Final PDF to printer Principles of Corporate Finance ● ● ● ● ● bre44380_fm_i-xxviii i 10/08/15 07:09 AM Final PDF to printer THE MCGRAW-HILL/IRWIN SERIES IN FINANCE, INSURANCE, AND REAL ESTATE Stephen A Ross, Franco Modigliani Professor of Finance and Economics, Sloan School of Management, Massachusetts Institute of Technology, Consulting Editor Financial Management Block, Hirt, and Danielsen Foundations of Financial Management Sixteenth Edition Brealey, Myers, and Allen Principles of Corporate Finance Twelfth Edition Brealey, Myers, and Allen Principles of Corporate Finance, Concise Second Edition Brealey, Myers, and Marcus Fundamentals of Corporate Finance Eighth Edition Brooks FinGame Online 5.0 Bruner Case Studies in Finance: Managing for Corporate Value Creation Seventh Edition Cornett, Adair, and Nofsinger Finance: Applications and Theory Third Edition Cornett, Adair, and Nofsinger M: Finance Third Edition DeMello Cases in Finance Second Edition Grinblatt (editor) Stephen A Ross, Mentor: Influence through Generations Grinblatt and Titman Financial Markets and Corporate Strategy Second Edition Higgins Analysis for Financial Management Eleventh Edition Ross, Westerfield, Jaffe, and Jordan Corporate Finance Eleventh Edition Ross, Westerfield, Jaffe, and Jordan Corporate Finance: Core Principles and Applications Fourth Edition bre44380_fm_i-xxviii ii Ross, Westerfield, and Jordan Essentials of Corporate Finance Ninth Edition Saunders and Cornett Financial Markets and Institutions Sixth Edition Ross, Westerfield, and Jordan Fundamentals of Corporate Finance Eleventh Edition International Finance Shefrin Behavioral Corporate Finance: Decisions that Create Value Eun and Resnick International Financial Management Seventh Edition Real Estate Investments Bodie, Kane, and Marcus Essentials of Investments Tenth Edition Bodie, Kane, and Marcus Investments Tenth Edition Hirt and Block Fundamentals of Investment Management Tenth Edition Brueggeman and Fisher Real Estate Finance and Investments Fifteenth Edition Ling and Archer Real Estate Principles: A Value Approach Fourth Edition Financial Planning and Insurance Jordan and Miller Fundamentals of Investments: Valuation and Management Seventh Edition Allen, Melone, Rosenbloom, and Mahoney Retirement Plans: 401(k)s, IRAs, and Other Deferred Compensation Approaches Eleventh Edition Stewart, Piros, and Heisler Running Money: Professional Portfolio Management Altfest Personal Financial Planning Second Edition Sundaram and Das Derivatives: Principles and Practice Second Edition Kapoor, Dlabay, and Hughes Focus on Personal Finance: An Active Approach to Help You Develop Successful Financial Skills Fifth Edition Financial Institutions and Markets Rose and Hudgins Bank Management and Financial Services Ninth Edition Rose and Marquis Financial Institutions and Markets Eleventh Edition Kapoor, Dlabay, and Hughes Personal Finance Eleventh Edition Walker and Walker Personal Finance: Building Your Future Second Edition Saunders and Cornett Financial Institutions Management: A Risk Management Approach Eighth Edition 10/08/15 07:09 AM Final PDF to printer Principles of Corporate Finance TWELFTH EDITION Richard A Brealey Professor of Finance London Business School Stewart C Myers Robert C Merton (1970) Professor of Finance Sloan School of Management Massachusetts Institute of Technology Franklin Allen Professor of Finance and Economics Imperial College London and Nippon Life Professor of Finance The Wharton School University of Pennsylvania bre44380_fm_i-xxviii iii 10/08/15 07:09 AM Final PDF to printer PRINCIPLES OF CORPORATE FINANCE, TWELFTH EDITION Published by McGraw-Hill Education, Penn Plaza, New York, NY 10121 Copyright © 2017 by McGraw-Hill Education All rights reserved Printed in the United States of America Previous editions © 2014, 2011, 2008, and 2006 No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning Some ancillaries, including electronic and print components, may not be available to customers outside the United States This book is printed on acid-free paper DOW/DOW ISBN 978-1-259-14438-7 MHID 1-259-14438-0 Senior Vice President, Products & Markets: Kurt L Strand Vice President, General Manager, Products & Markets: Marty Lange Vice President, Content Design & Delivery: Kimberly Meriwether David Managing Director: James Heine Brand Manager: Chuck Synovec Director, Product Development: Rose Koos Director of Digital Content Development: Douglas Ruby Product Developer: Noelle Bathurst Marketing Manager: Melissa Caughlin Digital Product Analyst: Kevin Shanahan Director, Content Design & Delivery: Linda Avenarius Program Manager: Mark Christianson Content Project Managers: Kathryn D Wright, Kristin 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10/08/15 07:09 AM Final PDF to printer For Maureen McGuire Myers 1941–2014 bre44380_fm_i-xxviii v 10/08/15 07:09 AM Final PDF to printer About the Authors ❱ Richard A Brealey ❱ Stewart C Myers ❱ Franklin Allen Professor of Finance at the London Business School He is the former president of the European Finance Association and a former director of the American Finance Association He is a fellow of the British Academy and has served as a special adviser to the Governor of the Bank of England and director of a number of financial institutions Other books written by Professor Brealey include Introduction to Risk and Return from Common Stocks Professor of Financial Economics at MIT’s Sloan School of Management He is past president of the American Finance Association, a research associate at the National Bureau of Economic Research, a principal of the Brattle Group, Inc., and a retired director of Entergy Corporation His research is primarily concerned with the valuation of real and financial assets, corporate financial policy, and financial aspects of government regulation of business He is the author of influential research papers on many topics, including adjusted present value (APV), rate of return regulation, pricing and capital allocation in insurance, real options, and moral hazard and information issues in capital structure decisions Professor of Finance and Economics, Imperial College London, and Nippon Life Professor of Finance at the Wharton School of the University of Pennsylvania He is past president of the American Finance Association, Western Finance Association, Society for Financial Studies, Financial Intermediation Research Society, and Financial Management Association His research has focused on financial innovation, asset price bubbles, comparing financial systems, and financial crises He is executive director of the Brevan Howard Centre for Financial Analysis at Imperial College Business School vi bre44380_fm_i-xxviii vi 10/08/15 07:09 AM Final PDF to printer Preface ❱ This book describes the theory and practice of corporate finance We hardly need to explain why financial managers have to master the practical aspects of their job, but we should spell out why down-to-earth managers need to bother with theory Managers learn from experience how to cope with routine problems But the best managers are also able to respond to change To so you need more than timehonored rules of thumb; you must understand why companies and financial markets behave the way they In other words, you need a theory of finance Does that sound intimidating? It shouldn’t Good theory helps you to grasp what is going on in the world around you It helps you to ask the right questions when times change and new problems need to be analyzed It also tells you which things you not need to worry about Throughout this book we show how managers use financial theory to solve practical problems Of course, the theory presented in this book is not perfect and complete—no theory is There are some famous controversies where financial economists cannot agree We have not glossed over these disagreements We set out the arguments for each side and tell you where we stand Much of this book is concerned with understanding what financial managers and why But we also say what financial managers should to increase company value Where theory suggests that financial managers are making mistakes, we say so, while admitting that there may be hidden reasons for their actions In brief, we have tried to be fair but to pull no punches This book may be your first view of the world of modern finance theory If so, you will read first for new ideas, for an understanding of how finance theory translates into practice, and occasionally, we hope, for entertainment But eventually you will be in a position to make financial decisions, not just study them At that point you can turn to this book as a reference and guide ❱ Changes in the Twelfth Edition We are proud of the success of previous editions of Principles, and we have done our best to make the twelfth edition even better Users of previous editions of this book will not find dramatic changes in either the material or the ordering of topics, but throughout we have tried to make the book more up-to-date and easier to read In many cases, the changes consist of some updated data here and a new example there Often these additions reflect some recent development in the financial markets or company practice For instance, you will find brief references to peer-to-peer lending (Chapter 14), crowdfunding (Chapter 15), and tax inversion (Chapter 31) In other cases, we have removed clutter that has accumulated over successive editions For example, we have pruned our discussion of market efficiency in Chapter 13, both to make it simpler and also more up-to-date Behavioral economists often stress the importance of investor sentiment in determining stock prices We have therefore expanded our discussion of behavioral finance to cover the role of sentiment, which we illustrate with a chart of the varying levels of investor optimism and pessimism The discussions of shortterm financial planning and working capital in Chapters 29 and 30 provide another instance where some rewriting has helped to simplify and remove overlap Some important topics get more emphasis than in previous editions For example, recent events have highlighted the need for ethical behavior We therefore expanded our discussion of ethical issues in Chapter There is a tendency to focus on blatantly illegal activities as examples of unethical behavior, but for most companies the difficult and important decisions are those that involve gray areas So we illustrate with a discussion of three gray areas— aggressive tax avoidance, asset stripping, and short selling We also highlight a key question: Does unethical activity simply result from a few bad apples, or is it more likely the result of a business culture that condones poor behavior? Another issue that deserved more