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Table of Contents for A First Course in Finance (Shortest Version)

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IMPORTANT Preface Matters Click here

chapter 1:IntroductionPage 1 (23)

section 1·1:The Goal of Finance: Relative ValuationPage 2 (24)

1·1.A:The Law of One PricePage 2 (24)

section 1·2:Investments, Projects, and FirmsPage 3 (25)

section 1·3:Firms vs. IndividualsPage 5 (27)

part I:Value and Capital Budgeting Page 9 (31)

chapter 2:The Time Value of Money and Net Present ValuePage 13 (35)

section 2·1:Our Basic Scenario: Perfect Markets, Certainty, Constant Interest RatesPage 14 (36)

section 2·2:Loans and BondsPage 14 (36)

section 2·3:Returns, Net Returns, and Rates of ReturnPage 15 (37)

section 2·4:The Time Value of Money, Future Value, and CompoundingPage 17 (39)

2·4.A:The Future Value of MoneyPage 17 (39)

2·4.B:Compounding and Future ValuePage 18 (40)

2·4.C:How Banks Quote Interest RatesPage 22 (44)

section 2·5:Present Values, Discounting, and Capital BudgetingPage 23 (45)

section 2·6:Net Present ValuePage 27 (49)

2·6.A:Application: Are Faster Growing Firms Better Bargains?Page 30 (52)

section 2·7:SummaryPage 32 (54)

chapter 3:Stock and Bond Valuation: Annuities and PerpetuitiesPage 37 (59)

section 3·1:PerpetuitiesPage 38 (60)

3·1.A:The Simple Perpetuity FormulaPage 38 (60)

3·1.B:The Growing Perpetuity FormulaPage 39 (61)

3·1.C:Perpetuity Application: Stock Valuation with A Gordon Growth ModelPage 41 (63)

section 3·2:AnnuitiesPage 43 (65)

3·2.A:Annuity Application: Fixed-Rate Mortgage PaymentsPage 44 (66)

3·2.B:Annuity Application: A Level-Coupon BondPage 44 (66)

section 3·3:The Four Formulas SummarizedPage 47 (69)

section 3·4:SummaryPage 49 (71)

section A:Advanced MaterialPage 50 (72)

a:Projects With Different Lives and Rental EquivalentsPage 50 (72)

b:Perpetuity and Annuity DerivationsPage 53 (75)

chapter 4:A First Encounter With Capital Budgeting RulesPage 59 (81)

section 4·1:Net Present ValuePage 60 (82)

4·1.A:Separating Investment Decisions and Consumption Choices: Does Project Value Depend on When You Need Cash?Page 60 (82)

section 4·2:The Internal Rate of Return (IRR)Page 63 (85)

4·2.A:Projects with Multiple or No IRRsPage 66 (88)

4·2.B:IRR as a Capital Budgeting RulePage 68 (90)

4·2.C:Problems with IRR as a Capital Budgeting RulePage 69 (91)

section 4·3:The Profitability IndexPage 71 (93)

section 4·4:The Payback Capital Budgeting RulePage 72 (94)

section 4·5:How do Chief Financial Officers (CFOs) Decide?Page 73 (95)

section 4·6:SummaryPage 74 (96)

chapter 5:Time-Varying Rates of Return and the Yield CurvePage 79 (101)

section 5·1:Working With Time-Varying Rates of ReturnPage 80 (102)

5·1.A:Compounding Different Rates of ReturnPage 80 (102)

5·1.B:Annualized Rates of Return Page 81 (103)

5·1.C:Present Values With Time-Varying Interest RatesPage 84 (106)

section 5·2:InflationPage 85 (107)

5·2.A:Defining the Inflation RatePage 85 (107)

5·2.B:Real and Nominal Interest RatesPage 87 (109)

5·2.C:Inflation in Net Present ValuesPage 88 (110)

section 5·3:Time-Varying Interest Rates in Bonds: U.S. Treasuries and The Yield CurvePage 90 (112)

5·3.A:Yield Curve ShapesPage 91 (113)

5·3.B:An Example: The Yield Curve on December 31, 2004Page 92 (114)

5·3.C:Bond Payoffs and Your Investment HorizonPage 94 (116)

5·3.D:The Effect of Interest Rate Changes on Short-Term and Long-Term BondsPage 95 (117)

section 5·4:Why is the (Nominal) Yield Curve Usually Upward-Sloping?Page 98 (120)

