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Lessons in Corporate Finance: A Case Studies Approach to Financial Tools, Financial Policies, and Valuation

Lessons in Corporate Finance: A Case Studies Approach to Financial Tools, Financial Policies, and Valuation

Hardcover(2nd ed.)

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Available for Pre-Order. This item will be available on March 26, 2019

Product Details

ISBN-13: 9781119537830
Publisher: Wiley
Publication date: 03/26/2019
Series: Wiley Finance Series
Edition description: 2nd ed.
Pages: 560
Product dimensions: 6.50(w) x 1.50(h) x 9.50(d)

About the Author

PAUL ASQUITH is the Gordon Y. Billard professor of finance at M.I.T.'s Sloan School. He is a specialist in corporate finance and has written on all areas of corporate finance including mergers, LBOs, equity issues, dividend policy, and more.

LAWRENCE A. WEISS is professor of International Accounting at Tufts University. He is a specialist in accounting and finance and has written on corporate bankruptcy, firm performance, international accounting, mergers, and more.

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Table of Contents

About the Authors



Chapter 1 Introduction

Two Markets: Product and Capital

The Basics: Tools and Techniques

A Diagram of Corporate Finance

A Brief History of Modern Finance

Reading This Book

Chapter 2 Determining a Firm’s Financial Health (PIPES-A)

The Conversation with the Banker Is Like a Job Interview

Starting with the Product Market Strategy

Is PIPES Profitable?

Doing the Math

Sources and Uses of Funds

Ratio Analysis

The Cash Cycle


Chapter 3 Pro Forma Forecasts (PIPES-B)

First, Let’s Take a Closer Look at Ratio Analysis

Pro Forma Forecasts

Circular Relationships

Back to (Forecasting) the Future

Projecting Out to 2014 and 2015

Evaluating the Loan


Appendix 3A: Accounting Is Not Economic Reality

Chapter 4 The Impact of Seasonality on a Firm’s Funding (PIPES-C)

Monthly Pro Forma Income Statements

Monthly Pro Forma Balance Sheets

A Different Picture of the Firm


Appendix 4A: PIPES Monthly Pro Forma Income Statements and Balance Sheets 2014

Appendix 4B: PIPES Monthly Pro Forma Income Statements and Balance Sheets 2015

Chapter 5 Why Financing Matters (Massey Ferguson)

Product Market Position and Strategy

Political Risk and Economies of Scale in Production

Massey Ferguson 1971–1976

Sustainable Growth

The Period after 1976

Conrad Runs Away

The Competitors

Back to Massey

Massey’s Restructuring

Postscript: What Happened to Massey


Appendix 5A: Massey Ferguson Financial Statements

Chapter 6 An Introduction to Capital Structure Theory

Optimal Capital Structure

M&M and Corporate Finance


Costs of Financial Distress

The Textbook View of Capital Structure

The Cost of Capital


Chapter 7 Capital Structure Decisions (Marriott Corporation and Gary Wilson)

Capital Structure

The Cost of Capital

How Firms Set Capital Structure in Practice

Corporate Financial Policies

Sustainable Growth and Excess Cash Flow

What to Do with Excess Cash?


Appendix 7A: Marriott Corporation Income Statements and Balance Sheets

Appendix 7B: Marriott Corporation Selected Ratios

Chapter 8 Investment Decisions (Marriott Corporation and Gary Wilson)

What Is the Correct Price?

How Should Marriott Buy Its Shares?

The Loan Covenants

The Impact of the Product Market on Financial Policies

The Capital Market Impact and the Future


Chapter 9 Financial Policy Decisions (AT&T: Before and after the 1984 Divestiture)

Background on AT&T

M&M and the Practice of Corporate Finance

Old (Pre-1984) AT&T

New (Post-1984) AT&T


Appendix 9A: Development of AT&T Pro Formas 1984–1988 (Expected-Case)

Chapter 10 The Impact of Operating Strategy on Corporate Finance Policy (MCI)

A Brief Summary

A Brief History of MCI

Convertible Preferred Stock and Convertible Bonds

Interest Rates and Debt Ratios


Financing Needs of the New MCI

MCI’s Financing Choice

MCI Postscript


Appendix 10A: Development of MCI’s Pro Formas 1984–1988

Chapter 11 Dividends and Stock Repurchases (Apple Inc.)