emphasis is hidden leverage We introduce this topic in Chapter 14 We return to it in Chapter 17, with the example of Reeby Sports’ equipment purchase and a new mini-case, and again in Chapters 18 and 22, when we discuss the leverage created by growth options In the last edition, we added digital extensions through our Beyond the Page features, or apps as we call them This extra material can allow us to escape from some of the constraints of the printed page by providing more explanation for readers who need it and additional material for those who would like to dig deeper The Beyond the Page features include extra examples and spreadsheet programs, as well as some interesting anecdotes vii bre44380_fm_i-xxviii vii 10/08/15 07:09 AM Final PDF to printer viii Preface There are now over 150 of these apps, including many new ones in this edition They are all seamlessly available with a click on the e-versions of the book, but they are also readily accessible from the traditional hard copy of the text through the shortcut URLs Check out mhhe.com/brealey12e to learn more Examples of these applications include: ∙ Chapter Do you need to learn how to use a financial calculator? The Beyond the Page financial calculator application shows how to so ∙ Chapter Would you like to calculate a bond’s duration, see how it predicts the effect of small interest rate changes on bond price, calculate the duration of a common stock, or learn how to measure convexity? The duration application for Figure 3.2 allows you to so ∙ Chapter Want more practice in valuing annuities? There is an application that provides worked examples and hands-on practice ∙ Chapter How about measuring the betas of the Fama-French three-factor model for U.S stocks? The Beyond the Page beta estimation application does this ∙ Chapter 14 Ever wondered why Google split its stock into A and C shares? An app provides the answer ∙ Chapter 15 There was not space in the chapter to include a real IPO prospectus, but you can go Beyond the Page to view Twitter’s prospectus ∙ Chapter 19 The book briefly describes the flowto-equity method for valuing businesses, but using the method can be tricky We provide an application that guides you through the procedure ∙ Chapter 20 The Black-Scholes Beyond the Page application provides an option calculator It also shows how to estimate the option’s sensitivity to changes in the inputs and how to measure an option’s risk ∙ Chapter 28 Would you like to view the most recent financial statements for different U.S companies and calculate their financial ratios? There is an application that will this for you We believe that the opportunity to add additional content and applications such as these will increasingly widen the type of material that can be made available and help the reader to decide how deeply he or she wishes to explore a topic We realize the importance that instructors place on having access to a comprehensive and accurate set of questions and answers Therefore, much of the effort in creating this new edition has gone into improving the set of assignments and ensuring that the answers to these bre44380_fm_i-xxviii viii assignments are error-free We have added to the end-ofchapter questions in the text, but the principal additions are available online through McGraw-Hill’s Connect ❱ Making Learning Easier Each chapter of the book includes an introductory preview, a summary, and an annotated list of suggested further reading The list of possible candidates for further reading is now voluminous Rather than trying to include every important article, we largely list survey articles or general books We give more specific references in footnotes Each chapter is followed by a set of basic problems, intermediate problems on both numerical and conceptual topics, and a few challenge problems Answers to the odd-numbered basic problems appear in the Appendix at the end of the book We included a Finance on the Web section in chapters where it makes sense to so This section now houses a number of Web Projects, along with new Data Analysis problems These exercises seek to familiarize the reader with some useful websites and to explain how to download and process data from the Web The book also contains 13 end-of-chapter MiniCases These include specific questions to guide the case analyses Answers to the mini-cases are available to instructors on the book’s website Spreadsheet programs such as Excel are tailor-made for many financial calculations Several chapters include boxes that introduce the most useful financial functions and provide some short practice questions We show how to use the Excel function key to locate the function and then enter the data We think that this approach is much simpler than trying to remember the formula for each function We conclude the book with a glossary of financial terms The 34 chapters in this book are divided into 11 parts Parts to cover valuation and capital investment decisions, including portfolio theory, asset pricing models, and the cost of capital Parts to cover payout policy, capital structure, options (including real options), corporate debt, and risk management Part covers financial analysis, planning, and working-capital management Part 10 covers mergers and acquisitions, corporate restructuring, and corporate governance around the world Part 11 concludes We realize that instructors will wish to select topics and may prefer a different sequence We have therefore written chapters so that topics can be introduced in several logical orders For example, there should be no difficulty in reading the chapters on financial analysis and planning before the chapters on valuation and capital investment 10/08/15 07:09 AM Final PDF to printer Preface ❱ Acknowledgments We have a long list of people to thank for their helpful criticism of earlier editions and for assistance in preparing this one They include Faiza Arshad, Aleijda de Cazenove Balsan, Kedran Garrison, Robert Pindyck, Donna Cheung, and Gretchen Slemmons at MIT; Elroy Dimson, Paul Marsh, Mike Staunton, and Stefania Uccheddu at London Business School; Lynda Borucki, Marjorie Fischer, Larry Kolbe, Michael Vilbert, Bente Villadsen, and Fiona Wang at The Brattle Group, Inc.; Alex Triantis at the University of Maryland; Adam Kolasinski at the University of Washington; Simon Gervais at Duke University; Michael Chui at Bank for International Settlements; Pedro Matos at the University of Southern California; Yupana Wiwattanakantang at National University of Singapore; Nickolay Gantchev, University of North Carolina Chapel Hill; Tina Horowitz, Lin Shen, and Chenying Zhang at the University of Pennsylvania; Julie Wulf at Harvard University; Jinghua Yan at SAC Capital; Douglas Dwyer at Moody’s Analytics; Bennett Stewart at EVA Dimensions; and James Matthews at Towers Perrin We would also like to thank the dedicated experts who have helped with updates to the instructor materials and online content in Connect and LearnSmart, including Kay Johnson, Blaise Roncagli, Deb Bauer, Mishal Rawaf, Marc-Anthony Isaacs, Frank Ryan, Peter Crabb, Victoria Mahan, Nicholas Racculia, Angela Treinen, and Kent Ragan We want to express our appreciation to those instructors whose insightful comments and suggestions were invaluable to us during the revision process: Ibrahim Affaneh Indiana University of Pennsylvania Neyaz Ahmed University of Maryland Alexander Amati Rutgers University, New Brunswick Anne Anderson Lehigh University Noyan Arsen Koc University Anders Axvarn Gothenburg University John Banko University of Florida, Gainesville Michael Barry Boston College Jan Bartholdy ASB, Denmark Penny Belk Loughborough University Omar Benkato Ball State University Eric Benrud University of Baltimore Ronald Benson University of Maryland, University College Peter Berman University of New Haven Tom Boulton Miami University of Ohio Edward Boyer Temple University Alon Brav Duke University Jean Canil University of Adelaide bre44380_fm_i-xxviii ix ix Robert Carlson Bethany College Chuck Chahyadi Eastern Illinois University Fan Chen University of Mississippi Celtin Ciner University of North Carolina, Wilmington John Cooney Texas Tech University Charles Cuny Washington University, St Louis John Davenport Regent University Ray DeGennaro University of Tennessee, Knoxville Adri DeRidder Gotland University William Dimovski Deakin University, Melbourne David Ding Nanyang Technological University Robert Duvic University of Texas at Austin Alex Edmans London Business School Susan Edwards Grand Valley State University Riza Emekter Robert Morris University Robert Everett Johns Hopkins University Dave Fehr Southern New Hampshire University Donald Flagg University of Tampa Frank Flanegin Robert Morris University Zsuzanna Fluck Michigan State University Connel Fullenkamp Duke University Mark Garmaise University of California, Los Angeles Sharon Garrison University of Arizona Christopher Geczy University of Pennsylvania George Geis University of Virginia Stuart Gillan University of Delaware Felix Goltz Edhec Business School Ning Gong Melbourne Business School Levon Goukasian Pepperdine University Gary Gray Pennsylvania State University C J Green Loughborough University Mark Griffiths Thunderbird, American School of International Management Re-Jin Guo University of Illinois, Chicago Ann Hackert Idaho State University Winfried Hallerbach Erasmus University, Rotterdam Milton Harris University of Chicago Mary Hartman Bentley College Glenn Henderson University of Cincinnati Donna Hitscherich Columbia University Ronald Hoffmeister Arizona State University James Howard University of Maryland, College Park George Jabbour George Washington University Ravi Jagannathan Northwestern University Abu Jalal Suffolk University Nancy Jay Mercer University Thadavillil (Nathan) Jithendranathan University of Saint Thomas Kathleen Kahle University of Arizona Jarl Kallberg NYU, Stern School of Business Ron Kaniel Rochester University 10/08/15 07:09 AM Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an I-10 Index General Motors Acceptance Corporation (GMAC), 853n General partnerships, 853–854 Genesee & Wyoming, 227 Geometric average return, 165n Germany accounting standards in, 734 agency problem and, 890 CEO compensation, 308 growth and declining industries in, 881–881 inflation in, 65 mergers and, 815 net present value calculations in, 145–146 ownership and control in, 873–875 short-termism in, 881 taxes in, 145–146 Gertner, R., 849n Gilligan, Thomas W., 654n Gilson, R., 383n Ginnie Mae, 802n Glaxo Smith Kline, 2, Glencore, 813 Global bonds, 395, 629 Global Crossing, 858 Global markets See International finance Goetzmann, W N., 166n, 186, 212 Going-concern value, 79 Going dark, 385n Gold, 282–284, 674, 674n, 