INSEAD Library

Includes bibliographical references and index and glossary

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Applied Corporate Finance Contents PREFACE iv ix ACKNOWLEDGMENTS CHAPTER 1 THE FOUNDATIONS THE FIRM: STRUCTURAL SET-UP 1 FIRST PRINCIPLES 2 CORPORATE FINANCIAL DECISIONS, FIRM VALUE, AND EQUITY VALUE 5 A REAL-WORLD Focus 6 A RESOURCE GUIDE 7 SOME FUNDAMENTAL PROPOSITIONS ABOUT CORPORATE FINANCE 7 CONCLUSION 8 1 CHAPTER 2 THE OBJECTIVE IN DECISION MAKING CHOOSING THE RIGHT OBJECTIVE 10 THE CLASSICAL OBJECTIVE 11 MAXIMIZE STOCK PRICES: THE BEST-CASE SCENARIO 14 MAXIMIZE STOCK PRICES: REAL-WORLD CONFLICTS OF INTEREST 14 ALTERNATIVES TO STOCK PRICE MAXIMIZATION 37 MAXIMIZE STOCK PRICES: SALVAGING A FLAWED OBJECTIVE 40 A POSTSCRIPT: THE LIMITS OF CORPORATE FINANCE 53 CONCLUSION 54 LIVE CASE STUDY: CORPORATE GOVERNANCE ANALYSIS 55 PROBLEMS AND QUESTIONS 57 9 CHAPTER 3 THE BASICS OF RISK MOTIVATION AND PERSPECTIVE IN ANALYZING RISK 59 EQUITY RISK AND EXPECTED RETURNS 60 THE RISK IN BORROWING: DEFAULT RISK AND THE COST OF DEBT 87 CONCLUSION 94 LIVE CASE STUDY: STOCKHOLDER ANALYSIS 95 PROBLEMS AND QUESTIONS 96 58 CHAPTER 4 RISK MEASUREMENT AND HURDLE RATES IN PRACTICE COST OF EQUITY 101 FROM COST OF EQUITY TO COST OF CAPITAL 155 CONCLUSION 174 LIVE CASE STUDY: RISK AND RETURN: ANALYSIS FOR THE FIRM 175 PROBLEMS AND QUESTIONS 177 100 CHAPTER 5 MEASURING RETURN ON INVESTMENTS WHAT IS A PROJECT? 183 HURDLE RATES FOR FIRMS VERSUS HURDLE RATES FOR PROJECTS 185 MEASURING RETURNS: THE CHOICES 191 INVESTMENT DECISION RULES 214 PROBABILISFIC APPROACHES TO INVESTMENT ANALYSIS 239 CONCLUSION 254 LIVE CASE STUDY: ESTIMATING EARNINGS AND CASH FLOWS 256 PROBLEMS AND QUESTIONS 257 182 CHAPTER 6 PROJECT INTERACTIONS, SIDE COSTS, AND SIDE BENEFITS MUTUALLY EXCLUSIVE PROJECTS 261 SIDE COSTS FROM PROJECTS 282 SIDE BENEFITS FROM PROJECTS 287 OPTIONS EMBEDDED IN PROJECTS 293 MEASURING THE QUALITY OF EXISTING INVESTMENTS 307 CONCLUSION 321 LIVE CASE STUDY: ESTIMATING EARNINGS AND CASH FLOWS 323 PROBLEMS AND QUESTIONS 324 260 CHAPTER 7 CAPITAL STRUCTURE: OVERVIEW OF THE FINANCING DECISION THE CHOICES: TYPES OF FINANCING 329 FINANCING BEHAVIOR 340 THE PROCESS OF RAISING CAPITAL 347 THE TRADEOFF OF DEBT 359 No OPTIMAL CAPITAL STRUCTURE 372 THERE IS AN OPTIMAL CAPITAL STRUCTURE 378 How FIRMS CHOOSE THEIR CAPITAL STRUCTURES 380 CONCLUSION 385 LIVE CASE STUDY: ANALYZING A FIRMS CURRENT FINANCING CHOICES 387 PROBLEMS AND QUESTIONS 389 328 CHAPTER 8 CAPITAL STRUCTURE: THE OPTIMAL FINANCIAL MIX OPERATING INCOME APPROACH 394 COST OF CAPITAL APPROACH 398 ADJUSTED PRESENT VALUE APPROACH 434 COMPARATIVE ANALYSIS 441 SELECTING THE OPTIMAL DEBT RATIO 444 CONCLUSION 445 LIVE CASE STUDY: THE OPTIMAL FINANCING MIX 447 PROBLEMS AND QUESTIONS 448 393 CHAPTER 9 CAPITAL STRUCTURE: THE FINANCING DETAILS A FRAMEWORK FOR CAPITAL STRUCTURE CHANGES 456 IMMEDIATE, GRADUAL OR NO CHANGE 456 CHOOSING THE RIGHT FINANCING INSTRUMENTS 475 CONCLUSION 498 LIVE CASE STUDY: MECHANICS OF MOVING TO THE OPTIMAL 500 PROBLEMS AND QUESTIONS 502 455 CHAPTER 10 DIVIDEND POLICY BACKGROUND ON DIVIDEND POLICY 506 WHEN ARE DIVIDENDS IRRELEVANT? 519 THE "DIVIDENDS ARE BAD" SCHOOL 522 THE "DIVIDENDS ARE GOOD" SCHOOL 529 MANAGERIAL INTERESTS AND DIVIDEND POLICY 540 CONCLUSION 543 LIVE CASE STUDY: THE TRADEOFF ON DIVIDEND POLICY 544 PROBLEMS AND QUESTIONS 545 505 CHAPTER 11 ANALYZING CASH RETURNED TO STOCKHOLDERS CASH RETURNED TO STOCKHOLDERS 547 A CASH FLOW APPROACH TO ANALYZING DIVIDEND POLICY 555 A COMPARABLE FIRM APPROACH TO ANALYZING DIVIDEND POLICY 581 MANAGING CHANGES IN DIVIDEND POLICY 585 CONCLUSION 588 LIVE CASE STUDY: A FRAMEWORK FOR ANALYZING DIVIDENDS 589 PROBLEMS AND QUESTIONS 591 546 CHAPTER 12 VALUATION: PRINCIPLES AND PRACTICE DISCOUNTED CASH FLOW VALUATION 597 RELATIVE VALUATION 649 RECONCI LING DIFFERENT VA LUATIONS 667 CONCLUSION 668 LIVE CASE STUDY: VALUATION 669 PROBLEMS AND QUESTIONS 671 APPENDIX 1 BASIC STATISTICS 675 APPENDIX 2 FINANCIAL STATEMENTS 682 APPENDIX 3 TIME VALUE OF MONEY 694 APPENDIX 4 OPTION PRICING 707 GLOSSARY INDEX 721 718 596