5·4.A:Does It Predict Higher Future Inflation?Page 98 (120)

5·4.B:Does It Predict Higher Future Interest Rates?Page 99 (121)

5·4.C:Does It Mean Bargains on the Long End?Page 100 (122)

5·4.D:Does It Compensate Investors For Risk?Page 100 (122)

5·4.E:Corporate Insights About Time-Varying Costs of Capital From the Yield CurvePage 100 (122)

section 5·5:SummaryPage 101 (123)

section A:The Finer Points of BondsPage 104 (126)

a:Extracting Forward Interest RatesPage 104 (126)

b:Shorting and Locking in Forward Interest RatesPage 106 (128)

c:Bond DurationPage 108 (130)

d:Duration SimilarityPage 109 (131)

e:Duration HedgingPage 110 (132)

f:Continuous CompoundingPage 111 (133)

g:Institutional Knowledge: Compounding, Price Quotes, and STRIPSPage 112 (134)

h:Appendix SummaryPage 113 (135)

chapter 6:Uncertainty, Default, and RiskPage 117 (139)

section 6·1:An Introduction to StatisticsPage 118 (140)

6·1.A:Random Variables and Expected ValuesPage 118 (140)

6·1.B:Variance, and Standard DeviationPage 120 (142)

6·1.C:Risk-Neutrality (and Risk-Aversion Preview)Page 121 (143)

section 6·2:Interest Rates and Credit Risk (Default Risk)Page 122 (144)

6·2.A:Risk-Neutral Investors Demand Higher Promised RatesPage 122 (144)

6·2.B:A More Elaborate Example With Probability RangesPage 124 (146)

6·2.C:Deconstructing Quoted Rates of Return --- Time and Default PremiumsPage 125 (147)

6·2.D:Credit Ratings and Default RatesPage 126 (148)

6·2.E:Differences in Quoted Bond Returns in 2002Page 128 (150)

6·2.F:Credit Default SwapsPage 129 (151)

section 6·3:Uncertainty in Capital BudgetingPage 130 (152)

6·3.A:Present Value With State-Contingent Payoff TablesPage 130 (152)

section 6·4:Splitting Uncertain Project Payoffs into Debt and EquityPage 133 (155)

6·4.A:The LoanPage 133 (155)

6·4.B:The Levered EquityPage 134 (156)

6·4.C:Reflections On The Example: Payoff TablesPage 135 (157)

6·4.D:Reflections On The Example: Debt and Equity RiskPage 136 (158)

6·4.E:What ``Leverage'' Really Means --- Financial and Operational LeveragePage 137 (159)

6·4.F:Working More Than Two Possible OutcomesPage 139 (161)

section 6·5:SummaryPage 141 (163)

part I:Investments: Risk Vs. Expected Returns Page 9 (31)

chapter 7:A First Look at InvestmentsPage 151 (173)

section 7·1:Stocks, Bonds, and Cash, 1970--2004Page 152 (174)

7·1.A:Graphical Representations of Historical ReturnsPage 152 (174)

7·1.B:Historical Investment PerformancePage 155 (177)

7·1.C:Comovement, Market-Beta, and CorrelationPage 159 (181)

7·1.D:The Big Picture Take-awaysPage 161 (183)

7·1.E:Will History Repeat Itself?Page 162 (184)

section 7·2:A Brief Overview of Equities Market Institutions and VehiclesPage 164 (186)

7·2.A:BrokersPage 164 (186)

7·2.B:Exchanges and Non-ExchangesPage 165 (187)

7·2.C:Investment Companies (ADRs and Funds)Page 166 (188)

7·2.D:How Securities Appear and DisappearPage 167 (189)

section 7·3:SummaryPage 169 (191)

chapter 8:Investor Choice: Risk and RewardPage 171 (193)

section 8·1:Measuring Risk and RewardPage 172 (194)

8·1.A:Measuring Reward: The Expected Rate of ReturnPage 174 (196)

8·1.B:Measuring Risk: The Standard Deviation of the Rate of ReturnPage 174 (196)

section 8·2:Portfolios, Diversification, and Investor PreferencesPage 175 (197)

8·2.A:Assume Investors Care Only About Risk and RewardPage 178 (200)

section 8·3:How To Measure Risk ContributionPage 179 (201)

8·3.A:An Asset's own Risk is not a Good Measure for Risk Contribution To a PortfolioPage 179 (201)

