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The Theory of financial decisions

Author: Schall, Lawrence D ; Haley, Charles W. Series: McGraw-Hill series in finance Publisher: McGraw-Hill, 1979.Edition: 2d ed.Language: EnglishDescription: 508 p. ; 25 cm.ISBN: 0070255687Type of document: BookBibliography/Index: Includes bibliographical references and index
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Item type Current location Collection Call number Status Date due
Book Doriot Library
Main Collection
Print HG4011 .H27 1979
(Browse shelf)
Book Tanoto Library
Print HG4011 .H27 1979
(Browse shelf)

Includes bibliographical references and index


Preface Frequently Used Symbols xi xv 1 Introduction Financial Decisions in General Managerial Objectives and the Agency Relationship Market Equilibrium, Valuation, and Financial Decisions Time and Timing Stocks and Flows Firm Income and Investment A Note on Notation 2 Decisions under Certainty with Perfect Capital Markets Individual Financial Decisions Firm Financial Decisions A Comment on Equilibrium Summary Appendix 2A: Multiperiod Dividend Policy and Firm Valuation Appendix 2B: Valuation of Continuous Streams 15 16 22 31 32 33 39 3 Capital Budgeting in Perfect Markets Investment Strategy and the Optimal Capital Budget The Characteristics of Investment Opportunities Project Analysis and the Optimal Budget Cost Minimization and Economic Life Summary Appendix 3A: Problems in Using the Rate-of-Return Method 43 43 45 41 62 64 66 4 Probability and Random Variables I . Probability Probability Distributions and Random Variables Expectations and Moments Combinations of Random Variables Summary 71 74 76 81 85 5 Individual Decisions under Uncertainty: The Expected Utility Model The General Problem for the Individual Assumptions of Rational Choice Utility Functions Application of the Model Risk Aversion and Measurement Summary Appendix SA: The Individual's Consumption-Investment Decision Appendix 5B: Quadratic Utility Functions Appendix 5C: Properties of Utility Functions 88 89 90 91 94 95 99 100 102 106 120 6 Individual Investment Decisions: Portfolio Theory Securities Diversification and Portfolios The Efficient Frontier Lending Borrowing The Separation Theorem Summary Appendix 6A: Derivation of the Efficient Set Appendix 6B: Determination of the Optimal Proportions of a Two-Security Portfolio 120 121 125 126 129 132 133 135 140 143 143 145 148 152 154 156 156 157 163 171 178 179 7 Capital Market Equilibrium Assumptions The Capital Market Line The Security Market Line The Valuation of Assets Current Market Value and the Objective of the Firm 8 Firm Financial Decisions: The Single-Period Model Basic Assumptions Financing Policy Investment Policy Firm Decisions and Corporate Income Taxes Summary Appendix 8A: An Alternative Approach to Project Selection 9 Multiperiod Valuation Time-State Preference (TSP) Certainty Equivalents (CE) Risk-adjusted Discount Rates Other Models Market Valuation The Value-Additivity Principle (VAP) Firm Cash Flow Summary Appendix 9A: The Time-State Preference Model and Market Valuation Appendix 9B: The Value-Additivity Principle 184 186 189 191 193 194 202 208 217 218 230 239 239 243 247 253 26 1 263 278 278 279 281 283 295 296 298 10 The Valuation of Options in Continuous Time Valuation in Continuous Time Introduction to Options Call Option Valuation Applications of the OPM to Firm Financial Decisions Summary Appendix 10A: Stochastic Calculus and Derivation of the Option-Pricing Model 11 Financing Decisions in Perfect Markets Financing Decisions in General The Irrelevance of the Financing Decision with No Taxes Firm Value and Share Value Firm Value and the Debt-Equity Ratio Internal Financing and Dividend Policy Summary Appendix 1lA: Interrelationships Among Capital Market Rates . 12 Firm Investment Decisions in Perfect Capital Markets Perfect Markets and the Investment Criterion with No Firm Taxes Perfect Markets and the Investment Criterion with Firm Taxes Summary 303 307 323 332 334 335 344 354 358 359 13 The Cost of Capital Financing Policy Investment Decisions Imperfect Markets and Investment Decisions: The "Traditional Case" Summary Appendix 13A: Mathematical Proofs 14 Introduction to Financial Decisions in Imperfect Markets The Significance of Market Imperfections Individual Financial Decisions Firm Financial Decisions Rate Effects and Stream Effects Capital Market Imperfections Financing Strategies in Use Overview of Chapters 15, 16, and 17 363 364 365 366 368 370 379 383 15 Financing and Investment Decisions with Imperfect Markets Financing Decisions-Debt Policy Dividend Policy: Internal vs. External Equity Financing An Overview of Financing Policy in Imperfect Markets The Interdependence of Investment and Financing Decisions Summary Appendix 15A: The Irrelevance of Financial Structure with Personal and Corporate Taxes 385 386 412 415 417 433 435 442 442 455 468 470 475 477 482 484 499 16 Special Topics: Mergers and Leasing Merger Policy Leasing 17 Firm Objectives with Imperfect Markets The Shareholder's Objective and Share Value Unanimity Share Value and Firm Value Summary Bibliography Index

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