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About the Author
Acknowledgements
0.1 Chapter Zero Learning Outcomes
0.2 The Time Value of Money and Interest
0.3 The Time Value of Money and Interest (Solutions and Explanations)
0.4 Ordinary Annuities
0.5 The Derivation of Ordinary Annuity Factors
0.6 The Derivation of Annuity Factors (Solution)
0.7 Future and Present Annuity Factors: Mathematical Formulas
0.8 Loans: The Conventional Mortgage
0.9 Growth Perpetuities and the Dividend Discount Model
0.10 Chapter Zero Review Questions
1.1 Chapter One Learning Outcomes
1.2 Corporate Financial Management: The Issues
1.3 Free Cash Flow
1.4 Capital Budgeting: The Investment Decision
1.5 Independent versus Mutually Exclusive Projects
1.6 The Payback and Discounted Payback Methods
1.7 Personal Financial Planning Problem: Payback Method
1.8 Personal Financial Planning Problem: Payback Method (Solutions)
1.9 Payback and Discounted Payback Summary
1.10 Decisions and Uncertainty
1.11 Critical Methodological Issues Relative to Choice of Capital Budgeting Technique
1.12 Net Present Value (NPV)
1.13 Net Present Value (NPV) (continued)
1.14 NPV Solutions
1.15 NPV Practice Problem
1.16 NPV Application: Trading in a Car to Save on MPGs
1.17 Trading in a Car to Save on MPGs (Solution)
1.18 Should I Buy a Home – or Rent? The Considerations
1.19 Net Present Value (NPV): Annuity Cash Inflows
1.20 The Equivalent of the Multiple Cash Flows as A Singular Cash (Out-) Flow: "$1 to $2" The Rate of Return
1.21 The Internal Rate of Return for Multiple Cash Flows
1.22 Personal Financial Planning Problem: Net Present Value (In-class Exercise)
1.23 Profitability Index
1.24 The Capital Rationing Problem
1.25 Capital Budgeting and the Limits of a Firm’s Capital
1.26 The Internal Rate of Return (IRR)
1.27 Some more NPV and IRR Practice Problems
1.28 IRR Practice Problems (Solutions)
1.29 What Does “IRR” Mean? (A Brief Review)
1.30 The NPV vs. the IRR: Differences in Methodologies (Summary and Review)
1.31 Project Scale
1.32 Multiple IRRs
1.33 Quadratic Solution to IRR
1.34 Quadratic Practice Problems
1.35 The Reinvestment Rate Assumption of the Internal Rate of Return
1.36 The Reinvestment Rate and the MIRR (The Idea)
1.37 General MIRR Formula (Derivation)
1.38 The Modified Internal Rate of Return (MIRR) (Problem)
1.39 MIRR Solution
1.40 Problems with Capital Budgeting Methods (Summary)
1.41 Review Questions: Chapter One
1.42 Selected Solutions to Chapter One Problems
2.1 Chapter Two Learning Outcomes
2.2 Comparison of NPV and IRR: Some Technical Points
2.3 Solution to Problem NPV vs. IRR
2.4 NPV Profiles Illustrated
2.5 The Solution Explained: A Retrospective Bird’s Eye View
2.6 Calculating the MIRR: Negative Interim Outflows
2.7 A Word about Discount and Reinvestment Rates
2.8 Final Words Regarding IRR versus MIRR
2.9 Capital Budgeting for Mutually Exclusive Projects with Unequal Lives: Replacement Chain Analysis
2.10 Capital Budgeting for Mutually Exclusive Projects with Unequal Lives: The Annual Annuity Approach
2.11 Benefits and Demerits of the Replacement Chain and Annual Annuity Approaches
2.12 Sample Problem: NPV and AAA for Unequal Lives
2.13 NPV and AAA for Unequal Lives (Worksheet)
2.14 NPV and AAA for Unequal Lives (Solutions)
2.15 Topical Practice Problems: Replacement Chain versus AAA (Problems # 1 – 7)
2.16 Solution for "Question #2"
2.17 “Question #2” – Continued
2.18 Solutions for "Questions #3-5"
2.19 Solution for “Questions #6 & #7”
2.20 NPV and AAA One Last Problem ("Question #8")
2.21 The Capital Budgeting Process Summary and Review
2.22 Spot Rates
2.23 Comparison of Single Discounted Rate (YTM) and Spot Curve
2.24 Comparison of Single Discount Rate (YTM) and Spot Curve (Solution)
2.25 Market Value Added (MVA) and Economic Value Added (EVA)
2.26 Summary: Capital Budgeting
2.27 Review Questions: Chapter Two
3.1 Chapter Three Learning Outcomes
3.2 What is the Discount Rate Anyway?
3.3 The After-Tax Cost of Debt Capital
3.4 Flotation Costs
3.5 The Cost of Capital (Summary of all capital components’ respective costs)
3.6 Weighted Average Cost of Capital (WACC)
3.7 Solutions to WACC Problems
3.8 WACC Practice Problem
3.9 Marginal Cost of Capital
3.10 Changes in the Cost of Capital