8·3.B:Beta Is a Good Measure for Risk Contribution to a PortfolioPage 181 (203)

8·3.C:Why not Correlation or Covariance?Page 186 (208)

8·3.D:Interpreting Typical Stock Market BetasPage 186 (208)

section 8·4:Expected Rates of Return and Market-Betas For (Weighted) Portfolios and FirmsPage 188 (210)

section 8·5:Spreadsheet Calculations For Risk and RewardPage 191 (213)

8·5.A:Statistical NuancesPage 191 (213)

section 8·6:SummaryPage 193 (215)

section A:An Investor's Specific Trade-Off of Risk vs RewardPage 196 (218)

a:A Short-Cut Formula For the Risk of a PortfolioPage 198 (220)

b:Graphing the Mean-Variance Efficient FrontierPage 200 (222)

c:Adding a Risk-Free RatePage 203 (225)

chapter 9:The Capital Asset Pricing ModelPage 213 (235)

section 9·1:What You Already Know And What You Want To KnowPage 214 (236)

section 9·2:The Capital-Asset Pricing Model (CAPM) --- A Cookbook Recipe ApproachPage 215 (237)

9·2.A:The Security Market Line (SML)Page 216 (238)

section 9·3:The CAPM Cost of Capital in the Present Value FormulaPage 219 (241)

9·3.A:Deconstructing Quoted Rates of Return --- Risk PremiumsPage 219 (241)

section 9·4:Estimating the CAPM InputsPage 221 (243)

9·4.A:The Equity PremiumPage 221 (243)

9·4.B:The Risk-Free Rate and Multi-Year ConsiderationsPage 225 (247)

9·4.C:Investment Projects' Market BetasPage 226 (248)

section 9·5:Empirical RealityPage 232 (254)

9·5.A:The Relationship Between Beta and Expected Rates of Return If the CAPM Does Not WorkPage 232 (254)

9·5.B:Does the CAPM Work?Page 234 (256)

section 9·6:SummaryPage 240 (262)

section A:Application: Certainty EquivalencePage 243 (265)

a:Valuing Goods Not Priced at Fair ValuePage 243 (265)

b:Application: The CAPM Hurdle Rate For a Project With Cash Flow History OnlyPage 246 (268)

section B:Theory: CAPM BackgroundPage 248 (270)

a:Portfolio SeparationPage 248 (270)

b:The Mean-Variance Efficient Frontier and CAPM-type FormulasPage 248 (270)

c:CAPM Logic RecapPage 250 (272)

section C:Theory: CAPM Alternatives!?Page 251 (273)

a:The Arbitrage Pricing Theory (APT) and Intertemporal CAPM (ICAPM)Page 251 (273)

b:The Fama-French-Momentum (-And-More) Model Page 253 (275)

part I:Value and Market Efficiency in an Imperfect MarketPage 259 (281)

chapter 10:Market ImperfectionsPage 263 (285)

section 10·1:Causes and Consequences of Imperfect MarketsPage 264 (286)

10·1.A:Application: Judging Market Perfection for PepsiCo Shares and HousesPage 264 (286)

10·1.B:Perfect Market Assumptions and ViolationsPage 266 (288)

10·1.C:Ambiguous Value in Imperfect MarketsPage 267 (289)

10·1.D:Social Value and SurplusPage 268 (290)

section 10·2:Opinions, Disagreements, and Insider InformationPage 269 (291)

10·2.A:Expected Return Differences or Promised Return Differences?Page 269 (291)

10·2.B:Covenants, Collateral, and Credit Rating AgenciesPage 271 (293)

section 10·3:Market Depth and Transaction CostsPage 272 (294)

10·3.A:Typical Costs When Trading Real Goods---Real EstatePage 272 (294)

10·3.B:Typical Costs When Trading Financial Goods---StocksPage 273 (295)

10·3.C:Transaction Costs in Returns and Net Present ValuesPage 275 (297)

10·3.D:The Value of LiquidityPage 276 (298)

section 10·4:TaxesPage 278 (300)

10·4.A:The Basics of (Federal) Income TaxesPage 278 (300)

10·4.B:The Effect of Taxes on Rates of Returns Page 279 (301)

10·4.C:Taxes in Net Present ValuesPage 281 (303)

