This is completed downloadable of Test Bank for Fundamentals of Corporate Finance 10th edition. Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan
Product Details:
- ISBN-10 ‏ : ‎ 0077479459
- ISBN-13 ‏ : ‎ 978-0077479459
- Author:Â Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan
Now in a Tenth Canadian Edition, Ross Fundamentals of Corporate Finance continues its tradition of excellence as a market leader. Known for its approach, Ross focuses on three powerful ideas which are integrated throughout — emphasis on intuition, unified valuation approach, and managerial emphasis giving students a solid foundation in business and finance. The Tenth Edition has been updated to provide current, real world examples, and a wealth of new problem material.
Table of Content:
- PART 1 Overview of Corporate Finance
- CHAPTER 1 Introduction to Corporate Finance
- 1.1 Corporate Finance and the Financial Manager
- What Is Corporate Finance?
- The Financial Manager
- Financial Management Decisions
- 1.2 Forms of Business Organization
- Sole Proprietorship
- Partnership
- Corporation
- Income Trust
- Co-operative (Co-op)
- 1.3 The Goal of Financial Management
- Possible Goals
- The Goal of Financial Management
- A More General Goal
- 1.4 The Agency Problem and Control of the Corporation
- Agency Relationships
- Management Goals
- Do Managers Act in the Shareholders’ Interests?
- Corporate Social Responsibility and Ethical Investing
- 1.5 Financial Markets and the Corporation
- Cash Flows to and from the Firm
- Money versus Capital Markets
- Primary versus Secondary Markets
- 1.6 Financial Institutions
- 1.7 Trends in Financial Markets and Financial Management
- 1.8 Outline of the Text
- Summary and Conclusions
- CHAPTER 2 Financial Statements, Cash Flow, and Taxes
- 2.1 Statement of Financial Position
- Assets
- Liabilities and Owners’ Equity
- Net Working Capital
- Liquidity
- Debt versus Equity
- Value versus Cost
- 2.2 Statement of Comprehensive Income
- International Financial Reporting Standards (IFRS)
- Non-Cash Items
- Time and Costs
- 2.3 Cash Flow
- Cash Flow from Assets
- Cash Flow to Creditors and Shareholders
- 2.4 Taxes
- Individual Tax Rates
- Average versus Marginal Tax Rates
- Taxes on Investment Income
- Corporate Taxes
- Taxable Income
- Global Tax Rates
- Capital Gains and Carry-Forward and Carry-Back
- 2.5 Capital Cost Allowance
- Asset Purchases and Sales
- Summary and Conclusions
- PART 2 Financial Statements and Long-Term Financial Planning
- CHAPTER 3 Working with Financial Statements
- 3.1 Cash Flow and Financial Statements: A Closer Look
- Sources and Uses of Cash
- Statement of Cash Flows
- 3.2 Standardized Financial Statements
- Common-Size Statements
- Common–Base Year Financial Statements: Trend Analysis
- 3.3 Ratio Analysis
- Short-Term Solvency or Liquidity Measures
- Other Liquidity Ratios
- Long-Term Solvency Measures
- Asset Management, or Turnover, Measures
- Profitability Measures
- Market Value Measures
- 3.4 The DuPont Identity
- 3.5 Using Financial Statement Information
- Why Evaluate Financial Statements?
- Choosing a Benchmark
- Problems with Financial Statement Analysis
- Summary and Conclusions
- CHAPTER 4 Long-Term Financial Planning and Corporate Growth
- 4.1 What Is Financial Planning?
- Growth as a Financial Management Goal
- Dimensions of Financial Planning
- What Can Planning Accomplish?