3.11 A Word about Linear Equations (Review of Algebra)
3.12 The Capital Asset Pricing Model (CAPM)
3.13 Diagram of the CAPM
3.14 CAPM Diagram
3.15 Changes in the CAPM
3.16 Diagrammatic Changes in The Security Market Line
3.17 Accounting Manipulations
3.18 Summary: The Cost of Capital
3.19 Review Questions: Chapter Three
4.1 Chapter Four Learning Outcomes
4.2 External Funds Needed Formula (EFN)
4.3 Growth and Assets Acquisition
4.4 Financing Leases
4.5 Financing Lease Problem
4.6 Financing Lease (Solution to Question #1)
4.7 Lease (Solution to Question #2)
4.8 Leasing Summary Calculations
4.9 Examination of the Lease Obligation over its Entire Life
4.10 Examination of the Equity Account over the Term of the Lease
4.11 Comparative Asset Financing Options Advantages and Disadvantages
4.12 Review Questions: Chapter Four
NOT IN USE 4.3 Chapter 4a: Leasing
NOT IN USE 4.14 Counter Argument
5.1 Chapter Five Learning Outcomes
5.2 Financial Leverage
5.3 Financial Leverage (Graph)
5.4 The Crossover Point
5.5 Leverage and the Crossover Point
5.6 Leverage and Risk
5.7 ROE Sample Solution
5.8 EBIT and ROE for Different Degrees of Leverage: A Diagram
5.9 Implications of Financial Leverage
5.10 Optimal Capital Structure
5.11 The Impact of Financial Leverage on Valuation or Price
5.12 Truth, Opinion, and ….
5.13 The Importance of Capital Structure in the Firm’s Valuation
5.14 Review Questions: Chapter Five
6.1 Chapter Six Learning Outcomes
6.2 “Homemade” Leverage Illustrated: An Introduction to Modigliani & Miller ("M&M") The Financing Decision
6.3 Leveraging versus De-leveraging
6.4 The “Levered” Beta
6.5 Modigliani & Miller (“M & M”): “Proposition One” The Formula
6.6 M&M and Pizza
6.7 Leverage After-Thought
6.8 Review Questions: Chapter Six
7.1 Chapter Seven Learning Objectives
7.2 The Effect of Paying a Dividend on a Firm’s Prospective Capitalization
7.3 Dividend Policy Theories (Prelude)
7.4 Dividend Policy Theories
7.5 Some Further Dividend Policy Issues
7.6 Stock Splits
7.7 Cash Dividend vs. Stock Repurchase
7.8 Optimal Capital Structure (Last Minute Thoughts)
7.9 Review Questions: Chapter Seven
8.1 Chapter 8 Learning Outcomes
8.2 Working Capital
8.3 Capital Financing Sources
8.4 Alternative Capital Structures: Matching and Mismatching Assets and Capital Funds
8.5 Alternative Capital Structures The "Matching Principle" Illustrated
8.6 Summary: Financial Leverage and Capital Structure
8.7 Review Questions: Chapter Eight
9.1 Chapter 9 Learning Outcomes
9.2 The Cash Conversion Cycle
9.3 Cash Conversion Cycle
9.4 Chronological Map of the Cash Conversion Cycle
9.5 Some Short-term Sources of Funds
9.6 Cash Conversion Cycle: Practice Problem
9.7 Cash Ratios: Firms in Financial Straits
9.8 Cash Optimal Order Quantities Model: Baumol’s Cash Optimization Model
9.9 Baumol’s Model Illustrated
9.10 Cash Optimization (Baumol) Model: The Mathematics
9.11 The Inverse Relationship between Opportunity and Transaction Costs
9.12 Opportunity and Transaction Costs: (Solution)
9.13 Illustration of the Inverse Relationship between Opportunity and Transaction Costs
9.14 The Optimal Cash Order Quantity Solution
9.15 Cash Receipt and Disbursement Management
9.16 Economic Ordering Quantity (EOQ) Model Inventory Optimal Order Quantities Model
9.17 Inventory Model Mathematics Problem
9.18 Receivables and Credit Policy
9.19 Altering Credit Policy
9.20 “Trade Credit”: Relevant Costs
9.21 Altman’s Corporate Credit Scoring System
9.22 Five Steps to Credit Management
9.23 Review Questions: Chapter Nine
10.1 Chapter Ten Learning Outcomes
10.2 Operating Leverage
10.3 Operating Break-even Point
10.4 Solution to Problem: Operating Break-even Point
10.5 Illustration of Comparative Operating Leverage Plans
10.6 The Degree of Operating Leverage
10.7 Operating Earnings (EBIT): Standard Accounting (Reporting) versus Cost Accounting
10.8 Liberalizing Credit Policy (A Last Look)
10.9 Summary: Short-term Corporate Financial Management
Appendix: Basic Finance Formulae
The following completes the diagram on the prior page
Remember: the PRP could be < MRP also.
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Corporate Finance Copyright © 2023 by Kenneth S. Bigel is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.