10·4.D:Tax TimingPage 283 (305)

section 10·5:Corporate Finance vs. Entrepreneurial FinancePage 284 (306)

section 10·6:Deconstructing Quoted Rates of Return --- Liquidity and Tax PremiumsPage 285 (307)

section 10·7:Multiple Effects: How to Work Novel ProblemsPage 287 (309)

10·7.A:Solving a Problem With Inflation and TaxesPage 287 (309)

10·7.B:Taxes on Nominal Returns?Page 288 (310)

section 10·8:SummaryPage 289 (311)

chapter 11:Efficient Markets, Classical Finance, and Behavioral FinancePage 297 (319)

section 11·1:Market EfficiencyPage 298 (320)

11·1.A:Short-Term vs. Long-Term Market EfficiencyPage 299 (321)

11·1.B:Relation to Perfect MarketPage 300 (322)

11·1.C:Market Efficiency in Modern Financial MarketsPage 301 (323)

section 11·2:Classifications Of Market Efficiency Beliefs and Behavioral FinancePage 303 (325)

11·2.A:The Traditional ClassificationPage 304 (326)

11·2.B:The Fundamentals-Based Classification and Behavioral FinancePage 305 (327)

section 11·3:The Random Walk and The Signal-To-Noise RatioPage 306 (328)

11·3.A:The SignalPage 306 (328)

11·3.B:The NoisePage 308 (330)

11·3.C:Detecting an Interesting Signal in the NoisePage 309 (331)

section 11·4:True Arbitrage and Risk(y) ArbitragePage 311 (333)

11·4.A:The Definition of ArbitragePage 311 (333)

11·4.B:More Hypothetical Arbitrage ExamplesPage 312 (334)

section 11·5:Investment ConsequencesPage 313 (335)

11·5.A:Weak Form Efficiency and Technical AnalysisPage 313 (335)

11·5.B:Investment Manager Performance EvaluationPage 316 (338)

section 11·6:Corporate ConsequencesPage 319 (341)

11·6.A:If the Market is (Close To) PerfectPage 319 (341)

11·6.B:If the Market is not Perfect but at least EfficientPage 320 (342)

11·6.C:If the Market is Not Even EfficientPage 321 (343)

11·6.D:Comparison and SummaryPage 322 (344)

section 11·7:Event Studies Can Measure Instant Value ImpactsPage 323 (345)

11·7.A:An Example: The Congressional Mid-Term Election of 2006Page 323 (345)

11·7.B:Important Event Study LimitationsPage 326 (348)

11·7.C:Capital-Structure-Related and Other Event Study ResultsPage 327 (349)

section 11·8:SummaryPage 329 (351)

part I:Financial Analysis and Applied ValuationPage 333 (355)

chapter 12:Capital Budgeting Applications and PitfallsPage 337 (359)

section 12·1:So Many Returns: The Internal Rate of Return, the Cost of Capital, the Hurdle Rate, and the Expected Rate of ReturnPage 338 (360)

section 12·2:Promised, Expected, Typical, or Most Likely?Page 339 (361)

12·2.A:Promised and Expected ReturnsPage 339 (361)

12·2.B:Expected, Typical, and Most Likely ScenariosPage 340 (362)

section 12·3:Badly Blended Costs of CapitalPage 341 (363)

12·3.A:Does Risk-Reduction Create Value?Page 341 (363)

12·3.B:How To Misuse the CAPMPage 343 (365)

12·3.C:Differential Costs of Capital --- Theory and PracticePage 345 (367)

section 12·4:The Economics of Project InteractionsPage 347 (369)

12·4.A:The Ultimate Project Selection RulePage 348 (370)

12·4.B:Project PairsPage 348 (370)

section 12·5:Evaluating Projects IncrementallyPage 351 (373)

12·5.A:Economies of ScalePage 353 (375)

12·5.B:Sunk CostsPage 355 (377)

12·5.C:Overhead AllocationPage 356 (378)

section 12·6:Real OptionsPage 358 (380)

12·6.A:A Specific Real Options ExamplePage 358 (380)

12·6.B:Importance and DifficultyPage 360 (382)

12·6.C:Embedded Real OptionsPage 361 (383)

section 12·7:Behavioral BiasesPage 362 (384)

section 12·8:Incentive (Agency) BiasesPage 364 (386)

section 12·9:An NPV ChecklistPage 368 (390)

section 12·10:SummaryPage 369 (391)

section A:Valuing Some More Real OptionsPage 373 (395)

a:Decision Trees: One Set of ParametersPage 373 (395)

b:Projects With Different ParametersPage 377 (399)

chapter 13:From Financial Statements To Economic Cash FlowsPage 385 (407)

section 13·1:Financial StatementsPage 386 (408)