676 Golden parachutes, 834 Goldman Sachs, 6, 371, 371n, 388, 638 Goldreich, D., 394n Gompers, P A., 400, 833n Goodwill, 829 Google, 93, 347, 347n, 361, 393, 393n, 396, 411, 477, 526–540, 547–567, 590, 814, 878 Gordon, M J., 85n Governance See Ownership and control Government National Mortgage Association (GNMA; Ginnie Mae), 802n Government regulation, 635–636 See also names of specific laws and government agencies Government sponsored enterprises (GSEs), 802, 802n, 803 Goyal, V., 482n Graham, John R., 108n, 124, 203n, 319, 319n, 320n, 321, 414n, 421n, 423n, 430, 466, 466n, 478n, 486, 632, 632n, 654n, 674n, 760n Grant, R M., 285n Gray market, 390n Great Depression, 61, 343 Greece, sovereign debt crisis, 68–69, 375, 601, 896 Greenshoe option, 387 Greenspan, Alan, 342n Greinke, Zack, 308 Grenadier, S R., 668 Grinstein, Y., 423n Gromb, D., 883n Grossman, S J., 336n Growth industries, 881–882 Growth rates internal, 777–778 sustainable, 778 Growth stocks, 90, 205–206 bre44380_idx_I1-I24 Gruber, M J., 212, 335n, 606n, 607n Grullon, G., 413n Gucci, 305 Guiso, L., 10n Gulf & Western Industries, 855 H Habib, M., 643 Hall, B H., 837n Hall, B J., 321 Halliburton, 813 Haltiwanger, R S., 846n Hamada, R S., 507n Hammond, J S., 271 Hansen, Robert S., 389n, 395n Hard rationing, 123 Harford, J., 836n, 838 Harper, J T., 852n Harrah’s Entertainment, 844 Harrah’s Operating Company, 597n Harris, M., 486 Harris, R S., 723n, 827n Hartman, P., 881n Hart, O., 359n, 376, 817n, 862n Hart-Scott-Rodino Antitrust Act of 1976, 827, 827n Harvey, Campbell R., 108n, 124, 203n, 319, 319n, 320n, 321, 414n, 430, 478n, 486, 632, 632n, 723n, 760n Haushalter, G David, 676, 676n Hazard analysis, 610n HBOS, 387–388, 398, 399 Healy, Paul M., 413–414, 413n, 414n, 752, 837, 837n, 882n, 885 Hedge funds, 343, 369–370, 623 Hedge ratio, 549, 693–695 Hedging commodity price risk, 676 currency risk, 676, 717–719 economic exposure, 719 example, 718 transaction exposure, 719 defined, 673–674, 679 fuel costs, 678, 680, 683 with futures contracts, 680–686, 691–693 interest rate risk, 676 setting up hedge, 691–695 as zero-sum game, 673–674 Heinz, 813, 844 Hellman, T., 383n Hellwig, M., 876n Helyar, J., 845n, 865 Hendel, Igal, 654n Herman Miller Corporation, 314 Hess, 81, 93 Hewlett-Packard (HP), 4, 525, 584–585, 585n Higgins, R C., 822n Hill, M., 806 Hilton Hotels, 844, 853 Hilton Worldwide, 396 Hirshleifer, J., 896n Histogenics Corp., 396 Historic data on capital markets, 162–169 on CEO compensation, 307 on inflation, 60–61, 65 on mergers, 836–837 Hodges, Stewart D., 288n, 664n Holcim, 813 Holderness, Clifford, 359, 359n Holmstrom, B., 838 Home Depot, The, 308, 734–752 Honeywell, 827 Horizontal mergers, 814 Horizon value estimating, 95–96, 498–500 market-book ratios and, 95–96 price-earnings ratio and, 95–96 Hoshi, T., 872, 872n, 882n Host Marriott, 627 Hotchkiss, E S., 610n, 615, 860n, 864 Hotelling’s principle, 283n Household portfolios, 868–869 House of Fraser, 835 Houston, J F., 819n Howe, Christopher D., 261n HR Ratings de Mexico, 608n HSBC, 653, 653n HSBC Holdings, 388 Huang, J., 606n Huang, M., 207n, 340n, 606n Hub Power Company (Hubco), 649–650 Hudson’s Bay Company, Hull, J C., 567, 698 Hurdle rate See Opportunity cost of capital Hyperinflation, 60 Hypobank, 819 Hypo Group, 375 Hypo Real Estate, 852n I Ibbotson, R G., 186, 401 IBES, 86n IBM, 63n, 117, 192–193, 193, 235, 311n, 411, 604, 652, 691, 830, 835 Icahn, Carl, 306, 831 ICE Benchmark Administration (ICE), 638 Ihrig, J., 726 IKEA, 285 Ikenberry, D., 415n Imputation tax system, 425–426, 478n IMS Health, 844 Incentives See also Stock options financial distress and, 471–472 for financial managers, 302–311, 373 leveraged buyouts (LBOs) and, 846, 847 payout policy and, 422 Incidental effects, 135–136 Inco, 835 Income statement common-size, 748–750 described, 736–737 in estimating cash flow, 762–763 example, 762 leasing and, 657 Income stocks, 90 Incomplete contracts, 359n Incremental net present value, 135–137 Indenture, bond, 621 Indexed bonds, 62–63, 62n, 64 Index funds, 180, 335, 369 Index futures, 684 10 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an Index Indexing, 180 Indirect quote, 707–708 Industrial and Commercial Bank of China, 851, 852 Industrial Bank (China), 174, 182 Industry beta, 227 Industry consolidation, mergers and, 818–819 Industry structure, components of, 285 Inefficiency eliminating, 818 mergers and, 818 Inflation rates in bond valuation, 60–63 Consumer Price Index (CPI), 60 by country, 61, 65 equivalent annual cash flow, 149 exchange rates and, 711–712 interest rates and, 60–63, 712–717 international rates, 65 in net present value analysis, 137–138 nominal interest rates and, 63–64 in term structure of interest rates, 60 Inflation swaps, 691 Information asymmetries, 479–481, 826–827 Information effect See also Signaling information provided by financial markets, 373–374 investor response to, 334–335 market reaction to stock issues, 396–398 for mergers, 826–827 of payout policy, 413–415 in semistrong market efficiency, 332, 333–334, 888 in sensitivity analysis, 253–254 of stock repurchase plans, 414–415 in strong form of market efficiency, 332, 334–335, 888 in weak form of market efficiency, 332, 344–345, 888 Information memo, 638–639 ING, 375 Initial public offerings (IPOs), 384–394, 854 arranging, 385–387 bookbuilding method, 392–393 new-issue puzzle, 337 sale of, 389–392 underpricing of, 389–392 underwriters of, 387–388 winner’s curse and, 390, 390n, 394 Installment plan costing, 29–30 Institutional investors initial public offerings and, 386–387 private placements and, 399, 627–629 Insurance, 676–678 credit, 795n portfolio, 562 risk transfer and, 676–677 Insurance companies, 371–372 Intangible assets applying net present value rule, 132–133 in equity valuation, 79 investment option, 587–588 in merger accounting, 829 nature of, 19 Intel, 382, 383, 761 Intercompany loans, 870 Intercontinental Exchange (ICE), 77n, 680n, 681, 682n bre44380_idx_I1-I24 Interest coverage, 745–746 Interest rate(s) See also Term structure of interest rates on bank loans, 637 bond prices and, 50–54 bond terms and, 51, 619–621 in bond valuation, 47–54, 60–63 exchange rates and, 710 Fisher’s theory of, 63–64, 712n inflation rates and, 60–63, 712–717 on money-market investments, 800–801 nominal versus real, 61–63, 715–717 option value and, 537–539 real, 60–63 Interest rate parity, 710, 713 Interest rate risk in bond valuation, 54–60 hedging, 676, 691–693 Interest rate swaps, 687–689 Interest tax shields, 461–464 personal taxes and, 464–466 value of stockholders’ equity, 462 Intermediaries, 368 Internal capital market, 855–858 Internal diversification, 879 Internal growth rate, 777–778 Internal rate of return (IRR), 107, 111–119 calculating, 112–113 IRR rule, 107, 113 in lending versus borrowing, 113–114 modified, 115n more than one opportunity cost of capital, 118 multiple rates of return and, 114–115 for mutually exclusive projects, 115–118 spreadsheet functions, 122 verdict on, 118–119 Internal Revenue Service (IRS), 144, 423, 423n, 501n, 661–662, 661n, 800 International Accounting Standards Board (IASB), 656n, 734 International banking facilities (IBFs), 802 International finance, 867–885 See also Financial crisis of 2007–2009; names of specific countries accounting standards, 656n, 734 adjusted present value, 511 average market risk premiums, 167 banks in, 799 beta for selected foreign stocks, 182 bonds in, 365, 629 bubbles in, 339 cash management, 799 CEO compensation, 307, 308, 309 comparative inflation rates, 60–61, 65 comparisons across countries, 867–871 compounding intervals in, 47–48, 48n conglomerates, 878–880 corporate names, 5n cross-border mergers, 813, 829–830 currency options, 678 defaulting debt, 598 discount rates for international projects, 235 dual-class shares, 361, 878 exchange risk and, 720–723 financial markets and institutions, 395, 867–871 11 I-11 financial statements, 733–734 imputation tax systems, 425–426, 478n inflation rates by country, 61, 65 initial public offerings, 384, 391, 396 international money market, 801–802 leasing in, 666, 666n mergers, 813, 834–835 net present value in other countries, 145–146 ownership and control, 871–880 perpetuities in, 27–28 privatization in, 851–852 restructuring, 851–855, 862–863 risks in See International risks security issues, 395 sovereign debt, 67–69, 375 standard deviations of stocks in, 172, 173, 174 stock market returns, 172, 173 stock repurchases, 413 taxation of multinational companies, 11–12 venture capital, 383 weighted-average cost of capital (WACC), 224–225 International Financial Reporting Standards (IFRS), 734 International Fisher effect, 712n International Monetary Fund (IMF), 68–69, 896 International Power, 649 International projects See Project finance International risks, 707–726 foreign exchange risk, 707–723 basic relationships, 709–717 economic exposure, 719 foreign exchange market, 707–723 hedging currency risk, 717–719 international investment decisions, 720–723 transaction exposure, 719 political risk, 723–725 purchasing power theory, 714–715 International Securities Exchange (ISE), 526n International Swap Dealers Association (ISDA), 600n, 601 International Swaps and Derivatives Association, 687n Internet bubble, 339, 341, 348, 374, 383, 388, 389 Inventory management, 788–790 Inventory period, 765, 766 Inventory turnover, 742 Investment banks, 371, 389 Investment decisions See also Capital budgeting; Project finance capital budgeting process for, 250–252 defined, examples, 2–4, 3, 4–5 financing decisions versus, 5, 138, 141, 329 investment trade-off, 9–10 market value in, 279–282 net present value (NPV) and, 105–109, 132–151 alternatives to, 107 book rate of return versus, 108–109 cash flow in, 132–138 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an I-12 Index Investment decisions—Cont cost of excess capacity, 146, 150–151 depreciation and, 137, 139–140, 142–144 example, 139–146 forecasting economic rents, 284–287 incentives, 302–311 inflation and, 137–138 investment versus financing decisions, 5, 138, 141, 329 key points concerning, 107–108 long- versus short-lived projects, 146, 147–150 market values in, 279–282 multiple cash flows, 25–26 payback analysis versus, 109–111 replacement problem, 146, 150 review of basics, 105–109 taxes and, 142–144 timing, 146–147 real estate, 279–282 Investment funds, 368–370 See also Hedge funds; Mutual funds; Pension funds Investment opportunity, present value of, 22–23 Investment option, 263–264, 279–282, 288–294, 525, 526, 573–577, 587–588 Involuntary issuers, 397n Iowa Electronic Markets, 347 Iridium Communications, Inc., 3–4 IRR See Internal rate of return (IRR) IRS See Internal Revenue Service (IRS) Ishii, J L., 833n ISS, 311 Italy, nominal versus real