- 4.2 Financial Planning Models: A First Look
- A Financial Planning Model: The Ingredients
- A Simple Financial Planning Model
- 4.3 The Percentage of Sales Approach
- An Illustration of the Percentage of Sales Approach
- 4.4 External Financing and Growth
- External Financing Needed and Growth
- Internal Growth Rate
- Financial Policy and Growth
- Determinants of Growth
- A Note on Sustainable Growth Rate Calculations
- 4.5 Some Caveats on Financial Planning Models
- Summary and Conclusions
- PART 3 Valuation of Future Cash Flows
- CHAPTER 5 Introduction to Valuation: The Time Value of Money
- 5.1 Future Value and Compounding
- Investing for a Single Period
- Investing for More than One Period
- A Note on Compound Growth
- 5.2 Present Value and Discounting
- The Single-Period Case
- Present Values for Multiple Periods
- 5.3 More on Present and Future Values
- Present versus Future Value
- Determining the Discount Rate
- Finding the Number of Periods
- Summary and Conclusions
- CHAPTER 6 Discounted Cash Flow Valuation
- 6.1 Future and Present Values of Multiple Cash Flows
- Future Value with Multiple Cash Flows
- Present Value with Multiple Cash Flows
- A Note on Cash Flow Timing
- 6.2 Valuing Annuities and Perpetuities
- Present Value for Annuity Cash Flows
- Future Value for Annuities
- A Note on Annuities Due
- Perpetuities
- Growing Perpetuities
- Formula for Present Value of Growing Perpetuity
- Growing Annuity
- Formula for Present Value of Growing Annuity
- 6.3 Comparing Rates: The Effect of Compounding
- Effective Annual Rates and Compounding
- Calculating and Comparing Effective Annual Rates
- Mortgages
- EARs and APRs
- Taking It to the Limit: A Note on Continuous Compounding
- 6.4 Loan Types and Loan Amortization
- Pure Discount Loans
- Interest-Only Loans
- Amortized Loans
- Summary and Conclusions
- Appendix 6A: Proof of Annuity Present Value Formula
- CHAPTER 7 Interest Rates and Bond Valuation
- 7.1 Bonds and Bond Valuation
- Bond Features and Prices
- Bond Values and Yields
- Interest Rate Risk
- Finding the Yield to Maturity
- 7.2 More on Bond Features
- Is It Debt or Equity?
- Long-Term Debt: The Basics
- The Indenture
- 7.3 Bond Ratings
- 7.4 Some Different Types of Bonds
- Financial Engineering
- Stripped Bonds
- Floating-Rate Bonds
- Other Types of Bonds
- 7.5 Bond Markets
- How Bonds Are Bought and Sold
- Bond Price Reporting
- A Note on Bond Price Quotes
- Bond Funds
- Bonds and Restructuring
- 7.6 Inflation and Interest Rates
- Real versus Nominal Rates
- The Fisher Effect
- Inflation and Present Values
- 7.7 Determinants of Bond Yields
- The Term Structure of Interest Rates
- Bond Yields and the Yield Curve: Putting It All Together
- Conclusion
- Summary and Conclusions
- Appendix 7A: Managing Interest Rate Risk
- CHAPTER 8 Stock Valuation
- 8.1 Common Stock Valuation
- Common Stock Cash Flows
- Common Stock Valuation: Some Special Cases
- Changing the Growth Rate
- Components of the Required Return
- 8.2 Common Stock Features
- Shareholders’ Rights
- Dividends
- Classes of Stock
- 8.3 Preferred Stock Features
- Stated Value
- Cumulative and Non-Cumulative Dividends
- Is Preferred Stock Really Debt?
