Applied Corporate Finance / Edition 3

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Overview

Readable and usable in style and valuable in approach, this text provides the practical and succinct advice that students and practitioners need, rather than a sole concentration on debate theory, assumptions, or models. Like no other text of its kind, the author applies corporate finance to real companies. The new Third Edition has four real-world core companies to study and follow. Perfected suited for MBA programs’ corporate finance and equity valuation courses, all business decisions are classified into three groups: the investment, financing, and dividend decisions.
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Product Details

  • ISBN-13: 9780470384640
  • Publisher: Wiley, John & Sons, Incorporated
  • Publication date: 2/2/2010
  • Edition description: New Edition
  • Edition number: 3
  • Pages: 752
  • Sales rank: 676,118
  • Product dimensions: 7.50 (w) x 9.20 (h) x 1.30 (d)

Meet the Author

ASWATH DAMODARAN is an Associate Professor of Finance at New York University’s Leonard N. Stern School of Business. He has received several awards, including, the NYU Distinguished Teaching Award in 1990, Stern’s Outstanding Teacher Award in 1988, and the Professor of the Year Award in 1988, 1991, and 1992. He has written three books on equity valuation (Damodaran on Valuation, Investment Valuation, The Dark Side of Valuation) and two on corporate finance (Corporate Finance: Theory and Practice, Applied Corporate Finance: A User’s Manual). He has co-edited a book on investment management with Peter Bernstein (Investment Management) and has a book on investment philosophies (Investment Philosophies).  His newest book titled Investment Fables was released in 2004.  Mr. Damodaran also offers training programs in corporate finance and valuation at Deutsche Bank, Swiss Bank, Credit Suisse, J. P. Morgan, and Smith Barney. A former instructor at the University of California at Berkeley, he has written several articles for many of the nation’s leading financial journals. He received his MBA and Ph.D from the University of California at Los Angeles.

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Table of Contents

PREFACE.

ACKNOWLEDGMENTS.

CHAPTER 1 THE FOUNDATIONS.

The Firm: Structural Set-up.

First Principles.

Corporate Financial Decisions, Firm Value, and Equity Value.

A Real-World Focus.

A Resource Guide.

Some Fundamental Propositions about Corporate Finance.

Conclusion.

CHAPTER 2 THE OBJECTIVE IN DECISION MAKING.

Choosing the Right Objective.

The Classical Objective.

Maximize Stock Prices: The Best-Case Scenario.

Maximize Stock Prices: Real-World Conflicts of Interest.

Alternatives to Stock Price Maximization.

Maximize Stock Prices: Salvaging a Flawed Objective.

A Postscript: The Limits of Corporate Finance.

Conclusion.

LIVE CASE STUDY: Corporate Governance Analysis.

Problems and Questions.

CHAPTER 3 THE BASICS OF RISK.

Motivation and Perspective in Analyzing Risk.

Equity Risk and Expected Returns.

The Risk in Borrowing: Default Risk and the Cost of Debt.

Conclusion.

LIVE CASE STUDY: Stockholder Analysis.

Problems and Questions.

CHAPTER 4 RISK MEASUREMENT AND HURDLE RATES IN PRACTICE.

Cost of Equity.

From Cost of Equity to Cost of Capital.

Conclusion.

LIVE CASE STUDY: Risk and Return: Analysis for the Firm.

Problems and Questions.

CHAPTER 5 MEASURING RETURN ON INVESTMENTS.

What Is a Project?

Hurdle Rates for Firms versus Hurdle Rates for Projects.

Measuring Returns: The Choices.

Investment Decision Rules.

Probabilistic Approaches to Investment Analysis.

Conclusion.

LIVE CASE STUDY: Estimating Earnings and Cash Flows.

Problems and Questions.

CHAPTER 6 PROJECT INTERACTIONS, SIDE COSTS, AND SIDE BENEFITS.

Mutually Exclusive Projects.

Side Costs from Projects.

Side Benefits from Projects.

Options Embedded in Projects.

Measuring the Quality of Existing Investments.

Conclusion.

LIVE CASE STUDY: Estimating Earnings and Cash Flows.

Problems and Questions.

CHAPTER 7 CAPITAL STRUCTURE: OVERVIEW OF THE FINANCING DECISION.

The Choices: Types of Financing.

Financing Behavior.

The Process of Raising Capital.

The Tradeoff of Debt.

No Optimal Capital Structure.

There Is an Optimal Capital Structure.

How Firms Choose Their Capital Structures.

Conclusion.

LIVE CASE STUDY: Analyzing a Firm’s Current Financing Choices.

Problems and Questions.

CHAPTER 8 CAPITAL STRUCTURE: THE OPTIMAL FINANCIAL MIX.

Operating Income Approach.

Cost of Capital Approach.

Adjusted Present Value Approach.

Comparative Analysis.

Selecting the Optimal Debt Ratio.

Conclusion.

LIVE CASE STUDY: The Optimal Financing Mix.

Problems and Questions.

CHAPTER 9 CAPITAL STRUCTURE: THE FINANCING DETAILS.

A Framework for Capital Structure Changes.

Immediate, Gradual or no Change.

Choosing the Right Financing Instruments.

Conclusion.

LIVE CASE STUDY: Mechanics of Moving to the Optimal.

Problems and Questions.

CHAPTER 10 DIVIDEND POLICY.

Background on Dividend Policy.

When Are Dividends Irrelevant?

The ‘‘Dividends Are Bad’’ School.

The ‘‘Dividends Are Good’’ School.

Managerial Interests and Dividend Policy.

Conclusion.

LIVE CASE STUDY: The Tradeoff on Dividend Policy.

Problems and Questions.

CHAPTER 11 ANALYZING CASH RETURNED TO STOCKHOLDERS.

Cash Returned to Stockholders.

A Cash Flow Approach to Analyzing Dividend Policy.

A Comparable Firm Approach to Analyzing Dividend Policy.

Managing Changes in Dividend Policy.

Conclusion.

LIVE CASE STUDY: A Framework for Analyzing Dividends.

Problems and Questions.

CHAPTER 12 VALUATION: PRINCIPLES AND PRACTICE.

Discounted Cash Flow Valuation.

Relative Valuation.

Reconciling Different Valuations.

Conclusion.

LIVE CASE STUDY: Valuation.

Problems and Questions.

Appendix 1 Basic Statistics.

Appendix 2 Financial Statements.

Appendix 3 Time Value of Money.

Appendix 4 Option Pricing.

GLOSSARY.

INDEX.

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