interest rates, 715–717 ITT, 855, 855, 856 Ivanhoe Mines, 398–399 J Jackson, G., 873n, 884 Jack Wolfskin, 855 Jacquier, E., 165n Jaguar Land Rover, 814, 835 James, C M., 819n James Webb Space Telescope, 137 Japan bubbles in, 339, 341 foreign bonds in, 629 just-in-time approach, 790, 790n mergers and, 816 ownership and control in, 872–873, 881–882 short-termism in, 881 Jarmin, R S., 846n Jarrell, G., 97n, 414–415, 415n J.C Penney, 612–613, 620, 624, 626, 627–629 Jenkinson, T., 401 Jensen, Michael C., 303, 303n, 321, 422n, 483, 483n, 846n, 861–862, 862n, 864 Jin, L., 366n Jobs, Steve, 428 John, K., 864 Johnson, B., 752 Johnson, E J., 340n bre44380_idx_I1-I24 Johnson & Johnson, 66, 80, 80, 174, 176–179, 181, 193–197, 195, 196, 200, 222–223, 230, 293, 462–464, 463n, 478, 817 Johnson, Ross, 844–845, 846 Johnson, S., 362n, 880, 880n, 885 Jorion, P., 166n JPMorgan Chase, 370, 374, 388, 414, 415, 613n JP Morgan Prime Money Market Fund, 369 Jump risks, 677 Jung, K., 396 Junior debt, 365, 626 Junk bonds, 599, 608–609, 845, 846 Jurek, J., 623n Just-in-time approach, 790, 790n K Kadant Inc., 851 Kahneman, D., 251n, 340n, 341n Kalay, A., 430 Kallberg, J G., 779 Kane, A., 165n Kaneko, T., 393n Kansas City Southern Railroad, 80, 227, 503 Kaplan, S N., 309n, 383n, 470, 470n, 511, 511n, 838, 846, 846n, 864 Kashyap, A., 872, 872n, 882n Kay, John A., 285, 285n, 315n Kedia, S., 857n Keeney, R L., 271 Keiretsu, 872–873, 881–882 Kendall, Maurice G., 329–330, 329n, 332–333 Keown, A., 334n Kerviel, Jérôme, 695 Kester, W C., 271 Keurig Green Mountain, 525 K.G.R Ökologische Naturdüngemittel GmbH (KGR), 145–146 Kickstarter, 382 Kim, Y., 396 Kinder Morgan, 844 Kindleberger, C., 892n Kiska, Wendy, 607 KKR (Kohlberg Kravis Roberts & Co.), 844, 844–845 Klein, M., 651n KLM, 525 Knoeber, C R., 833n Kohlberg Kravis Roberts & Co (KKR), 844, 844–845 Kosowski, R., 335n, 888n Kothari, S P., 333n Kozlowski, Dennis, 12 KPMG, 79 Kraakman, R., 878n Kraft, 813 Krahnen, J P., 884 Krigman, L., 385n The Kroger Co., 396 Kroll Brand Ratings, 608n Kryvorizhstal, 851 Kulatilaka, N., 583n, 592 Kumar, A., 421n, 423n Kumar, P., 627n Kuoni, 719 Kuroki, F., 873n L Laclede Group Inc., 87 LA Dodgers, 308 Lafarge, 813 Lakonishok, J., 415n Lamont, O A., 850n, 856, 856n Landier, A., 308n Landsbanki, 852n Lang, L H P., 877–878, 877n La Porta, R., 359n, 429n, 871, 871n, 877, 877n, 884, 885 Laredo Petroleum, 80 Law of conservation of value, 439–440, 888–889 Law of one price, 55–56, 600, 712n Lazard, 371 LBOs See Leveraged buyouts (LBOs) Leary, M T., 654n Leases, 365–366 Leasing, 365–366, 652–668 dubious reasons for, 656–657 financial leases See Financial leases leveraged leases, 653, 666–667 nature of leases, 652–653 as off-balance-sheet financing, 656–657 operating leases, 653, 657–659 sensible reasons for, 653–655 in theory of optimal capital structure, 483 Lee, D S., 415n Leeson, Nick, 304n, 696 Legal systems, 827–828 Lehman Brothers, 5, 52, 374, 451n, 470, 640, 641, 800, 858 Leica, 855 Lemmon, M L., 311n, 430, 478n, 482n “Lemons” problem, leasing and, 654n Lenders, monitoring by, 306 Lenovo, 835 Lerner, J., 400, 846n Lessard, D R., 726 Lessee (user), 652 Lessor (owner), 652 Lev, B., 231n Leverage cost of equity capital and, 435–437, 444–445, 449–451 financial See Financial leverage hidden, 446–448 operating, 230–232, 257–258 Leveraged buyouts (LBOs), 474, 511, 745, 843–847 characteristics of, 847 examples, 844, 844–846 incentives and, 846, 847 junk bonds and, 599, 608–609, 845, 846 other stakeholders and, 846 taxes and, 846 Leveraged leases, 653, 666–667 Leveraged restructurings, 847 Leverage ratios, 744–746 Levered equity, 437 Levi, M D., 726 Levine, R., 880n, 885 Levi Strauss, 385 Lewellen, W G., 822n Lewis, C M., 632n, 643 Lewis, K K., 726 12 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an Index Lewis, M., 337n Liabilities, current, 502 Liability restructuring, 834 Liberty Media, 849 LIBOR (London Interbank Offered Rate), 364, 620, 637, 638, 686n, 687–688, 801 Lichtenberg, F., 837n Lie, E., 563n Li, F., 592 Life cycle of firm, payout policy and, 426–429 Life Technologies, 813 LIFFE, 680n, 681, 682 Limited liability, 5, 468, 603–604 Limited liability companies (LLCs), Limited liability partnerships (LLPs), Limited partnerships, 6, 362, 382–383, 853–854 Limit orders, 77 Linares, P., 166n, 186 Lindt & Sprüngli, 719 Linear programming (LP), 121–123, 197 LinkedIn, 878 Lintner, John, 200, 200n, 416n Liquidation value, 79, 500 Liquidity of current assets, 760–761 defined, 746–747 value of, 894–895 Liquidity ratios, 746–748 Liquid yield option notes (LYONs), 635 Litton Industries, 855 Litzenberger, R H., 424, 424n Lizzeri, Alessandro, 654n Ljungqvist, A., 392n, 400, 401 Lockbox systems, 799 Lognormal distributions, 193n London Interbank Offered Rate (LIBOR), 364, 620, 637, 638, 686n, 687–688, 801 London Metal Exchange (LME), 681 London Stock Exchange, 77, 881 Longevity bonds, 635 Long-lived assets choice between short-lived assets and, 146, 147–150 investing in, 355–356 multiple risk-adjusted discount rates for, 238–239 single risk-adjusted discount rate for, 237–239 Long Term Capital Management (LTCM), 343 Long-term financial planning, 772–777 contingency planning, 773 example, 774–776 pitfalls in model design, 776 short-term financial planning versus, 759–762 Long-term financing decisions, 619–629 See also Corporate financing choosing a plan, 776–777 contingency planning, 773 example, 774–776 pitfalls in model design, 776 Lookback options, 566 Loomis, C., 294n Lopez-de-Silanes, F., 359n, 429n, 871, 871n, 877, 877n, 884, 885 LoPucki, Lynn, 861n L’Oreal, bre44380_idx_I1-I24 Lorillard, 813 Lottery winnings, 30 Loughran, R., 337n Loughran, T., 391n, 392n, 398n, 399n Lowe’s Companies, 751 LTV, 855 Lucas, Deborah, 607 Lucent Technologies, 848, 849 Luehrman, T A., 515 Lufthansa, 366, 680 Lu, Qi, 349n Luxottica Group SpA, 628 LVMH, 3, 3n, 174, 182 Lyondell Chemical Company, 858 M Macaulay duration, 52–53, 54n Mackie-Mason, J., 478n MacKinlay, A C., 333n Macquarie Bank, 371 Maddaloni, A., 867n Madoff, Bernard, 11–12, 12n Majd, S., 581n Majluf, N S., 397n Majority voting, 360–361 Maksimovic, V., 481n, 851, 851n Malkiel, B G., 350 Malmendier, U., 835n Management buyouts (MBOs), 843–847 Management compensation, 307–309 See also Incentives; Stock options Mandelker, G N., 231n Maness, T., 806 Mann, C., 606n, 607n Mannesmann, 308 Mann, S V., 71, 806 Marcus, A J., 165n Maremont, Mark, 815n Margin, in futures trading, 681–683 Margrabe, W., 576n Marketable securities See also specific types as financial assets, 2–3 management of, 800–805 Market-based risk models, 610–613 Market-book ratio, 95–96 Market capitalization, 4–5, 722, 737 Market capitalization rate, 82, 87 See also Cost of equity capital Market efficiency See Efficient-market hypothesis Market factor, in three-factor model, 208–210 Market for corporate control, 831 Market model, 333 Market orders, 77 Market portfolio risk of, 165 stocks in, 204n Market risk, 888 beta in measuring, 181–184 defined, 176, 192 estimating, 240–241 portfolio diversification and, 173–176 spreadsheet functions in estimating, 240–241 Market risk premium defined, 199 13 I-13 expected, 162–164 historic, 162–164 in three-factor model, 209 Market timing, 482 Market-to-book ratio, 737, 737, 737n Market value, 279–282 Cadillac/movie star parable, 280 in capital budgeting decisions, 279–282 in investment decisions, 279–282 Market value added, 737, 738 Market Volatility Index (VIX), 173n, 562–563, 564 Markowitz, Harry M., 192, 192n, 197 Mark to market, futures contract, 682 Marriott Corporation, 627, 641 Marsh, P R., 61n, 65n, 162–164, 162n, 163n, 164n, 166–167, 167n, 168n, 170n, 173n, 186, 295, 344n, 716n Marston, F C., 723n Martin, K J., 818, 818n Marvin Enterprises case, 288–294, 379–381, 385–389, 406–409 Marx, Karl, 294 Mason, S P., 592 Master limited partnerships, 362 Masulis, R W., 400, 489n, 822n Matching duration, 692–693 Matching maturities, 760 Mattel, 305 Matthews, J., 623n Mauer, D C., 760n Maug, E., 875, 875n Mayer, C., 874in Mayers, D., 891n Mazda, 881 McCardle, K F., 835, 835n McConnell, J J., 634n, 659n, 668, 818, 818n McDonald, R L., 567, 592 McDonald’s, 305 McGuire, William, 563 MCI, 882 McKinnell, Henry, 308 McKinsey & Company, 313 McNichols, Maureen F., 610, 610n, 611n Medium-term notes (MTNs), 618, 641, 803, 804 Medtronic, 813 Megginson, W., 395n, 400, 852n, 864, 865 Mehra, R., 166n, 186 Mehrotra, V., 849n Mehta, P., 879–880, 880n Mei, J., 232n Mercedes Automobil Holding, 873 Mercedes-Benz, 853 Merck, 80, 813 Mergers, 813–838 antitrust law and, 827–828 Bank of America, 819 conglomerate mergers and value additivity, 841–842 dubious motives for, 819–822 economy and, 836–837 estimating gains and costs of, 822–827, 835–836 form of acquisition, 828 junk bonds and, 845, 846 mechanics, 827–830 merger accounting, 828–829 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an I-14 Index Mergers—Cont sensible motives for, 814–819 synergies in, 815–819 takeover battles and tactics, 830–835, 832 types, 814–815 waves of, 813, 836, 895–896 Merlin Entertainment, 855 Merrill Lynch, 304, 308, 371n, 374 Merton, Robert C., 366n, 376, 558n, 592, 604n, 891, 891n Metrick, A., 400, 833n, 854n Mexico, put options on oil, 678 Mezzanine financing, 381, 381n Mian, S L., 806 Michaels Stores, 855 Michaely, R., 385n, 413n, 414n, 423n, 430 Microsoft, 4–5, 174, 181, 196, 200, 225–227, 226, 330–331, 331, 477, 738, 739, 740 Mihov, V T., 627n, 628n, 636n Mikkelson, W H., 415n Miles, J A., 506n, 515, 849n Milgrom, P., 401 Miller, Merton H., 416–417, 416n, 424, 424n, 438n, 454, 463n, 465, 465n, 507n, 635–636, 674 Miller, N G., 229n Miller, S C., 638n Mill, John Stuart, 890 Miranda, J., 846n Miranti, P J., Jr., 855n Mishler, L., 806 Mishra, D R., 723n Mitchell, M., 827, 827n, 835, 835n, 836, 838 Mitsubishi Estate Company, 476n Mitsui & Co., 649 Mittal Steel, 834–835 Mittelstaedt, F., 752 Miyajima, H., 873n, 884 Mizuho Bank, 816, 816n Modified accelerated cost recovery system (MACRS), 142–144, 146n Modified duration, 54 Modified internal rate of return, 115n Modigliani, F., 416–417, 416n, 438n, 463n, 507n, 674 Modigliani-Miller (MM) approach to capital structure, 438–454, 889 law of conservation of value, 439–440, 888–889 Proposition 1, 439–443, 444, 446, 449, 451, 462, 463–464, 504 Proposition 2, 443–445, 448, 449, 452, 504, 505 rebalancing and, 506n, 507 taxes in, 462, 463–464 violations of, 451 to payout policy, 416–421, 426 Moffett M H., 726 Mohan, N., 844n, 846, 846n Mola, S., 399n Money machines, 58, 711 Money market, 800 Money-market investments, 369, 800–805 calculating yield on, 800–801 types, 802–805 yields on, 800–801 Monte Carlo simulation, 259–262 defined, 259 bre44380_idx_I1-I24 example, 259–262 Montgomery, C., 857, 857n Moody’s credit ratings, 