend Stability

621

(1)

Setting the Target Distribution Level: The Residual Distribution Model

621

(3)

Distributions in the Form of Dividends

624

(2)

Distributions through Stock Repurchases

626

(4)

Comparison of Dividends and Repurchases

630

(1)

Other Factors Influencing Distributions

631

(1)

Overview of the Distribution Policy Decision

632

(2)

Stock Splits and Stock Dividends

634

(2)

Dividend Reinvestment Plans

636

(1)

Summary

637

(10)

PART 6 Tactical Financing Decisions

647

(94)

Initial Public Offerings, Investment Banking, and Financial Restructuring

648

(38)

Box: Corporate Valuation, IPOs, and Financial Restructuring

649

(1)

The Financial Life Cycle of a Startup Company

649

(1)

The Decision to Go Public: Initial Public Offerings

650

(2)

The Process of Going Public

652

(8)

Equity Carve-Outs: A Special Type of IPO

660

(1)

Non-IPO Investment Banking Activities

661

(3)

The Decision to Go Private

664

(2)

Managing the Maturity Structure of Debt

666

(2)

Refunding Operations

668

(5)

Box: TVA Ratchets Down Its Interest Expenses

673

(2)

Managing the Risk Structure of Debt

675

(2)

Box: Bowie Bonds Ch-Ch-Change Asset Securitization

677

(1)

Summary

678

(8)

Web Extension: Rights Offerings and Zero Coupon Bonds

Lease Financing

686

(26)

The Two Parties to Leasing

687

(1)

Types of Leases

687

(1)

Box: Corporate Valuation and Lease Financing

688

(2)

Tax Effects

690

(2)

Financial Statement Effects

692

(2)

Evaluation by the Lessee

694

(4)

Evaluation by the Lessor

698

(1)

Box: Leasing Comes to the Internet

699

(2)

Other Issues in Lease Analysis

701

(2)

Box: Lease Securitization

703

(1)

Other Reasons for Leasing

704

(1)

Summary

705

(7)

Web Extension: Percentage Cost Analysis, Leasing Feedback, and Leveraged Leases

Hybrid Financing: Preferred Stock, Warrants, and Convertibles

712

(29)

Preferred Stock

713

(1)

Box: Corporate Valuation and Hybrid Financing

714

(1)

Box: Where's the Dividend?

715

(1)

Box: A Rose by Any Other Name: MIPS, QUIPS, TOPrS, and QUIDS

716

(2)

Warrants

718

(4)

Convertibles

722

(8)

A Final Comparison of Warrants and Convertibles

730

(1)

Reporting Earnings When Warrants or Convertibles Are Outstanding

731

(1)

Summary

731

(10)

Web Extension: Calling Convertible Issues

PART 7 Special Topics

741

(217)

Working Capital Management

742

(41)

Box: Corporate Valuation and Working Capital Management

743

(1)

The Cash Conversion Cycle

743

(5)

Alternative Net Operating Working Capital Policies

748

(1)

Box: The Best at Managing Working Capital

749

(1)

Cash Management

749

(1)

The Cash Budget

750

(3)

Box: The Great Debate: How Much Cash Is Enough?

753

(1)

Cash Management Techniques

754

(2)

Inventory

756

(1)

Receivables Management

756

(1)

Box: Supply Chain Management

757

(3)

Accruals and Accounts Payable (Trade Credit)

760

(4)

Alternative Short-Term Financing Policies

764

(2)

Short-Term Investments: Marketable Securities

766

(1)

Short-Term Financing

767

(1)

Short-Term Bank Loans

768

(2)

Commercial Paper

770

(1)

Use of Security in Short-Term Financing

771

(1)

Summary

771

(12)

Web Extension: Secured Short-Term Financing

Derivatives and Risk Management

783

(30)

Reasons to Manage Risk

784

(1)

Box: Corporate Valuation and Risk Management

785

(2)

Background on Derivatives

787

(2)

Derivatives in the News

789

(3)

Other Types of Derivatives

792

(6)

Risk Management

798

(1)

Fundamentals of Risk Management

798

(2)

Box: Microsoft's Goal: Manage Every Risk!

800

(1)

Using Derivatives to Reduce Risks

801

(3)

Box: Risk Management in the Cyber Economy

804

(4)

Summary

808

(5)

Web Extension: Risk Management with Insurance and Bond Portfolio Immunization

Bankruptcy, Reorganization, and Liquidation

813

(28)

Financial Distress and Its Consequences

814

(2)

Issues Facing a Firm in Financial Distress

816

(1)

Settlements without Going through Formal Bankruptcy

816

(3)

Federal Bankruptcy Law

819

(1)

Reorganization in Bankruptcy

820

(8)

Liquidation in Bankruptcy

828

(4)

Other Motivations for Bankruptcy

832

(1)

Some Criticisms of Bankruptcy Laws

833

(1)

Amazon no longer offers textbook rentals. We do!

Financial Management Theory and Practice (with Thomson ONE)

Financial Management Theory and Practice (with Thomson ONE)

9780324259681

0324259689

Summary

Table of Contents

Supplemental Materials

Write a Review

Amazon no longer offers textbook rentals. We do!

Financial Management Theory and Practice (with Thomson ONE)

Financial Management Theory and Practice (with Thomson ONE)

9780324259681

0324259689

Summary

Table of Contents

Supplemental Materials

Write a Review

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