The Theory of Dividend Policy

Empirical Evidence

Apple Inc. and the Decision on Whether to Pay Dividends

What Did Apple Do?


Chapter 12 A Continuation of Capital Structure Theory

The Tax Shield of Debt

The Costs of Financial Distress

Transaction Costs, Asymmetric Information, and Agency Costs

Asymmetric Information and Firm Financing

Agency Costs: Manager Behavior and Capital Structure

Leverage and Agency Conflicts between Equity and Debt Holders

The Amount of Financing Required

Summary: An Integrated Approach

Chapter 13 Restructuring and Bankruptcy: When Things Go Wrong (Avaya Holdings)

When Things Go Wrong

Avaya Holdings

Avaya Files for Chapter 11 Bankruptcy

The Key Economic Principle of Bankruptcy is to Save Viable Firms

When Should a Firm File for Bankruptcy

The Rules of Bankruptcy

Maintaining the Value of a Firm in Bankruptcy

Avaya Emerges from Bankruptcy


Appendix 13.A: The Creditors Coordination Problem

Chapter 14 The Time Value of Money: Discounting and Net Present Values

The Time Value of Money

Net Present Value (NPV)


Projects with Unequal Lives



Chapter 15 Valuation and Cash Flows (Sungreen A)

Investment Decisions

How to Value a Project

The Weighted Average Cost of Capital (WACC)

Terminal Values


Chapter 16 Valuation (Sungreen B)

Sungreen’s Projected Cash Flows

The Weighted Average Cost of Capital (WACC)

Twin Firms

The Cost of Equity

The Cost of Debt

The Final Valuation

Strategic Analysis


Chapter 17 Valuation Nuances

Cash Flow Nuances

Cost of Capital Nuances

Nuances on Calculating the Cost of Equity: Levering and Unlevering Beta

Separating Cash Flows and Terminal Values

Nuances of Terminal Value Methods

Other Valuation Techniques: DCF Variations

Real Options (aka Strategic Choices)


Chapter 18 Leveraged Buyouts and Private Equity Financing (Congoleum)

Congoleum: A Short History

Leading Up to the LBO: What Makes a Firm a Good LBO Target?

Details of the Deal

Postscript: What Happened to LBOs?


Appendix 18A: Congoleum’s Pro Formas with and without the LBO

Appendix 18B: Highlights of the Lazard Fairness Opinion

Chapter 19 Mergers and Acquisitions: Strategic Issues (The Dollar Stores)

The Three Main Competitors

Recent History

Shopping a Firm/Finding a Buyer


Chapter 20 Valuing an Acquisition: Free Cash Flows to the Firm (The Dollar Stores)

The Bid for Family Dollar

Free Cash Flows to the Firm

Estimating the Cost of Capital

Discounted Cash Flows

Terminal Values

The Three Pieces


Appendix 20A: Family Dollar Pro Forma Financial Statements with Authors’ Constant Debt Ratio

Chapter 21 Understanding Free Cash Flows (The Dollar Stores)

Comparing the Free-Cash-Flows Formulas

Back to Discount Rates

On to Free Cash Flows to Equity

Discounting the Free Cash Flows to Equity


Appendix 21A: Family Dollar Pro Forma Free Cash Flows to Equity with Constant Debt Ratio

Chapter 22 Mergers and Acquisitions: Execution (The Dollar Stores)

The Time Line

Managerial Discretion

Activist Shareholders

The Federal Trade Commission (FTC)

Shareholder Lawsuits

The Vote


Appendix 22.A: Key Events in the Bidding for Family Dollar during 2014 and 2015

Chapter 23 Review

Chapters 2–4: Cash Flow Management—Financial Tools

Chapters 5–13: Financing Decisions and Financial Policies

Chapters 14–22: Valuation

Tools and Concepts Discussed in This Book

Finance as Art, Not Science

Bottom Lines

An Intelligent Approach to Finance

Keeping Current

Larry’s Last (Really a True) Story

Paul’s Theory of Pies

Rules to Live By