- Preferred Stock and Taxes
- Beyond Taxes
- 8.4 Stock Market Reporting
- Growth Opportunities
- Application: The Price–Earnings Ratio
- Summary and Conclusions
- Appendix 8A: Corporate Voting
- PART 4 Capital Budgeting
- CHAPTER 9 Net Present Value and Other Investment Criteria
- 9.1 Net Present Value
- The Basic Idea
- Estimating Net Present Value
- 9.2 The Payback Rule
- Defining the Rule
- Analyzing the Payback Period Rule
- Redeeming Qualities
- Summary of the Rule
- The Discounted Payback Rule
- 9.3 The Average Accounting Return
- Analyzing the Average Accounting Return Method
- 9.4 The Internal Rate of Return
- Problems with the IRR
- Redeeming Qualities of the IRR
- 9.5 The Profitability Index
- 9.6 The Practice of Capital Budgeting
- 9.7 Capital Rationing
- Summary and Conclusions
- Appendix 9A: The Modified Internal Rate of Return
- CHAPTER 10 Making Capital Investment Decisions
- 10.1 Project Cash Flows: A First Look
- Relevant Cash Flows
- The Stand-Alone Principle
- 10.2 Incremental Cash Flows
- Sunk Costs
- Opportunity Costs
- Side Effects
- Net Working Capital
- Financing Costs
- Inflation
- Capital Budgeting and Business Taxes in Canada
- Other Issues
- 10.3 Pro Forma Financial Statements and Project Cash Flows
- Getting Started: Pro Forma Financial Statements
- Project Cash Flows
- Project Total Cash Flow and Value
- 10.4 More on Project Cash Flow
- A Closer Look at Net Working Capital
- Depreciation and Capital Cost Allowance
- An Example: The Majestic Mulch and Compost Company (MMCC)
- 10.5 Alternative Definitions of Operating Cash Flow
- The Bottom-up Approach
- The Top-down Approach
- The Tax Shield Approach
- Conclusion
- 10.6 Applying the Tax Shield Approach to the Majestic Mulch and Compost Company Project
- Present Value of the Tax Shield on CCA
- Salvage Value versus UCC
- 10.7 Some Special Cases of Discounted Cash Flow Analysis
- Evaluating Cost-Cutting Proposals
- Replacing an Asset
- Evaluating Equipment with Different Lives
- Setting the Bid Price
- Summary and Conclusions
- Appendix 10A: More on Inflation and Capital Budgeting
- Appendix 10B: Capital Budgeting with Spreadsheets
- Appendix 10C: Deriving the Tax Shield on CCA Formula
- CHAPTER 11 Project Analysis and Evaluation
- 11.1 Evaluating NPV Estimates
- The Basic Problem
- Projected versus Actual Cash Flows
- Forecasting Risk
- Sources of Value
- 11.2 Scenario and Other What-If Analyses
- Getting Started
- Scenario Analysis
- Sensitivity Analysis
- Simulation Analysis
- 11.3 Break-Even Analysis
- Fixed and Variable Costs
- Accounting Break-Even
- Accounting Break-Even: A Closer Look
- Uses for the Accounting Break-Even
- 11.4 Operating Cash Flow, Sales Volume, and Break-Even
- Accounting Break-Even and Cash Flow
- Cash Flow and Financial Break-Even Points
- 11.5 Operating Leverage
- The Basic Idea
- Implications of Operating Leverage
- Measuring Operating Leverage
- Operating Leverage and Break-Even
- 11.6 Managerial Options
- Summary and Conclusions
- PART 5 Risk and Return
- CHAPTER 12 Lessons from Capital Market History
- 12.1 Returns
- Dollar Returns
- Percentage Returns
- 12.2 The Historical Record
- A First Look
- A Closer Look
- 12.3 Average Returns: The First Lesson
- Calculating Average Returns
- Average Returns: The Historical Record
- Risk Premiums
- The First Lesson
- 12.4 The Variability of Returns: The Second Lesson
- Frequency Distributions and Variability
- The Historical Variance and Standard Deviation
- The Historical Record
- Normal Distribution
- Value at Risk
- The Second Lesson
- 2008: The Bear Growled and Investors Howled
- Using Capital Market History
- 12.5 More on Average Returns
- Arithmetic versus Geometric Averages
- Calculating Geometric Average Returns
- Arithmetic Average Return or Geometric Average Return?