66, 608, 612–613, 636, 640n, 792 Mooradian, R M., 864 Moore, J., 862n Moral hazard risk, 677 Morck, R., 885 Moretti, E., 835n Morgan Stanley, 6, 371, 371n, 387–388, 388, 394–395, 638 Morningstar Credit Ratings, 608n Morris, J R., 779 Mortality bonds, 635 Mortgage-backed securities (MBSs), 304 short sales of, 11 subprime crisis of 2007–2009, 11, 304–305, 308, 343–344, 374–375, 600–602, 623, 895, 896 Mortgage bonds, 621–622 Mortgage pass-through certificates, 623n Mortgages calculating payments, 32 subprime crisis of 2007-2009, 304–305, 308, 343–344, 374–375, 600–602, 623, 895, 896 Motorola, 831, 849 Motorola Mobility, 814 Mulally, Alan, 484 Mulherin, J H., 838 Mullainathan, S., 304n, 879–880, 880n Mullins, David W., Jr., 344n, 348, 348n Multi Commodity Exchange (India), 681 Müntegering, Franz, 845n Murphy, K J., 321 Murphy, T., 790n Mutual funds, 368–369 closed-end, 78n, 369, 892 open-end, 78n, 369 Mutually exclusive projects internal rate of return and, 115–118 net present value rule for, 146–151 Myers, Stewart C., 169, 234, 251, 295, 397n, 482n, 486, 507n, 508n, 581n, 590n, 664n, 683n, 777, 821n, 822n, 883n, 890 N Nagel, S., 421n “Naked” call options, 223n Nanda, V., 392n, 849n Nanjing Cenbest, 835 Narayanan, P., 615 Nardelli, Robert, 308 Nasdaq (National Association of Securities Dealers Automated Quotations System), 77, 563 Nasdaq Composite Index, 339, 892 Nationalization, 851–852 Nationally recognized statistical rating organizations (NRSOs), 608n Naveen, L., 311n Navistar, 306 NCR, 848, 849 Negative pledge clause, 621n, 626 Negotiable certificates of deposit (CDs), 803, 804 Nenova, Tatiana, 361, 361n, 878, 879n Nestlé, 174, 182, 719, 719 Net convenience yield, 684–685 Net leases, 653 Net operating profit after tax (NOPAT), 740n Net present value (NPV), 105–109, 328–329, 887 See also Net present value rule; Present value (PV) calculating, 105–106 capital budgeting decisions and, 249–271 capital budget, defined, 250 capital investment process, 250–252 decision trees, 263, 265, 266 economic rents See Economic rents forecasting market values, 279–282 incentives, 304–305 Monte Carlo simulation, 259–262 performance measurement, 311–320 process for, 250–252 real options, 262–266, 573–592 sensitivity analysis, 252–258 defined, 23, 105 in evaluating expansion option, 288–294 financing decisions and, 5, 138, 141, 319 investment decisions and, 105–109, 132–151 alternatives to, 107 book rate of return versus, 108–109 cash flow in, 132–138 cost of excess capacity, 146, 150–151 depreciation and, 137, 139–140, 142–144 example, 139–146 forecasting economic rents, 284–287 incentives, 302–311 inflation and, 137–138 investment versus financing decisions, 138, 141, 329 key points concerning, 107–108 long- versus short-lived projects, 146, 147–150 market values in, 279–282 multiple cash flows, 25–26 payback analysis versus, 109–111 replacement problem, 146, 150 review of basics, 105–109 taxes and, 142–144 timing, 146–147 key features, 107–108 leasing and, 664, 666n for other countries/currencies, 145–146 present value versus, 23, 23n production option and, 583–587 project analysis, 144–145 project risk and, 890 review, 105–109 sensitivity analysis and, 253–254 Net present value rule, 132–151 applying, 132–138 to choose among projects, 146–151 statement of, 25 Net return on investment, 312 Netter, J M., 852n Net working capital See Working capital Net-working-capital-to-total-assets, 747 Neuberger, Anthony J., 284n, 300n Neuer Markt, 383, 892 Nevitt, P K., 668 14 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an Index New issues alternative issue procedures, 392–394 auctions, 393–394 costs of, 388–389 efficient-market hypothesis and, 328–339 hot new-issue periods, 392 primary market, 77, 367–368 See also Initial public offerings (IPOs) secondary market, 77, 394–399 New Jersey Resources Corp., 87 Newmont Mining, 174, 175, 175–176, 181, 181–182, 196, 196, 197, 200, 200 New projects See also Capital budgeting; Capital rationing and entries beginning with “Project” incidental effects of, 135–136 New securities, 893 New York Mercantile Exchange (NYMEX), 680, 680n, 681, 683 New York Stock Exchange (NYSE), 77, 77n, 310–311, 362 Ng, C K., 791n Nikkei 225 Index, 339 Nimmo, R., 615 Nippon Telegraph and Telephone (NTT), 816, 852 NiSource Inc., 87 Nocco, B W., 698 Nominal cash flows, 521–523 Nominal rates of interest, 61–63 inflation and, 63–64 real interest rates versus, 61–63, 715–717 Nominal returns, real returns versus, 712–713 Nomura, 305, 371 Nondiversifiable risk See Market risk Non-negotiable time deposits, 803 Norfolk Southern, 80, 227 Norli, Ø., 400 Northern Rock, 852n Northwest Natural Gas Co., 86–87, 87 Notes defined, 621 floating rate, 620 medium-term (MTNs), 618, 641, 803, 804 Treasury, 48–50 valuation See Bond valuation Notional principal, 687–688 Notional value, 687 Novartis, 80, 413, 719, 719 NPV See Net present value (NPV) NTT (Nippon Telephone and Telegraph), 816, 852 NYSE Euronext, 77, 77n NYSE Euronext LIFFE, 680n O OATs (Obligations Assimilables du Trésor), 47–48 Obama, Barack, 68, 308, 347 O’Brien, T J., 723n Ofek, E., 339n, 857n Ofer, A R., 414n Off-balance-sheet liabilities, 590, 656–657, 892–893 Offering price, 388–389 O’Hara, M., 385n bre44380_idx_I1-I24 Omidyar, Pierre, 392 Omnicom Group, 813 ONGC, 851 Open account, 791 Open-end mutual funds, 78n, 369 Operating cycle, 765, 766 Operating expenses, 108–109 Operating leases, 657–659 defined, 653 example, 657–658 lease-or-buy decision and, 659 Operating leverage, 257–258 asset beta and, 230–232 break-even points and, 257–258 defined, 258 Operating profit margin, 743 Opler, Tim, 761, 761n Opportunity cost of capital See also Discount rate calculating, 22–23 company, 221–242, 443 defined, 10 discount rates for international projects, 235 example, 26 financing decisions and, 329 historical evidence to evaluate, 165–168 for international investments, 722–723 multiple, 118 nature of, 10, 91 net present value and, 107–108, 136–137 payback period and, 107, 109–111 perfect pitch and, 223–224 project, 222–242 use of capital and, 222–223, 224–225 Optimization models, 772 Option(s), 525–541 See also Convertible bonds; Option pricing models; Real options; Stock options; Warrants in disguise, 525 investment, 263–264, 279–282, 288–294 reducing risk with, 678 spotting, 534–535 strategies for using, 530–535 types, 564–566 See also specific types of options Option ARM loans, 374n Option delta, 549, 551, 551n, 554 Option equivalents, 548–551 Option pricing models, 536–541, 547–567 binomial method, 552–557, 578–579 Black-Scholes, 547, 557–564, 574–576, 587–588, 589, 889 call options, 548–551, 558–560 dividends in, 565–566 government financial guarantees, 607 option values at a glance, 564–566 risk and, 540–541, 549–551, 613–614 simple option-valuation model, 548–552, 590–591 stock value and, 536–541 types of options, 564–566 Option theory, 889 Option valuation See Option pricing models Oracle Corporation, 309, 561, 561n, 832–835 Original issue discount bonds, 620n Osaka Securities Exchange (OSE), 682 Oshkosh, 306 15 I-15 Osobov, I., 411n Out-of-the-money options, 576 Overconfidence bias, 251n, 340–341 Overhead, in net present value analysis, 137 Over-the-counter (OTC) market, 77, 367–368, 563 Owens Corning, 561–562, 562n Ownership and control See also Agency theory; Board of directors; Corporate governance of conglomerates, 878–880 dual-class equity in, 361–362, 878 family, 877–878, 879 in France, 875 in Germany, 873–875 in Japan, 872–873 of leased assets, 661 pyramids in, 878 risk and short-termism and, 880–881 separation of ownership and control, 6, 12–13, 830–831, 871–880 transparency and, 882–883 P Pacific Gas & Electric, 640, 858 Pakistan State Oil Company, 649 Palepu, Krishna G., 413–414, 413n, 414n, 752, 837, 837n, 882n, 885 Palm, 850 Panchapegesan, V., 861n Panunzi, F., 883n Paramount, 834 Parkinson, K., 779 Parmalat, 882 Parrino, R., 865 Partch, M M., 415n Participation, 639n Partnerships, 6, 362 Passive investing, 180 Pass-through certificates, 623n Pastor, L., 392n Patel, J., 320, 320n Paulson, John, 11, 11n, 343n Payback period, 107, 109–111 applying, 109–110, 119 determining, 109–110 discounted payback, 110–111 payback rule and, 109–110 Payback rule, 109–110 Pay for performance, monitoring, 310–311 Pay-in-kind (PIK) bonds, 635 Payment mechanism, 372 Payout policy, 410–430 capital structure and, tax-free economy, 437–442 controversy concerning, 416–421, 893–894 in corporate governance, 427–429 efficient-market hypothesis and, 416–421 facts concerning, 411–413 information effect, 413–415 leftist position, 422–426 life cycle of the firm and, 426–429 method of paying dividends, 412 Modigliani-Miller approach to, 416–421, 426 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an I-16 Index Payout policy—Cont payout decision in, pecking order of financing choices and, 481 rightist position, 421–422 stock repurchases, 410, 418–421 Payout ratio, 86–87, 422 See also Payout policy, controversy concerning Pecking order of financing choices, 479–484 financial slack, 482–483, 496–498 impact of asymmetric information, 479–481 implications of, 481 trade-off theory versus, 481–482 Peer-to-peer lending firms (P2PLs), 373n Pemex, 678 Penman, S., 752 Penney (J.C.), 612–613, 620, 624, 626, 627–629 Pension Benefit Guarantee Corporation (PBGC), 607, 858 Pension funds, 366, 370, 382–383, 423, 607, 635, 704n PeopleSoft, 832–835 PepsiCo, 339, 827 Percentage of sales model, 776 Performance measurement, 311–320 incentives and See Incentives; Stock options Performance ratios, 737–741 Performance shares, 309 Perkins, C A., 592 Perks, 303, 305 Perpetuities, 27–28 defined, 27 growing, 34, 85 valuation of, 27–28 Peso loans, 710 Petersen, M A., 806 Peters, F., 835n Peterson, M A., 796n Petrobas, 852 Pettway, R., 393n Pfizer, 80, 132–133, 308, 412, 601, 830, 849, 850 Phaup, Marvin, 607 Philips Electronics, 330–331, 331 Phillips, G., 851, 851n Phillips Petroleum, 114 Piedmont Natural Gas Co., 87 PIK (pay in kind), 635 Pindyck, R S., 271, 582n, 592 Pinkerton, J., 334n Pinkowitz, L., 761n, 762, 762n, 806 Pinnacle Foods, 855 Plains All American Pipeline LP, 362 Plains GP Holdings, 396 Playing for time game, in financial distress, 474 P&O, 828 Poison pill defense, 832–833, 834 Poison-put clauses, 627 Poison put defense, 834 Political risk, 723–725 Ponzi, Charles, 12n Ponzi schemes, 11–12, 12n Pooling risks, 373, 676–678 Porsche, 342–343 bre44380_idx_I1-I24 Porter, Michael E., 285, 285n, 295, 881n Portfolio beta, 227, 229 Portfolio insurance, 562 Portfolio risk, 162–186 beta and, 181–184, 199–202 calculating, 176–184, 182–183 diversification and, 173–176, 184 historic performance of capital markets and, 162–169 individual securities and, 180–184 measuring, 169–176 relationship to return, 199–202 