13·1.A:The Contents of FinancialsPage 387 (409)

13·1.B:PepsiCo's FinancialsPage 393 (415)

13·1.C:Why Financiers and Accountants Think DifferentlyPage 394 (416)

section 13·2:A Bottom-Up Example --- Long-Term Accruals (Depreciation)Page 396 (418)

13·2.A:Doing AccountingPage 396 (418)

13·2.B:Doing FinancePage 398 (420)

13·2.C:Reverse-Engineering Accounting into FinancePage 400 (422)

13·2.D:Depreciation NuancesPage 402 (424)

section 13·3:A Bottom-Up Example --- Deferred TaxesPage 403 (425)

section 13·4:A Bottom-Up Example --- Short-Term Accruals and Working CapitalPage 406 (428)

section 13·5:Earnings ManagementPage 409 (431)

section 13·6:Extracting Economic Cash Flows from PepsiCo's FinancialsPage 410 (432)

section 13·7:SummaryPage 415 (437)

section A:Supplementary Financials --- Coca ColaPage 416 (438)

a:Coca Cola's Financials From EdgarScan, RestatedPage 416 (438)

b:Coca Cola's Financials From Yahoo!Finance, Not RestatedPage 416 (438)

chapter 14:Valuation From Comparables and Some Financial RatiosPage 425 (447)

section 14·1:Comparables and Net Present ValuePage 426 (448)

14·1.A:The Law of One PricePage 426 (448)

section 14·2:The Price-Earnings (P/E) RatioPage 429 (451)

14·2.A:DefinitionPage 430 (452)

14·2.B:Why {\text {P}/{E} Ratio}s differPage 431 (453)

14·2.C:Empirical EvidencePage 434 (456)

section 14·3:Problems With Price-Earnings RatiosPage 440 (462)

14·3.A:Selection of Comparison FirmsPage 442 (464)

14·3.B:(Non-) Aggregation of ComparablesPage 442 (464)

14·3.C:Trailing Twelve Month (TTM) Figures and Other AdjustmentsPage 447 (469)

14·3.D:Debt Adjustments For P/E RatiosPage 448 (470)

section 14·4:Other Financial RatiosPage 450 (472)

14·4.A:Valuation RatiosPage 450 (472)

14·4.B:Non-Valuation Diagnostic Financial RatiosPage 453 (475)

section 14·5:SummaryPage 459 (481)

part V:Capital Structure and Payout PolicyPage 465 (487)

chapter 15:Corporate ClaimsPage 469 (491)

section 15·1:The Basic Building BlocksPage 470 (492)

15·1.A:Cash Flow Rights as Payoff DiagramsPage 471 (493)

section 15·2:LiabilitiesPage 473 (495)

15·2.A:Financial Claims (Debt)Page 473 (495)

15·2.B:Non-Financial LiabilitiesPage 478 (500)

section 15·3:Equity (Stock)Page 479 (501)

section 15·4:Tracking IBM's Capital Structure From 2001 to 2003Page 481 (503)

15·4.A:IBM's LiabilitiesPage 481 (503)

15·4.B:IBM's EquityPage 487 (509)

15·4.C:Observations on the Evolution of IBM's Capital StructurePage 489 (511)

section 15·5:SummaryPage 490 (512)

chapter 16:Capital Structure and Capital Budgeting in a Perfect MarketPage 495 (517)

section 16·1:Conceptual Basics --- Maximization of Equity Value or Firm Value?Page 496 (518)

section 16·2:Modigliani and Miller, The Informal WayPage 498 (520)

section 16·3:Modigliani and Miller, The Formal WayPage 500 (522)

section 16·4:The Weighted Average Cost of Capital (WACC)Page 504 (526)

16·4.A:An Example In a Risk-Averse World In Which Riskier Securities Must Offer Higher Expected Rates of Return Page 504 (526)

16·4.B:The WACC Formula (Without Taxes)Page 508 (530)

16·4.C:The CAPM and WACC in the NPV Formula --- A Seamless Magical FitPage 510 (532)

16·4.D:How the Cost of Capital and Quoted Interest Rates Vary With LeveragePage 512 (534)