- 12.6 Capital Market Efficiency
- Price Behaviour in an Efficient Market
- The Efficient Markets Hypothesis
- Market Efficiency—Forms and Evidence
- Summary and Conclusions
- CHAPTER 13 Return, Risk, and the Security Market Line
- 13.1 Expected Returns and Variances
- Expected Return
- Calculating the Variance
- 13.2 Portfolios
- Portfolio Weights
- Portfolio Expected Returns
- Portfolio Variance
- Portfolio Standard Deviation and Diversification
- The Efficient Set
- Correlations in the Financial Crisis of 2007–2009
- 13.3 Announcements, Surprises, and Expected Returns
- Expected and Unexpected Returns
- Announcements and News
- 13.4 Risk: Systematic and Unsystematic
- Systematic and Unsystematic Risk
- Systematic and Unsystematic Components of Return
- 13.5 Diversification and Portfolio Risk
- The Effect of Diversification: Another Lesson from Market History
- The Principle of Diversification
- Diversification and Unsystematic Risk
- Diversification and Systematic Risk
- Risk and the Sensible Investor
- 13.6 Systematic Risk and Beta
- The Systematic Risk Principle
- Measuring Systematic Risk
- Portfolio Betas
- 13.7 The Security Market Line
- Beta and the Risk Premium
- Calculating Beta
- The Security Market Line
- 13.8 Arbitrage Pricing Theory and Empirical Models
- Appendix 13A: Derivation of the Capital Asset Pricing Model
- Summary and Conclusions
- PART 6 Cost of Capital and Long-Term Financial Policy
- CHAPTER 14 Cost of Capital
- 14.1 The Cost of Capital: Some Preliminaries
- Required Return versus Cost of Capital
- Financial Policy and Cost of Capital
- 14.2 The Cost of Equity
- The Dividend Growth Model Approach
- The SML Approach
- The Cost of Equity in Rate Hearings
- 14.3 The Costs of Debt and Preferred Stock
- The Cost of Debt
- The Cost of Preferred Stock
- 14.4 The Weighted Average Cost of Capital
- The Capital Structure Weights
- Taxes and the Weighted Average Cost of Capital
- Solving the Warehouse Problem and Similar Capital Budgeting Problems
- Performance Evaluation: Another Use of the WACC
- 14.5 Divisional and Project Costs of Capital
- The SML and the WACC
- Divisional Cost of Capital
- The Pure Play Approach
- The Subjective Approach
- 14.6 Company Valuation with the WACC
- 14.7 Flotation Costs and the Weighted Average Cost of Capital
- The Basic Approach
- Flotation Costs and NPV
- Internal Equity and Flotation Costs
- 14.8 Calculating WACC for Loblaw
- Estimating Financing Proportions
- Market Value Weights for Loblaw
- Cost of Debt
- Cost of Preferred Shares
- Cost of Common Stock
- CAPM
- Dividend Valuation Model Growth Rate
- Loblaw’s WACC
- Summary and Conclusions
- Appendix 14A: Adjusted Present Value
- Appendix 14B: Economic Value Added and the Measurement of Financial Performance
- CHAPTER 15 Raising Capital
- 15.1 The Financing Life Cycle of a Firm: Early-Stage Financing and Venture Capital
- Venture Capital
- Some Venture Capital Realities
- Choosing a Venture Capitalist
- Conclusion
- 15.2 The Public Issue
- 15.3 The Basic Procedure for a New Issue
- Securities Registration
- Exempt Securities and Crowd funding
- Alternative Issue Methods
- 15.4 The Cash Offer
- Types of Underwriting
- Bought Deal
- Dutch Auction Underwriting
- The Selling Period
- The Overallotment Option
- Lockup Agreements
- The Quiet Periods
- The Investment Dealers
- 15.5 IPOs and Underpricing
- IPO Underpricing: The 1999–
- Experience
- Evidence on Underpricing
- Why Does Underpricing Exist?