security beta and, 182–184 standard deviation in, 169–173, 182–183 variance in, 169–172, 173–180 Portfolio theory, 192–212 birth of, 192–199 borrowing and lending in, 197–199 developing stock portfolios, 193–197 efficient portfolios in, 196, 197–199, 201 standard deviation and, 192–193, 198n Portfolio variance, 169–172, 173–180 Position diagrams, 527–530 Postaudits, in capital budgeting process, 251–252 Postbank, 851 Poterba, J M., 333n, 339n Powers, E., 849n PPG, 80 Prediction markets, 347 Preferred stock, 363, 805 Premium, bond, 48 Prescott, E C., 186 Present value (PV), 19–40 See also Adjusted present value (APV); Net present value (NPV) of annuities, 28–30 in bond valuation, 47–50 calculating, 20–21 defined, 20–21, 105 of investment opportunity, 21–23 in Monte Carlo simulation, 261–262 net present value rule, 25, 132–151 net present value versus, 23, 23n nominal interest rates and, 61–63 opportunity cost of capital and, 26 of perpetuity, 27–28 present value formula, 27n rates of return and, 24–25 real interest rates and, 60–63 risk and, 23–24 Present value of growth opportunities (PVGO), 92–93, 264, 319n in business valuation, 96–97 calculating, 92–93 defined, 92 examples of growth opportunities, 92–93 President’s Council on Jobs and Competitiveness, 386 Pretty Woman (film), 11 Price discovery, 686n Price-dividend ratio, 168–169 Price-earnings (P/E) ratio, 78–81, 95–96 Price-to-book (P/B) ratio, 79–81 Primary issues, 367–368, 384 See also Initial public offerings (IPOs) Primary markets, 77, 367–368 Prince, Charles, 304 Principal, bond, 47 Principals, agents and, 12 Private benefits, 303, 361 Private companies, 385, 385n Private-equity deals, 843 Private equity investing, 382–383, 385, 843, 853–858 Private Export Funding Corporation (PEFCO), 802n Private placements, 399, 627–629 Privatization, 851–852 Privileged subscription issues, 398–399 Probabilities, beliefs about, 340–341 Procter & Gamble (P&G), 2, 3, 345–346 Procurement, 584, 585–587 Production option, 265–266, 583–587 Professional corporations (PC), Profitability index, 107, 120–121 Profitability measures, 113 biases in, 314–320 calculating profitability, 316–317 economic value added (EVA), 313–314, 738–739 net return on investment, 312 Profit diagrams, 529–530, 530n Profit margin, 743 Profit maximization, 794 Progress Energy, 816 Project analysis, 249–271 capital investment process, 250–252 decision trees, 263–269 Monte Carlo simulation, 259–262 net present value and, 144–145 real options, 262–266 sensitivity analysis, 252–258 Project beta, 222–225 Project cost of capital, 222–242 Project finance, 649–651 adjusted present value for international investments, 511 common features, 650 defined, 649 discount rates for international projects, 235 example, 649–650 role of, 651 weighted-average cost of capital (WACC), 224–225 Project life, abandonment value and, 581 Project risk, 890 analyzing, 229–235 capital budgeting and, 222–225 Prospect theory, 340 Prospectus, 386, 406–409 Prosper and Lending Club, 373n Protective put, 531n Prowse, S., 873n Proxy contests, 306, 361, 831 PRS Group, Inc., 723, 724n Prudhoe Bay Royalty Trust, 363 Public companies, 5–6 closely-held companies versus, 5–6 defined, dispersal of ownership, 359 security sales, 394–399 costs, 395–396 general cash offers, 394–398 16 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an Index market reaction to stock issues, 396–398 rights issues, 398–399 Publicis Group, 813 Purchase method of merger accounting, 828–829 Purchase option, 585–587 Purchasing power parity, 712, 712n, 714–715, 719n Pure plays, 230 Puri, M., 383n Put-call parity, 531–533, 533n Put options in reducing risk, 678 relationship between call prices and, 552, 603 selling, 528–529 valuation of, 551–552 Puttable bonds, 625–626 PV See Present value (PV) PVGO See Present value of growth opportunities (PVGO) Pyramids, 878 Q QQQQs, 369 Quadratic programming, 197 Qualified institutional buyers, 399 Qualified opinions, 306 Quatar Petroleum, 856n QUBES, 369 Quick ratio, 747–748 Quiet period, 385n QVC, 834 R Raghaven, Anita, 628n Raiders, 11 Raiffa, H., 251n, 271 Rainbow options, 566 Rajan, Raghu G., 303n, 376, 481–482, 796n, 806, 871, 871n, 880, 880n, 881n, 885 Rajaratnam, Raj, 334n Rajgopal, S., 319, 319n, 320n, 321 Rally Software, 396 Ramaswamy, K., 424, 424n Random walk hypothesis, 329–332, 539n Rate of return rule, statement of, 25 Rates of return See also specific types return accounting, 739–741 bond, 52 book, 107, 108–109, 119, 740 calculating, 162–164 defined, 52 on levered equity, 444–445, 449–451 present value and, 24–25 Rauh, J D., 309n Rau, P R., 339n Ravenscroft, D J., 837, 837n Ravid, S A., 863n Raviv, A., 486 Read, J A., Jr., 590n, 683n Real assets, 2, 18 Real estate investment decisions for, 279–282 bre44380_idx_I1-I24 optimal timing for development of, 579–580 Real estate investment trusts (REITs), 229, 229n, 363, 476n Real exchange rates, defined, 715n Real options, 262–266, 573–592 abandonment option, 264–265, 526, 580–582 conceptual problems, 589 decision trees and, 263–266 default option, 602–607, 626 default risk, 604–607 defined, 263 examples, 525 expansion option, 263–264, 288–294, 525–526, 573–577, 773 investment option, 263–264, 279–282, 288–294, 525, 526, 573–577, 587–588 practical challenges, 590–591 production option, 265–266, 583–587 purchase option, 585–587 timing option, 146–147, 266, 577–580 valuing, 589–591 Real rates of interest, 60–63 in bond valuation, 60–63 determinants of, 63 indexed bonds and, 62–63, 62n, 64 nominal interest rates versus, 61–63, 715–717 Real-time, gross settlement system, 798n Rebalancing debt, 506 Receivables turnover, 742–743 Red herring, 386n Registered bonds, 47n, 621 Registered shares, 360 Registration statement, 385–386 Regular cash dividends, 412 Reinhart, Carmen M., 377, 896, 896n Relational Investors, 11 Relative risk, 223 Relative tax advantage of debt, 464–465 Relevering beta, 505, 506n Rental leases, 653 Reorder point (two-bin) system, 790n Replacement decisions, equivalent annual cash flow and, 146, 150 Replicating portfolio, 549 Repurchase agreements (repos), 803, 804–805 Repurchase programs See Stock repurchases Reserve Primary Fund, 451n, 800 Residual claims, 359, 366 Residual income See Economic value added (EVA) Residual risk See Specific (diversifiable) risk Restricted stock, 309, 310 Restricted voting rights defense, 834 Restructuring, 843–865 asset/liability, 834 asset sales, 851 of AT&T, 848, 848, 849 bankruptcy, 467–471, 858–863 carve-outs, 850–851 leveraged buyouts, 843–847 leveraged restructurings, 847 private equity, 855–858 privatization, 851–852 spin-offs, 849, 850 17 I-17 as takeover defense, 834 Return on assets (ROA), 312n, 740–741, 743–744 Return on capital (ROC), 312n, 739, 740 Return on equity (ROE), 86–90, 740, 746 Return on investment (ROI) biases in, 314–320, 319–320 net, 312 Revenue adequacy, 88 Reverse floaters (yield-curve notes), 635 Reverse stock splits, 362, 362n Revlon, 832n Revolving credit, 637 Revsine, L., 752 Reynolds American, 813 Rhee, S G., 231n Rhie, Jung-Wu, 610, 610n, 611n Rice, E M., 891n Richardson, M W., 339n, 377, 623n Richemont, 719 Riddiough, T J., 579n, 580n Rieker, M., 415n Rights issues, 387n, 398–399 Right to default, 467–468 Risk See also International risks; Portfolio risk of an option, 560 attitudes toward, 340 capital asset pricing model (CAPM) and, 199–202, 227–229 company, 222–225 compound annual return and, 164–165, 165n counterparty, 679 default, 64–69, 604–607 diversifiable (specific), 176, 176n, 181–182, 192, 230, 232–234 expected return and, 199–202 foreign exchange, 707–723 of foreign investments, 235 market See Market risk option pricing and, 540–541, 549–551, 613–614 political, 723–725 pooling, 373, 676–678 portfolio See Portfolio risk present value and, 23–24 project, 222–225, 229–235 return and, 890–891 short-termism and, 880–881 in term structure of interest rates, 59–60 Risk-adjusted discount rate, 236–239 Risk arbitrage, 835n Risk aversion, Risk class, 82 Risk-free rate of interest, 532n Risk management, 673–698, 894 agency costs, 674, 675–676 derivatives in, 676, 678–691 evidence on, 676 financial distress and, 674–675 forward contracts, 679 hedging defined, 673–674, 679 with futures contracts, 680–686, 691–693 setting up hedge, 691–695 insurance, 562, 676–678 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an I-18 Index Risk management—Cont international risks in See International risks options, 678 reasons for, 673–676 swaps, 687–691 Risk-neutral option valuation, 549–552, 578–579 Risk premium calculating, 164, 164n defined, 166n dividend yields and, 168–169 historic, 162–164 market See Market risk premium in Sharpe ratio, 198–199, 199n Risk-return trade-off, financial leverage and, 437–442 Risk shifting game, in financial distress, 472–473 Ritter, J R., 337n, 389, 389n, 391n, 392n, 392n, 397, 398, 401 Ritz Carlton, 814 RJR Nabisco, 474, 474n, 843, 844–846 ROA (return on assets), 312n, 740–741, 743–744 Road show, 386–387 Robert Bosch, 873 Roberts, M R., 478n, 637n, 640n ROC (return on capital), 312n, 739, 740 Roche, 719, 719, 719–722 Rockefeller Center, 476n Rockefeller Center Properties, 476n ROE (return on equity), 86–90, 740, 746 Röell, A., 884 Roe, M., 862n Rogalski, R J., 632n, 643 Rogers, D A., 680, 680n Rogoff, Kenneth, 377, 726, 896, 896n ROI See Return on investment (ROI) Rolfe, David A., 428 Roll, Richard, 891n Romaine, C., 522n Rosenthal, L., 337n Rosetta Restaurants, 66 Ross, Stephen, 207–208 Royal Bank of Scotland, 375 Royal Dutch Petroleum, 337, 338, 343 Royal Dutch Shell, 77, 413, 856 Royal Mail, 851 Royal Statistical Society, 329 Ruback, Richard S., 350, 511, 511n, 515, 837, 837n, 846, 846n Rubinstein, M E., 350 Rule 10b-18, 413n Rule 144A, 399, 629 Rule of signs (Descartes), 114n Russian debt default (1998), 68, 343, 343n, 602n Rydqvist, K., 391n Ryngaaert, M D., 819n S Sacconaghi, A M., 428 Sagner, J., 806 Sahlman, W A., 400 Sale and lease-back, 653 bre44380_idx_I1-I24 Salvage value abandonment options and, 581–582 depreciation and, 137, 139–140, 659 leasing and, 659 in net present value analysis, 137, 139–140 in replacement decisions, 150 Samsung, 174, 182 Samurai bonds, 629 Sanofi, 305 Santos, T., 207n, 340n Sapienza, P., 10n Sarbanes-Oxley Act of 2002 (SOX), 305, 385, 386, 428, 854 Saunders, A., 615 Savings banks, 371n Savor, Pavel, 349n SBC (bank), 360 SBC Communications, Inc., 848 Scannapieco, D., 865 Scenario analysis, 145, 255, 576n Schaefer, S M., 71, 698 Schallheim, J S., 659n, 668 Schall, L D., 822n Scharfstein, D., 698, 849n, 872, 872n Scherbina, A., 351 Scherer, F M., 837, 837n Schmalz, M., 430 Schmidt, R H., 884 Schneider, C., 875, 875n Schoar, A., 482, 482n Schofield, Adrian, 680, 680n Scholes, Myron S., 412n, 424, 424n, 548, 548n, 557–564, 