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91 pages

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English

This book provides a comprehensive overview of the most important topics covered in a corporate finance course.

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Description

Content

This book provides a comprehensive overview of the most important topics covered in a corporate finance course.

Subjects as Value and Opportunity Cost of Capital, Budgeting, Market efficiency and Options are explained.

The compendium is designed such that it mimics the structure of a typical corporate finance course. Throughout the compendium theory is supplemented with examples and illustrations.

This compendium provides a comprehensive overview of the most important topics covered in a corporate finance course at the Bachelor, Master or MBA level. The intension is to supplement renowned corporate finance textbooks such as Brealey, Myers and Allen's "Corporate Finance", Damodaran's "Corporate Finance - Theory and Practice", and Ross, Westerfield and Jordan's "Corporate Finance Fundamentals".

The compendium is designed such that it follows the structure of a typical corporate finance course. Throughout the compendium theory is supplemented with examples and illustrations.

- Introduction
- The objective of the firm
- Present value and opportunity cost of capital
- Compounded versus simple interest
- Present value
- Future value
- Principle of value additivity
- Net present value
- Perpetuities and annuities
- Nominal and real rates of interest
- Valuing bonds using present value formulas
- Valuing stocks using present value formulas

- The net present value investment rule
- Risk, return and opportunity cost of capital
- Risk and risk premia
- The effect of diversification on risk
- Measuring market risk
- Portfolio risk and return
- Portfolio theory
- Capital assets pricing model (CAPM)
- Alternative asset pricing models

- Capital budgeting
- Cost of capital with preferred stocks
- Cost of capital for new projects
- Alternative methods to adjust for risk
- Capital budgeting in practise
- Why projects have positive NPV

- Market efficiency
- Tests of the efficient market hypothesis
- Behavioural finance

- Corporate financing and valuation
- Debt characteristics
- Equity characteristics
- Debt policy
- How capital structure affects the beta measure of risk
- How capital structure affects company cost of capital
- Capital structure theory when markets are imperfect
- Introducing corporate taxes and cost of financial distress
- The Trade-off theory of capital structure
- The pecking order theory of capital structure
- A final word on Weighted Average Cost of Capital
- Dividend policy

- Options
- Option value
- What determines option value?
- Option pricing

- Real options
- Expansion option
- Timing option
- Abandonment option
- Flexible production option
- Practical problems in valuing real options

- Appendix: Overview of formulas
- Index