- 15.6 New Equity Sales and the Value of the Firm
- 15.7 The Cost of Issuing Securities
- IPOs in Practice: The Case of Seven Generations Energy
- 15.8 Rights
- The Mechanics of a Rights Offering
- Number of Rights Needed to Purchase a Share
- The Value of a Right
- Theoretical Value of a Right
- Ex Rights
- Value of Rights after Ex-Rights Date
- The Underwriting Arrangements
- Effects on Shareholders
- Cost of Rights Offerings
- 15.9 Dilution
- Dilution of Proportionate Ownership
- Dilution of Value: Book versus Market Values
- 15.10 Issuing Long-Term Debt
- Summary and Conclusions
- CHAPTER 16 Financial Leverage and Capital Structure Policy
- 16.1 The Capital Structure Question
- Firm Value and Stock Value: An Example
- Capital Structure and the Cost of Capital
- 16.2 The Effect of Financial Leverage
- The Basics of Financial Leverage
- Corporate Borrowing and Homemade Leverage
- 16.3 Capital Structure and the Cost of Equity Capital
- M&M Proposition I: The Pie Model
- The Cost of Equity and Financial Leverage: M&M Proposition II
- Business and Financial Risk
- 16.4 M&M Propositions I and II with Corporate Taxes
- The Interest Tax Shield
- Taxes and M&M Proposition I
- Taxes, the WACC, and Proposition II
- 16.5 Bankruptcy Costs
- Direct Bankruptcy Costs
- Indirect Bankruptcy Costs
- Agency Costs of Equity
- 16.6 Optimal Capital Structure
- The Static Theory of Capital Structure
- Optimal Capital Structure and the Cost of Capital
- Optimal Capital Structure: A Recap
- Capital Structure: Some Managerial Recommendations
- 16.7 The Pie Again
- The Extended Pie Model
- Marketed Claims versus Non-Marketed Claims
- 16.8 The Pecking-Order Theory
- Internal Financing and the Pecking Order
- Implications of the Pecking Order
- 16.9 Observed Capital Structures
- 16.10 Long-Term Financing under Financial Distress and Bankruptcy
- Liquidation and Reorganization
- Agreements to Avoid Bankruptcy
- Summary and Conclusions
- Appendix 16A: Capital Structure and Personal Taxes
- Appendix 16B: Derivation of Proposition II (Equation 16.4)
- CHAPTER 17 Dividends and Dividend Policy
- 17.1 Cash Dividends and Dividend Payment
- Cash Dividends
- Standard Method of Cash Dividend Payment
- Dividend Payment: A Chronology
- More on the Ex-Dividend Date
- 17.2 Does Dividend Policy Matter?
- An Illustration of the Irrelevance of Dividend Policy
- 17.3 Real-World Factors Favouring a Low Payout
- Taxes
- Some Evidence on Dividends and Taxes in Canada
- Flotation Costs
- Dividend Restrictions
- 17.4 Real-World Factors Favouring a High Payout
- Desire for Current Income
- Uncertainty Resolution
- Tax and Legal Benefits from High Dividends
- Conclusion
- 17.5 A Resolution of Real-World Factors?
- Information Content of Dividends
- Dividend Signalling in Practice
- The Clientele Effect
- 17.6 Establishing a Dividend Policy
- Residual Dividend Approach
- Dividend Stability
- A Compromise Dividend Policy
- Some Survey Evidence on Dividends
- 17.7 Stock Repurchase: An Alternative to Cash Dividends
- Cash Dividends versus Repurchase
- Real-World Considerations in a Repurchase
- Share Repurchase and EPS
- 17.8 Stock Dividends and Stock Splits
- Some Details on Stock Splits and Stock Dividends
- Value of Stock Splits and Stock Dividends
- Reverse Splits
- Summary and Conclusions
- PART 7 Short-Term Financial Planning and Management
- CHAPTER 18 Short-Term Finance and Planning
- 18.1 Tracing Cash and Net Working Capital
- 18.2 The Operating Cycle and the Cash Cycle
- Defining the Operating and Cash Cycles
- Calculating the Operating and Cash Cycles
- Interpreting the Cash Cycle
- 18.3 Some Aspects of Short-Term Financial Policy
- The Size of the Firm’s Investment in Current Assets
- Alternative Financing Policies for Current Assets
- Which Financing Policy Is Best?