558n Schranz, D., 600n Schreffler, R., 790n Schultze, George J., 862n Schwartz, E S., 284n, 582n, 592, 625n, 643, 892n Schwartz, S L., 339, 339n Schwert, G W., 350 SCOR, 635 Sealed Air Corporation, 847 Seasoned equity offerings (SEOs), 394–399 general cash offer, 394–398 international securities, 395 market reaction to stock issues, 396–398 rights issues, 387n, 398–399 Seaworld Parks and Entertainment, 855 SEC See U.S Securities and Exchange Commission (SEC) Secondary issues, 367–368, 384, 394–399 Secondary markets, 77, 394–399 Second Law, Brealey, Myers, and Allen, 234n, 251, 251n Second-stage financing, 381 Secured debt, 365, 621 Securities See Marketable securities and specific types Securities Act of 1933, 385n Securitization, 623 Security market line defined, 200 stocks not lying on, 201–202 Segmented markets, 329 Self-liquidating loans, 637 Semiannual coupons, 48–50, 619 Semiannual interest payment, 48–50, 619 Semistrong form of market efficiency, 332, 333–334, 888 Senbet, L., 864 Senior debt, 365, 621–622, 626 Senior management See also Board of directors; Chief executive officers (CEOs); Chief financial officers (CFOs) CEO compensation by country, 307 as off-balance-sheet liability, 892–893 Sensitivity analysis, 145, 252–258 in arbitrage pricing theory, 207–208 break-even analysis, 256–258 defined, 253 limits to, 254–255 operating leverage and, 257–258 scenario analysis, 145, 255, 576n in three-factor model, 209–210 value of information, 253–254 Sentiment, in behavioral finance, 341–342 Separation of ownership and control, 6, 12–13, 830–831, 871–880 Sercu, P., 726 Seuss, Dr., 305–306, 306n, 311 Seward, J K., 632n, 643, 864 SFR, 813 Shanghai Futures Exchange, 681 Shapiro, A C., 726 Shapiro, E., 85n Shareholders agency problem and, 10–12, 889–890 as equity investors, limited liability of, 830–831 managers and needs of, 10–12 minority, 361–362 monitoring by, 306 role of, 830–831 separation of ownership and control, 6, 12–13, 830–831, 871–880 stakeholders versus, 875–876 value maximization and, 7–13, 17–18, 249–271, 732–733 Share repurchases See Stock repurchases Shark-repellent charter amendments, 833, 834 Sharpe ratio, 198–199, 199n Sharpe, William F., 200, 200n Shaw, W H., 385n Shefrin, H., 422n Sheifer, A., 877n Shelf registration, 394 Shell Transport & Trading, 337, 338, 343 Shenzhen Stock Exchange, 564 Shiely, J S., 322 Shiller, Robert J., 169n, 342n, 350, 351 Shin, B., 651n Shivdasani, A., 849n Shleifer, A., 303n, 350, 359n, 429n, 851n, 852n, 871, 871n, 884, 885 Shortage of capital, 117 Short-lived assets choice between long-lived assets and, 146, 147–150 investing in, 355–356 Short sales, 11, 342–343, 370 Short squeeze, 342–343 Short-term debt, 501–502 Short-term financial planning, 759–762, 769–772 cash budgeting, 767–769 18 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an Index evaluating plan, 771–772 example, 770–772 leases in, 653 long-term financial planning versus, 759–762 models, 772 sources of short-term borrowing, 769–772 Short-term financing decisions, 769–772 bank loans, 770 commercial paper, 618, 640–641 long-term financing versus, 364 short-term financing plan, 769–772 stretching payables, 768 Short-termism, 319, 854, 880–881 Short-term tax-exempts, 802–803 Shoven, J B., 561n Shutterstock, 396 Shyam-Sunder, L., 398n, 482n “Siamese twins,” 337, 337n Sidel, R., 415n Siegel, D R., 414n, 837n Siemens, 174, 182, 305, 413 Sight drafts, 791 Sigma-Aldrich, 813 Signaling, 372, 380, 414–415 See also Information effect Simkins, B J., 680, 680n, 698 Sindelar, J L., 401 Singal, V., 865 Singapore Exchange (SGX), 682 Singh, R., 392n Singleton, K J., 615 Sinking funds, 624 Sithe Global, 855 Sivakumar, R., 849n Size factor, in three-factor model, 208–210 Skeel, D., 862n Skinner, Douglas J., 411n, 426n, 428, 430 Slavic, P., 251n Small business See also Mergers forms of organization, small-firm effect in three-factor model, 208–210 Small Business Administration (SBA), 607, 802n Small-firm effect, 208–210, 336–337 Smart, S B., 395n Smit, H., 590n, 592 Smith, Clifford W., Jr., 668, 674n, 806 Smith, J K., 791n Smith, R L., 791n Smithson, C H., 698 Société Générale, 695 Soft rationing, 122–123 Sogo, 882 So, J., 651n Sole proprietorships, Sony, 77, 135–136, 174, 182, 330–331, 331, 873n Southern California Edison, 640 Southern Company, South Jersey Industries Inc., 87 Southwestern Bell, 848 Southwest Gas Corp., 87 Sovereign bonds default risk, 67–69 sovereign debt crisis, 68–69, 375 Spark Energy, 396 Spark spread, 583 bre44380_idx_I1-I24 SPDRs (Standard & Poor’s Depository Receipts), 369 Special dividends, 412 Special-purpose entities (SPEs), 366, 477, 619, 666–667, 882 Specific (diversifiable) risk, 176, 176n, 181–182, 192, 230, 232–234 Speculation, 695–696 Spindt, P A., 393n Spinning, 388, 389 Spin-offs, 849, 850 Spitzer, Eliot, 389 Split-ups, 849 Spot prices, 679, 684–686 Spot rate defined, 55 of exchange, 708, 708, 710–711 forward premium and, 710–711 law of one price and, 55–56, 600, 712n Spread spark, 583 underwriting, 388–389, 395–396, 396 yield, 66–67, 599–602 Spreadsheet functions bond valuation, 69 discounting cash flows, 38–39 estimating market risk, 240–241 estimating stock risk, 240–241 internal rate of return, 122 Sprint, 739 Stafford, E., 623n, 827, 827n, 835, 835n, 836, 838 Staggered board defense, 834 Stakeholders in leveraged buyouts, 844–846 shareholders versus, 875–876 value maximization, 7–13 Standard deviation defined, 169–170 of foreign stocks, 173, 173 in measuring portfolio risk, 169–173, 182–183 portfolio, 169–172 in portfolio theory, 192–193, 198n in Sharpe ratio, 198–199, 198n Standard error, 164n of estimated beta, 227 Standard of profitability, 113 Standard & Poor’s 500 Index, 78, 335, 562–563, 565 Standard & Poor’s Composite Index, 165, 180, 338, 369, 563 Standard & Poor’s credit ratings, 66, 68, 608, 636, 640n, 792 Standard & Poor’s Depository Receipts (SPDRs), 369 Standards, accounting, 733–734 Starbucks, 11–12 State Bank of Pakistan, 649 Statement of cash flows, 762–766 example, 763 financing activity, 763, 764 investing activity, 763, 764 operating activity, 763 Statman, M., 422n Staunton, M., 61n, 65n, 162–164, 162n, 163n, 164n, 166–167, 167n, 168n, 170n, 173n, 186, 716n 19 I-19 Stein, Jeremy C., 348n, 632n, 698, 864 Step-up bonds, 635 Stern, J M., 322 Stern Stewart, 313, 313n Stertz, Bradley A., 815n Stigler, George, 479 Stiglin, L., 846n Stiglitz, J E., 336n Stillwell Financial, 503 Stock dividends, 412, 412n Stockholders See Shareholders Stockholders’ equity, interest tax shields and value of, 462 Stock options, 525–541 See also Option pricing models Black-Scholes model for valuing, 547, 557–564, 587–588, 589, 889 call options See Call options financial alchemy with, 530–535 incentives created by, 309–310 payout policy and, 422 position diagrams, 527–530 profit diagrams, 529–530, 530n put options See Put options selling/writing, 528–529, 531 stock value and, 536–541 strategies for using, 530–535 types, 564–566 Stock price anticipation of merger, 824–826 dividends and, 81–85 in equity valuation, 76–78 future, 82–85 link between earnings per share and, 78, 79, 90–93 market reaction to stock issues, 396–398 option values and, 536–541 Stock repurchases, 410, 418–421 free cash flow and, 97–98 growth in use, 356, 356 information content of, 414–415 irrelevance, 418–419 method of using, 413 Stock splits, 412n reverse, 362, 362n Stohs, M H., 760n Stonehill, A I., 726 Stonier, J E., 585n, 585n, 586n Stored-value cards, 797 Straight-line depreciation, 139–140, 144, 655 Stretching payables, 768 Stripped bonds (strips), 56–57, 62 Stromberg, P., 383n, 863n, 864 Strong form of market efficiency, 332, 334–335, 888 Structured investment vehicles (SIVs), 641, 747 Stulz, R M., 396n, 698, 723n, 761n Subordinated debt, 365 Subprime mortgage crisis, 304–305, 308, 343–344, 374–375, 600–602, 623, 895, 896 Sufi, A., 637n, 639n Sumitomo Bank, 881 Summers, L H., 333n Sundaresan, S., 71 Sundgren, S., 863n Sunk-cost fallacy, 137 Suntory, 813 Supermajority, 361, 833, 834 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an I-20 Index Surplus funds, in mergers, 817–818 Sussman, O., 470, 470n Sustainable growth rate, 778 Swaminathan, B., 413n Swaps, 687–691 credit default, 600–602, 690 currency, 689–690 inflation, 691 interest rate, 687–689 other types, 691 total return, 691 Swatch Group, 6, 719, 719 Swiss Bank Corp., 695, 819 Swiss Re, 719 Switzerland foreign bonds in, 629 transaction/economic exposure in, 719 voting rights in, 360 Symantec, 305 Syndicated loans, 637–639 Syndicates, underwriting, 394 Synergy, 815–819 Systematic risk See Market risk T Taggart, R A., Jr., 515 Take-or-pay agreement, 649n Takeover premium, 334 Takeovers, 11, 334, 831–835 See also Mergers Tangible assets in merger accounting, 829 nature of, 19 Target, 305, 712 Tata Group, 814, 835, 879 Tata Motors, 77, 174, 182 Tauron Polska Energia, 851 Taweel, Kevin, 880 Taxes on bond-warrant packages, 634 on capital gains versus cash dividends, 422–426 on corporations alternative minimum tax (AMT), 143, 655 capital structure and, 461–466 depreciation rules, 142–144 equivalent annual cash flow and, 150 financial leases, 661–662 impact of real options, 589–590 innovation in the bond market, 634–636 investment decisions and, 142–144 leveraged buyouts (LBOs) and, 846 in merger analysis, 829–830 tax inversion, 830 form of business organization and, in Germany, 145–146 imputation tax system, 425–426, 478n on individuals, leverage and, 464–466 in net present value analysis, 135 on partnerships, 362 on REITs, 363 on stock options, 310 tax avoidance, 11–12 Tax-exempt municipal notes, 802–803, 803 Tax preferences, 143 bre44380_idx_I1-I24 Tax Reform Act of 1986, 142–144 Tax shields depreciation, 142–144, 522–523, 654, 657n, 659, 661–662 interest, 461–464 lease, 654 nature of, 461–464 Taylor, A M., 726 Taylor, M P., 726 Technological change equivalent annual cash flow and, 149 exploiting new technology, 288–294 TED spread, 638 Tehranian, H., 397n Telefonica Brasil, 77 Temporary abandonment, 581–582 10-K, 311, 733 10-Q, 733 Tender offer, 413, 831–833 Tenneco, 855 Tepco, 852 Tepper, David, 370n Term loans, 637 Terms of sale, 791 Term structure of interest rates, 54–60 in bond valuation, 54–60 defined, 54 expectations theory of, 58–59 explaining, 58–60 inflation in, 60 law of one price, 55–56, 600 measuring, 56–57 risk in, 59–60 Tesco, 305, 306 Tesla Motors, Tetley Tea, 835 Tetlow, R S., 855n Texaco, 858 Texas Pacific Group, 844 Textura Corp., 396 Thaler, R H., 207n, 340n, 350, 713n, 850n Thermo Electron, 850–851 Thermo Fisher Scientific, 813 Third Law, Brealey, Myers, and Allen, 777, 890 Thomas Lee, 844 Thorburn, K S., 838, 864 Thornburg, Karin, 470n 3Com, 850 3Doodler, 382 3G, 844 Three-factor model, 208–210 Throughput agreement, 