16·4.E:The Effect of Debt on Earnings-Per-Share and Price-Earnings RatiosPage 517 (539)

section 16·5:The Big Picture: How to Think of Debt and EquityPage 517 (539)

section 16·6:M&M For Operations and For Non-Financial LiabilitiesPage 518 (540)

16·6.A:Value IrrelevancePage 518 (540)

16·6.B:The Weighted Average Cost of CapitalPage 520 (542)

section 16·7:SummaryPage 521 (543)

chapter 17:The Weighted Cost of Capital and Adjusted Present Value in an Imperfect Market With TaxesPage 525 (547)

section 17·1:Relative Taxation of Debt and EquityPage 526 (548)

17·1.A:Hypothetical Equal Taxation and Capital BudgetingPage 526 (548)

17·1.B:Realistic Differential Taxation of Debt and EquityPage 527 (549)

section 17·2:Firm Value Under Different Capital StructuresPage 528 (550)

section 17·3:Formulaic Valuation Methods: APV and WACCPage 529 (551)

17·3.A:Adjusted Present Value (APV): TheoryPage 530 (552)

17·3.B:Tax-Adjusted Weighted Average Cost of Capital (WACC) Valuation: TheoryPage 532 (554)

section 17·4:A Sample Application of Tax-Adjusted Valuation TechniquesPage 537 (559)

17·4.A:The Flow-To-Equity Direct Valuation from the Pro Forma FinancialsPage 537 (559)

17·4.B:APVPage 539 (561)

17·4.C:WACCPage 540 (562)

section 17·5:The Tax Subsidy on PepsiCo's Financial StatementPage 541 (563)

section 17·6:Contemplating Corporate TaxesPage 542 (564)

17·6.A:Which Tax-Adjusted Valuation Method is Best?Page 542 (564)

17·6.B:A Quick-and-Dirty Heuristic Tax-Savings RulePage 544 (566)

17·6.C:Are Investment and Financing Decisions Separate Now?Page 544 (566)

17·6.D:Some Other Corporate Tax Avoidance SchemesPage 545 (567)

section 17·7:SummaryPage 547 (569)

section A:The Discount Factor on Tax Obligations and Tax SheltersPage 549 (571)

chapter 18:More Market Imperfections Influencing Capital StructurePage 559 (581)

section 18·1:What Matters?Page 560 (582)

section 18·2:The Role of Personal Income Taxes and Clientele EffectsPage 561 (583)

18·2.A:Background: The Tax Code For Security OwnersPage 561 (583)

18·2.B:The Principle Should Be ``Joint Tax Avoidance''Page 562 (584)

18·2.C:Tax ClientelesPage 563 (585)

18·2.D:How to Think About Different Tax CodesPage 570 (592)

section 18·3:Operating Policy: Behavior in Bad Times (Financial Distress)Page 573 (595)

18·3.A:The Tradeoff in the Presence of Financial Distress CostsPage 573 (595)

18·3.B:Direct Losses of Firm ValuePage 574 (596)

18·3.C:Operational Distortions of IncentivesPage 578 (600)

18·3.D:Strategic ConsiderationsPage 580 (602)

section 18·4:Operating Policy: Agency Issues and Behavior in Good TimesPage 581 (603)

section 18·5:Bondholder ExpropriationPage 583 (605)

18·5.A:Project Risk ChangesPage 583 (605)

18·5.B:Issuance of Bonds of Similar PriorityPage 584 (606)

18·5.C:Counteracting Forces Against ExpropriationPage 586 (608)

section 18·6:Inside Information and Adverse SelectionPage 588 (610)

section 18·7:Transaction Costs and Behavioral IssuesPage 591 (613)

section 18·8:Static Capital Structure SummaryPage 592 (614)

section 18·9:The Effect of Leverage on Costs of Capital and Quoted Bond YieldsPage 594 (616)

section 18·10:Valuation Formulas With Many Market ImperfectionsPage 595 (617)

18·10.A:Do You Need Other Valuation (APV or WACC) Formulas?Page 595 (617)

18·10.B:Lesser Evils: Combining Tax-Adjusted WACC with the CAPMPage 598 (620)

section 18·11:Capital Structure DynamicsPage 599 (621)

section 18·12:SummaryPage 600 (622)

chapter 19:Equity Payouts: Dividends and Share RepurchasesPage 607 (629)

section 19·1:BackgroundPage 608 (630)