- Current Assets and Liabilities in Practice
- 18.4 The Cash Budget
- Sales and Cash Collections
- Cash Outflows
- The Cash Balance
- 18.5 A Short-Term Financial Plan
- Short-Term Planning and Risk
- 18.6 Short-Term Borrowing
- Operating Loans
- Letters of Credit
- Secured Loans
- Factoring
- Securitized Receivables—A Financial Innovation
- Inventory Loans
- Trade Credit
- Money Market Financing
- Summary and Conclusions
- CHAPTER 19 Cash and Liquidity Management
- 19.1 Reasons for Holding Cash
- Speculative and Precautionary Motives
- The Transaction Motive
- Costs of Holding Cash
- Cash Management versus Liquidity Management
- 19.2 Determining the Target Cash Balance
- The Basic Idea
- Other Factors Influencing the Target Cash Balance
- 19.3 Understanding Float
- Disbursement Float
- Collection Float and Net Float
- Float Management
- Accelerating Collections
- Over-the-Counter Collections
- Controlling Disbursements
- 19.4 Investing Idle Cash
- Temporary Cash Surpluses
- Characteristics of Short-Term Securities
- Some Different Types of Money Market Securities
- Summary and Conclusions
- CHAPTER 20 Credit and Inventory Management
- 20.1 Credit and Receivables
- Components of Credit Policy
- The Cash Flows from Granting Credit
- The Investment in Receivables
- 20.2 Terms of the Sale
- Why Trade Credit Exists
- The Basic Form
- The Credit Period
- Cash Discounts
- Credit Instruments
- 20.3 Analyzing Credit Policy
- Credit Policy Effects
- Evaluating a Proposed Credit Policy
- 20.4 Optimal Credit Policy
- The Total Credit Cost Curve
- Organizing the Credit Function
- 20.5 Credit Analysis
- When Should Credit Be Granted?
- Credit Information
- Credit Evaluation and Scoring
- 20.6 Collection Policy
- Monitoring Receivables
- Collection Effort
- Credit Management in Practice
- 20.7 Inventory Management
- The Financial Manager and Inventory Policy
- Inventory Types
- Inventory Costs
- 20.8 Inventory Management Techniques
- The ABC Approach
- The Economic Order Quantity (EOQ) Model
- Extensions to the EOQ Model
- Managing Derived-Demand Inventories
- Materials Requirements Planning (MRP)
- Just-In-Time Inventory
- Summary and Conclusions
- PART 8 Topics in Corporate Finance
- CHAPTER 21 International Corporate Finance
- 21.1 Terminology
- 21.2 Foreign Exchange Markets and Exchange Rates
- Exchange Rates
- Types of Transactions
- 21.3 Purchasing Power Parity
- Absolute Purchasing Power Parity
- Relative Purchasing Power Parity
- Currency Appreciation and Depreciation
- 21.4 Interest Rate Parity, Unbiased Forward Rates, and the Generalized Fisher Effect
- Covered Interest Arbitrage
- Interest Rate Parity (IRP)
- Forward Rates and Future Spot Rates
- Putting It All Together
- 21.5 International Capital Budgeting
- Method 1: The Home Currency Approach
- Method 2: The Foreign Currency Approach
- Unremitted Cash Flows
- 21.6 Financing International Projects
- The Cost of Capital for International Firms
- International Diversification and Investors
- Sources of Short- and Intermediate-Term Financing
- 21.7 Exchange Rate Risk
- Transaction Exposure
- Economic Exposure
- Translation Exposure
- Managing Exchange Rate Risk
- 21.8 Political and Governance Risks
- Corporate Governance Risk
- Summary and Conclusions
- CHAPTER 22 Leasing
- 22.1 Leases and Lease Types
- Leasing versus Buying
- Operating Leases
- Financial Leases
- 22.2 Accounting and Leasing
- 22.3 Taxes, Canada Revenue Agency (CRA), and Leases
- 22.4 The Cash Flows from Leasing
- The Incremental Cash Flows
- 22.5 Lease or Buy?
