Corporate Finance

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.

1. Introduction
2. The objective of the firm
3. Present value and opportunity cost of capital
   1. Compounded versus simple interest
   2. Present value
   3. Future value
   4. Principle of value additivity
   5. Net present value
   6. Perpetuities and annuities
   7. Nominal and real rates of interest
   8. Valuing bonds using present value formulas
   9. Valuing stocks using present value formulas
4. The net present value investment rule
5. Risk, return and opportunity cost of capital
   1. Risk and risk premia
   2. The effect of diversification on risk
   3. Measuring market risk
   4. Portfolio risk and return
   5. Portfolio theory
   6. Capital assets pricing model (CAPM)
   7. Alternative asset pricing models
6. Capital budgeting
   1. Cost of capital with preferred stocks
   2. Cost of capital for new projects
   3. Alternative methods to adjust for risk
   4. Capital budgeting in practise
   5. Why projects have positive NPV
7. Market efficiency
   1. Tests of the efficient market hypothesis
   2. Behavioural finance
8. Corporate financing and valuation
   1. Debt characteristics
   2. Equity characteristics
   3. Debt policy
   4. How capital structure affects the beta measure of risk
   5. How capital structure affects company cost of capital
   6. Capital structure theory when markets are imperfect
   7. Introducing corporate taxes and cost of financial distress
   8. The Trade-off theory of capital structure
   9. The pecking order theory of capital structure
   10. A final word on Weighted Average Cost of Capital
   11. Dividend policy
9. Options
   1. Option value
   2. What determines option value?
   3. Option pricing
10. Real options
    1. Expansion option
    2. Timing option
    3. Abandonment option
    4. Flexible production option
    5. Practical problems in valuing real options
11. Appendix: Overview of formulas
12. Index