19·1.A:Dividend MechanicsPage 608 (630)

19·1.B:Share Repurchase MechanicsPage 609 (631)

section 19·2:Perfect Market IrrelevancePage 610 (632)

section 19·3:Dividends and Share RepurchasesPage 612 (634)

19·3.A:Personal Income Tax Differences and Investor ClientelesPage 613 (635)

19·3.B:Non-Tax DifferencesPage 616 (638)

section 19·4:Empirical EvidencePage 617 (639)

19·4.A:Historical Payout PatternsPage 617 (639)

19·4.B:Market ReactionsPage 619 (641)

section 19·5:Survey EvidencePage 625 (647)

section 19·6:SummaryPage 626 (648)

part V:Pro Forma Financial StatementsPage 631 (653)

chapter 20:Pro Forma Financial StatementsPage 633 (655)

section 20·1:The Goal and LogicPage 634 (656)

20·1.A:An External Analyst's View Versus an Entrepreneur's ViewPage 634 (656)

section 20·2:The TemplatePage 636 (658)

section 20·3:The Length of the Detailed Projection PeriodPage 638 (660)

section 20·4:The Detailed Projection PhasePage 640 (662)

20·4.A:Faking It: Direct Extrapolation of Historical Cash FlowsPage 641 (663)

20·4.B:The Real Thing: Detailed Financial Pro Forma ProjectionsPage 643 (665)

20·4.C:Ratio Calculations and Policy with Pro FormasPage 647 (669)

section 20·5:The Terminal ValuePage 649 (671)

20·5.A:The Cost of CapitalPage 649 (671)

20·5.B:The Cost of Capital Minus the Growth Rate of Cash FlowsPage 651 (673)

section 20·6:Some Pro FormasPage 654 (676)

20·6.A:An Unbiased Pro FormaPage 654 (676)

20·6.B:A Calibrated Pro FormaPage 654 (676)

section 20·7:Alternative Assumptions and Sensitivity AnalysisPage 658 (680)

20·7.A:Fiddling with Individual ItemsPage 658 (680)

20·7.B:Do Not Forget FailurePage 659 (681)

20·7.C:Assessing the Quality of a Pro FormaPage 660 (682)

section 20·8:Proposing Capital Structure ChangePage 661 (683)

section 20·9:Our Pro Forma in HindsightPage 663 (685)

section 20·10:Caution---The Emperor's New ClothesPage 665 (687)

section 20·11:SummaryPage 666 (688)

section A:In-a-Pinch Advice: Fixed vs. Variable ComponentsPage 668 (690)

part V:AppendicesPage 675 (697)

chapter A:EpiloguePage 677 (699)

section A·1:Thoughts on Business and Finance EducationPage 678 (700)

A·1.A:Common Student MisconceptionsPage 678 (700)

A·1.B:Common Faculty MisconceptionsPage 679 (701)

A·1.C:Business School vs. PracticePage 680 (702)

A·1.D:The RankingsPage 681 (703)

section A·2:Finance As A DisciplinePage 682 (704)

A·2.A:Art or Science?Page 682 (704)

A·2.B:Will We Ever Fully Understand Finance?Page 683 (705)

section A·3:Finance ResearchPage 683 (705)

A·3.A:Accomplishments of FinancePage 683 (705)

A·3.B:Interesting Current Academic ResearchPage 684 (706)

A·3.C:Getting Involved in Academic ResearchPage 684 (706)

A·3.D:Finance DegreesPage 684 (706)

A·3.E:Academic Careers in Finance and Economics: A Ph.D.?Page 684 (706)

A·3.F:Being a Professor --- A Dream Job for the Lazy?Page 685 (707)

A·3.G:The Best Finance JournalsPage 687 (709)

section A·4:Bon VoyagePage 687 (709)

chapter B:More ResourcesPage 689 (711)

section 2·1:Prominently Used Data WebsitesPage 690 (712)

section 2·2:Necessary Algebraic Background Page 691 (713)

section 2·3:Laws of Probability, Portfolios, and ExpectationsPage 692 (714)

2·3.A:Single Random VariablesPage 692 (714)

2·3.B:PortfoliosPage 695 (717)

section 2·4:Cumulative Normal Distribution TablePage 697 (719)

section 2·5:A Short Glossary of Some Bonds and RatesPage 698 (720)

chapter A:IndexPage 703 (725)

section 1·1:Main IndexPage 703 (725)