- A Preliminary Analysis
- NPV Analysis
- A Misconception
- Asset Pool and Salvage Value
- 22.6 A Leasing Paradox
- Resolving the Paradox
- Leasing and Capital Budgeting
- 22.7 Reasons for Leasing
- Good Reasons for Leasing
- Bad Reasons for Leasing
- Other Reasons for Leasing
- Leasing Decisions in Practice
- Summary and Conclusions
- CHAPTER 23 Mergers and Acquisitions
- 23.1 The Legal Forms of Acquisitions
- Merger or Consolidation
- Acquisition of Stock
- Acquisition of Assets
- Acquisition Classifications
- A Note on Takeovers
- Alternatives to Merger
- 23.2 Taxes and Acquisitions
- Determinants of Tax Status
- Taxable versus Tax-Free Acquisitions
- 23.3 Accounting for Acquisitions
- 23.4 Gains from Acquisition
- Synergy
- Revenue Enhancement
- Cost Reductions
- Tax Gains
- Changing Capital Requirements
- Avoiding Mistakes
- A Note on Inefficient Management and Opportunistic Takeover Offers
- The Negative Side of Takeovers
- 23.5 Some Financial Side-Effects of Acquisitions
- Earnings Per Share (EPS) Growth
- Diversification
- 23.6 The Cost of an Acquisition
- Case I: Cash Acquisition
- Case II: Stock Acquisition
- Cash versus Common Stock
- 23.7 Defensive Tactics
- The Control Block and the Corporate Charter
- Repurchase /Standstill Agreements
- Exclusionary Offers and Dual-Class Stock
- Share Rights Plans
- Going Private and Leveraged Buyouts
- LBOs to Date: The Record
- Other Defensive Devices and Jargon of Corporate Takeovers
- 23.8 Some Evidence on Acquisitions
- 23.9 Divestitures and Restructurings
- Summary and Conclusions
- PART 9 Derivative Securities and Corporate Finance
- CHAPTER 24 Enterprise Risk Management
- 24.1 Insurance
- 24.2 Managing Financial Risk
- The Impact of Financial Risk: The Credit Crisis of 2007–09
- The Risk Profile
- Reducing Risk Exposure
- Hedging Short-Term Exposure
- Cash Flow Hedging: A Cautionary Note
- Hedging Long-Term Exposure
- Conclusion
- 24.3 Hedging with Forward Contracts
- Forward Contracts: The Basics
- The Payoff Profile
- Hedging with Forwards
- 24.4 Hedging with Futures Contracts
- Trading in Futures
- Futures Exchanges
- Hedging with Futures
- 24.5 Hedging with Swap Contracts
- Currency Swaps
- Interest Rate Swaps
- Commodity Swaps
- The Swap Dealer
- Interest Rate Swaps: An Example
- Credit Default Swaps (CDS)
- 24.6 Hedging with Option Contracts
- Option Terminology
- Options versus Forwards
- Option Payoff Profiles
- Option Hedging
- Hedging Commodity Price Risk with Options
- Hedging Exchange Rate Risk with Options
- Hedging Interest Rate Risk with Options
- Actual Use of Derivatives
- Summary and Conclusions
- CHAPTER 25 Options and Corporate Securities
- 25.1 Options: The Basics
- Puts and Calls
- Stock Option Quotations
- Option Payoffs
- Put Payoffs
- Long-Term Options
- 25.2 Fundamentals of Option Valuation
- Value of a Call Option at Expiration
- The Upper and Lower Bounds on a Call Option’s Value
- A Simple Model: Part I
- Four Factors Determining Option Values
- 25.3 Valuing a Call Option
- A Simple Model: Part II
- The Fifth Factor
- A Closer Look
- 25.4 Employee Stock Options
- ESO Features
- ESO Repricing
- 25.5 Equity as a Call Option on the Firm’s Assets
- Case I: The Debt Is Risk-Free
- Case II: The Debt Is Risky
- 25.6 Warrants
- The Difference between Warrants and Call Options
- Warrants and the Value of the Firm
- 25.7 Convertible Bonds
- Features of a Convertible Bond
- Value of a Convertible Bond
- 25.8 Reasons for Issuing Warrants and Convertibles
- The Free Lunch Story
- The Expensive Lunch Story
- A Reconciliation
- 25.9 Other Options
- The Call Provision on a Bond
- Put Bonds
- The Overallotment Option
- Insurance and Loan Guarantees
- Managerial Options
- Summary and Conclusions
- Appendix 25A: The Black–Scholes Option Pricing Model
- CHAPTER 26 Behavioural Finance: Implications for Financial Management
- 26.1 Introduction to Behavioural Finance
- 26.2 Biases
- Overconfidence
- Overoptimism
- Confirmation Bias
- 26.3 Framing Effects
- Loss Aversion
- House Money
- 26.4 Heuristics
- The Affect Heuristic
- The Representativeness Heuristic
- Representativeness and Randomness
- The Gambler’s Fallacy
- 26.5 Behavioural Finance and Market Efficiency
- Limits to Arbitrage
- Bubbles and Crashes
- 26.6 Market Efficiency and the Performance of Professional Money Managers
- Summary and Conclusions
- Glossary
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