649n Tightwad Bank, 370 Time deposits, 803, 804 Time drafts, 791 Times-interest-earned ratio, 745–746 Time to maturity, option value and, 537–540 Time value of money, 107–108 Time Warner, 349, 739, 813, 815, 827 See also AOL Timing option, 146–147, 266, 577–580 Timken Co., 11 Timmerman, A., 335n, 888n TIPS (Treasury Inflation-Protected Securities), 62–63, 62n, 64 Titman, S., 454, 827n T-Mobile, 827, 848n Tokyo Financial Futures Exchange (TFX), 682 Tokyo Gas, 816 Tokyo Stock Exchange (TSE), 77, 682 Tolling contracts, 649n “Too big to fail” mentality, 344 Toronto Dominion Bank, 174, 182 Torous, W N., 861n Total capitalization, 502, 738 Total expected profit, 794 Total return payer, 691 Total return receiver, 691 Total return swaps, 691 Toyota, 222, 309, 413, 790 TPG Capital, 844 Trade acceptances, 791 Trade credit, 790, 870 Trade-off theory of capital structure, 467, 477–479 pecking order of financing choices versus, 481–482 Trade sales, 854 Tranches, 623 Transaction costs, in leasing, 654–655 Transaction exposure, 719 Transfer of value, 419–421 Transparency, 882–883 Trans World Airlines, 655 Travlos, N., 827n Treasury bills, 48–50, 802, 803 annual standard deviations and variances, 172 historic performance of capital markets, 162–164, 199 Treasury bonds See also Bond valuation annual standard deviations and variances, 172 duration, 52–54 historic interest rates, 50–52 historic performance of capital markets, 162–164 indexed, 62–63, 62n, 64 present value formulas and, 48–50 stripped, 56–57, 62 yield spread between corporate bonds and, 67, 599–602 yield to maturity trends, 49 Treasury Inflation-Protected Securities (TIPS), 62–63, 62n, 64 Treasury notes, semiannual interest, 48–50 Treynor, Jack, 200 Triantis, A J., 271, 579n, 580n, 878n Trigeorgis, L., 590n, 592 Troubled Asset Relief Program (TARP), 415 Trust deed, 621 Trusts, 363 TRW, 813 TSE (Tokyo Stock Exchange), 77, 682 Tufano, Peter, 454, 676, 676n Tufts Center for the Study of Drug Development, 267n Tunneling, 362, 879–880 Tversky, A., 340n Tversky, L A., 251n TWA, 655n, 859–860 21st Century Fox, 849 Twitter, 396, 525 TXU, 5, 844 Tyco, 12 20 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an Index U UBS, 360, 375, 695–696, 819 Underwriters, 371, 385, 387–389 Undiversifiable risk See Market risk Unfunded pension obligations, 366 Unicredit, 819 Uniform-price auctions, 393–394 Union Pacific, 2, 3, 4, 79, 80, 227, 227–229, 227n, 452, 452 Unique risk See Specific (diversifiable) risk United Airlines (UAL), 607n, 680, 858 United Auto Workers (UAW), 859 United Health Group Inc., 563 United Kingdom accounting standards in, 733–734 Anglo-Saxon financial system in, 733–734, 867–871, 870–871 electricity prices, 583–584 forward currency market, 713 inflation in, 65 nominal versus real interest rates, 715–717 United States Anglo-Saxon financial system in, 733–734, 867–871 bankruptcy regulation, 858–863 beta for selected stocks, 181 company financing in, 868–871 compounding intervals in, 48–50 debt ceiling increases, 68 deficit crisis of 2010, 68 dividend yields, 168–169, 169 historic performance of capital markets, 162–169 inflation in, 60–61, 65 initial public offerings (IPOs) in, 384–394, 392 market risk premia in, 168–169 mergers in, 814 merger waves, 813, 836–837 payout policy in, 410, 411 standard deviation of stocks in, 174 stock market returns, 170 venture capital financing in, 381–383 U.S Airways, 827 U.S Department of Justice, 389n, 832–833 U.S Department of Veterans’ Affairs (Vinnie Mae), 802n U.S Federal Communications Commission (FCC), 827 U.S Federal Reserve, 228, 374, 375, 623 U.S Federal Trade Commission (FTC), 827 U.S Food and Drug Administration (FDA), 266–269, 590 U.S Nuclear Regulatory Commission, 2–3 U.S Robotics, 850 U.S Securities and Exchange Commission (SEC), 10–12, 310–311, 385–386, 859 accounting and reporting standards, 733–734 proposed Rule 14a-11, 361n Rule 10b-18, 413n Rule 144A, 399, 629 well-known seasoned issuer (WKSI), 394n U.S Shoe Corp., 628 U.S Steel, 630, 631n U.S Supreme Court, 86n U.S Surface Transportation Board (STB), 88 bre44380_idx_I1-I24 Unlevering beta, 505, 506n, 576n Unsecured debt, 621 Unsystematic risk See Specific (diversifiable) risk V Vale, 2, 3, 835 Va Linux, 388, 390n Valuation of abandonment option, 581 annuity See Annuities bond See Bond valuation business See Business valuation process by certainty equivalents, 236–237 by comparables, 79–81, 230 debt See Debt valuation equity See Equity valuation financial lease, 660–665 option, 536–541, 547–567 See also BlackScholes option pricing model warrant, 561–562, 633 Valuation horizon, 95–96, 498–500 Value additivity, 439, 888–889 conglomerate mergers, 841–842 defined, 184–185 diversification and, 184–185 economic value added (EVA), 313–314 Value at risk (VAR), 613–614 Value Line, 86n Value maximization agency problem in, 12–13 as goal of corporation, 7–13, 17–18, 249–271, 732–733 Value stocks, 205–206 Van Binsbergen, J H., 335n Van Dijk, M A., 337n Vanguard 500 Index Fund, 335 Vanguard Index Funds, 369 Vanguard Total Stock Market index, 369 Variability diversification in reducing, 174–176 measuring, 172–173 Variable-rate demand notes (VRDNs), 803, 804 Variance defined, 169–170 in measuring portfolio risk, 169–172 portfolio, 169–172, 173–180 Venture capital, 379–383 market for, 381–383 stages of financing, 379–380 Verizon, 772, 773, 813 Vermaelen, T., 415n Veronesi, P., 392n Vertical mergers, 814–815, 816–817 Viacom, 834 Viasys Health Care, 851 Villalonga, B., 857n Violations of absolute priority, 862 Virgin America, 396 Virgin Atlantic, 230 Virgin Group, 230 Vishny, R W., 303n, 429n, 851n, 852n, 871, 871n, 885 Viskanta, T., 723n Viswanathan, S., 835, 835n 21 I-21 Vivint, 855 VIX (Market Volatility Index), 173n, 562–563, 564 Vlasic, Bill, 815n Vodafone, 813 Volatility See also Beta bond, 54 implied, 562–563 Volcker, Paul, 50 Volkswagen (VW), 342–343, 773–774 Volpin, P., 875n Voluntary Employees’ Beneficiary Association (VEBA), 862 Volvo, 835 Voting procedures, 360–361 Voting rights common stock, 360–361 preferred stock, 363 restricted, as takeover defense, 834, 834 in Switzerland, 360 VRDNs (variable-rate demand notes), 803, 804 Vulture funds, 370 W Wait and decide option, 585, 586 Waiting period defense, 834 Wakeman, L M., 668 Wald, J K., 478n Wall Street (film), 11 Wall Street Journal, The, 75, 77n “Wall Street Walk,” 306 Walmart, 3, 3, 4, 7, 9–10, 66, 174, 181, 196, 197, 200, 200–201, 712, 737, 738, 739 Walt Disney Company, 831 Walter Energy, 503 Warga, A., 627n Warner-Chilcott, 829–830 Warner, J B., 333n, 470n Warrants bond-warrant package, 633–634 Chinese warrant bubble, 564 nature of, 365 valuing, 561–562, 633 Warther, V A., 414n Washington Mutual, 858 Washington Public Power Supply System (WPPSS), 803n Water and Power Development Authority (WAPDA), 649 Weak form of market efficiency, 332, 344–345, 888 Weighted-average cost of capital (WACC), 221–226, 443, 448–452, 739 See also Company cost of capital adjusting debt ratios and business risks differ, 503–505 rebalancing, 506 unlevering and relevering cost of equity, 505 after-tax, 225, 228–229, 452, 491–496, 512–514 in business valuation process, 491–496 calculating, 228–229, 492–493 common mistakes in using, 495–496 company versus industry, 503 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an I-22 Index Weighted-average cost of capital (WACC)—Cont defined, 224–225 final word, 452 flow-to-equity valuation method versus, 500–501 industry costs of capital, 503 in practice, 501–507, 512–514 in project valuation, 493–494 questions concerning, 512–514 review of assumptions for, 495 Weiss, Lawrence A., 470, 470n, 858n, 860n, 865 Welch, I., 865, 896n Well-known seasoned issuer (WKSI), 394, 394n Wensley, R., 295 Wermers, R., 335n, 888n Werner, I., 861n Western Electric, 848 West Japan Railway Company, 851 West, L G., 375 Weston, J F., 726, 838 WGL Holdings Inc., 87 Whaley, R E., 565n WhatsApp, 813 Whited, T M., 849n White, H., 335n, 888n White, M J., 858n Wilhelm, W J., Jr., 401 Williams Act of 1968, 831, 832n, 836 Williams, J B., 85n, 416n, 438n Williamson, O., 817n Williamson, R., 761n, 762, 762n, 806 Wilmott, P., 567 Wilshire 5000 Index, 334 Wingfield, N., 428n Winner’s curse, 390, 390n, 394n Wizman, Thierry, 627, 627n WobbleWorks, 382 Wolfers, J., 347n Wolfson, M A., 412n Womack, K L., 385n Woolley, S., 295 Woolridge, J R., 849n bre44380_idx_I1-I24 Working capital See also Working capital management in applying net present value rule, 134–135 cash budgeting, 767–769 cash flows and, 764–765 characteristics of, 767–769 defined, 134–135, 787 in estimating cash flows, 134–135 investing in, 355–356 investments in, 134–135, 141–142 short-term borrowing sources, 769–772 Working capital management, 787–806 See also Working capital cash conversion cycle, 796–799 cash management, 796–799 credit management, 790–796 inventory management, 788–790 marketable security management, 800–805 operating cycle, 765 working capital, defined, 787 Workouts, 861 World Bank, 650, 724 WorldCom, 66, 385, 858, 882 Wright, Orville, 294 Wruck, E G., 321 Wruck, K H., 470n, 847n, 860n, 865 Wulf, J., 303n WuLiangYe Corporation, 564 Wurgler, J., 342n, 350, 421n, 482n X Xerox, 851 Xinrong Best Medical Instrument Co., 855 Xiong, Wei, 564n Xstrata, 813 Y Yago, G., 454 Yahoo!, 339 Yahoo! Finance, 77–78, 78n, 221 Yankee bonds, 629 Yasuda, A., 400, 854n Yellen, Janet, 309 Yermack, D., 563n Yeung, B., 885 Yield convenience, 283n, 684–685, 685 on corporate debt, 66–67, 597–602 current, 48 dividend, 78, 85, 168–169 on money-market investments, 800–801 Yield curve, 56 Yield spread, 66–67, 599–602 Yield to maturity bond valuation, 48 default risk and, 604–607 defined, 48 Yoshimori, M., 876n Yuan, K., 891n Yu, Jialin, 564n Yun, H., 641n Z Zeckhauser, R., 320, 320n Zender, J F., 478n, 482n Zero-coupon bonds, 56–57, 62, 605–606, 620n Zero-maintenance hedging, 692–693 Zero-stage financing, 379–380 Zero-sum game, 673–674 ZF, 813 Zheng, L., 891n Zhengzhou Commodity Exchange, 681 Zhu, N., 865 Zhu, Q., 891n Ziemba, W T., 339, 339n, 892n Zietlow, J., 806 Zingales, Luigi, 10n, 376, 471, 471n, 481–482, 871, 871n, 880, 880n, 881n, 885 Zitzewitz, E., 347n Z-scores, 610n Zuckerman, G., 11n 22 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn Final PDF to printer C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an bre44380_idx_I1-I24 23 09/30/15 01:56 PM Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn C.33.44.55.54.78.65.5.43.22.2.4 22.Tai lieu Luan 66.55.77.99 van Luan an.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.22 Do an.Tai lieu Luan van Luan an Do an.Tai lieu Luan van Luan an Do an Stt.010.Mssv.BKD002ac.email.ninhd 77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77t@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn