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New Arrival Lessons in Corporate Finance: A Case Studies Approach to Financial Tools, Financial Policies, and Valuation, 2nd Edition

Lessons in Corporate Finance: A Case Studies Approach to Financial Tools, Financial Policies, and Valuation, 2nd Edition

  • Author:
  • Publisher: John Wiley & Sons
  • ISBN: 9781119537830
  • Published In: May 2019
  • Format: Hardback , 554 pages
  • Jurisdiction: International ? Disclaimer:
    Countri(es) stated herein are used as reference only

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    An intuitive introduction to fundamental corporate finance concepts and methods

    Lessons in Corporate Finance, Second Edition offers a comprehensive introduction to the subject, using a unique interactive question and answer-based approach. Asking a series of increasingly difficult questions, this text provides both conceptual insight and specific numerical examples. Detailed case studies encourage class discussion and provide real-world context for financial concepts. The book provides a thorough coverage of corporate finance including ratio and pro forma analysis, capital structure theory, investment and financial policy decisions, and valuation and cash flows provides a solid foundational knowledge of essential topics. This revised and updated second edition includes new coverage of the U.S. Tax Cuts and Jobs Act of 2017 and its implications for corporate finance valuation.

    Written by acclaimed professors from MIT and Tufts University, this innovative text integrates academic research with practical application to provide an in-depth learning experience. Chapter summaries and appendices increase student comprehension. Material is presented from the perspective of real-world chief financial officers making decisions about how firms obtain and allocate capital, including how to:

    • Manage cash flow and make good investment and financing decisions
    • Understand the five essential valuation methods and their sub-families
    • Execute leveraged buyouts, private equity financing, and mergers and acquisitions
    • Apply basic corporate finance tools, techniques, and policies

     Lessons in Corporate Finance, Second Edition provides an accessible and engaging introduction to the basic methods and principles of corporate finance. From determining a firm’s financial health to valuation nuances, this text provides the essential groundwork for independent investigation and advanced study. 

  • About the Authors

    Acknowledgments

    Preface

    Chapter 1 Introduction

    Two Markets: Product and Capital

    The Basics: Tools and Techniques

    A Diagram of Corporate Finance

    A Brief History of Modern Finance

    Reading This Book

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

    The Conversation with the Banker Is Like a Job Interview

    Starting with the Product Market Strategy

    Is PIPES Profitable?

    Doing the Math

    Sources and Uses of Funds

    Ratio Analysis

    The Cash Cycle

    Summary

    Chapter 3 Pro Forma Forecasts (PIPES-B)

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

    Pro Forma Forecasts     

    Circular Relationships  

    Back to (Forecasting) the Future          

    Projecting Out to 2014 and 2015         

    Evaluating the Loan     

    Summary          

    Appendix 3A: Accounting Is Not Economic Reality  

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

    Monthly Pro Forma Income Statements          

    Monthly Pro Forma Balance Sheets     

    A Different Picture of the Firm           

    Summary          

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

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

    Chapter 5 Why Financing Matters (Massey Ferguson)

    Product Market Position and Strategy 

    Political Risk and Economies of Scale in Production  

    Massey Ferguson 1971–1976   

    Sustainable Growth      

    The Period after 1976   

    Conrad Runs Away      

    The Competitors           

    Back to Massey

    Massey’s Restructuring

    Postscript: What Happened to Massey

    Summary          

    Appendix 5A: Massey Ferguson Financial Statements

    Chapter 6 An Introduction to Capital Structure Theory

    Optimal Capital Structure        

    M&M and Corporate Finance  

    Taxes    

    Costs of Financial Distress       

    The Textbook View of Capital Structure         

    The Cost of Capital      

    Summary          

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

    Capital Structure          

    The Cost of Capital      

    How Firms Set Capital Structure in Practice   

    Corporate Financial Policies     

    Sustainable Growth and Excess Cash Flow     

    What to Do with Excess Cash?            

    Summary          

    Appendix 7A: Marriott Corporation Income Statements and Balance Sheets 

    Appendix 7B: Marriott Corporation Selected Ratios  

    Chapter 8 Investment Decisions (Marriott Corporation and Gary Wilson)

    What Is the Correct Price?       

    How Should Marriott Buy Its Shares? 

    The Loan Covenants    

    The Impact of the Product Market on Financial Policies         

    The Capital Market Impact and the Future      

    Summary          

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

    Background on AT&T 

    M&M and the Practice of Corporate Finance  

    Old (Pre-1984) AT&T  

    New (Post-1984) AT&T           

    Summary          

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

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

    A Brief Summary         

    A Brief History of MCI           

    Convertible Preferred Stock and Convertible Bonds  

    Interest Rates and Debt Ratios

    Leases   

    Financing Needs of the New MCI       

    MCI’s Financing Choice          

    MCI Postscript 

    Summary          

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

    Chapter 11 Dividends and Stock Repurchases (Apple Inc.)

    The Theory of Dividend Policy

    Empirical Evidence      

    Apple Inc. and the Decision on Whether to Pay Dividends    

    What Did Apple Do?   

    Summary          

    Chapter 12 A Continuation of Capital Structure Theory

    The Tax Shield of Debt

    The Costs of Financial Distress

    Transaction Costs, Asymmetric Information, and Agency Costs        

    Asymmetric Information and Firm Financing  

    Agency Costs: Manager Behavior and Capital Structure        

    Leverage and Agency Conflicts between Equity and Debt Holders         

    The Amount of Financing Required    

    Summary: An Integrated Approach     

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

    When Things Go Wrong

    Avaya Holdings

    Avaya Files for Chapter 11 Bankruptcy

    The Key Economic Principle of Bankruptcy is to Save Viable Firms

    When Should a Firm File for Bankruptcy

    The Rules of Bankruptcy

    Maintaining the Value of a Firm in Bankruptcy

    Avaya Emerges from Bankruptcy

    Summary

    Appendix 13.A: The Creditors Coordination Problem

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

    The Time Value of Money       

    Net Present Value (NPV)         

    Payback

    Projects with Unequal Lives    

    Perpetuities       

    Summary          

    Chapter 15 Valuation and Cash Flows (Sungreen A)

    Investment Decisions   

    How to Value a Project

    The Weighted Average Cost of Capital (WACC)       

    Terminal Values

    Summary          

    Chapter 16 Valuation (Sungreen B)

    Sungreen’s Projected Cash Flows        

    The Weighted Average Cost of Capital (WACC)       

    Twin Firms       

    The Cost of Equity       

    The Cost of Debt          

    The Final Valuation      

    Strategic Analysis         

    Summary          

    Chapter 17 Valuation Nuances

    Cash Flow Nuances      

    Cost of Capital Nuances

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

    Separating Cash Flows and Terminal Values   

    Nuances of Terminal Value Methods   

    Other Valuation Techniques: DCF Variations 

    Real Options (aka Strategic Choices)   

    Summary          

    Chapter 18 Leveraged Buyouts and Private Equity Financing (Congoleum)

    Congoleum: A Short History   

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

    Details of the Deal       

    Postscript: What Happened to LBOs? 

    Summary          

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

    Appendix 18B: Highlights of the Lazard Fairness Opinion    

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

    The Three Main Competitors    

    Recent History 

    Shopping a Firm/Finding a Buyer        

    Summary          

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

    The Bid for Family Dollar        

    Free Cash Flows to the Firm    

    Estimating the Cost of Capital 

    Discounted Cash Flows           

    Terminal Values

    The Three Pieces           

    Summary          

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

    Chapter 21 Understanding Free Cash Flows (The Dollar Stores)

    Comparing the Free-Cash-Flows Formulas      

    Back to Discount Rates

    On to Free Cash Flows to Equity         

    Discounting the Free Cash Flows to Equity    

    Summary          

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

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

    The Time Line  

    Managerial Discretion  

    Activist Shareholders   

    The Federal Trade Commission (FTC) 

    Shareholder Lawsuits   

    The Vote           

    Summary          

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

    Chapter 23 Review

    Chapters 2–4: Cash Flow Management—Financial Tools       

    Chapters 5–13: Financing Decisions and Financial Policies    

    Chapters 14–22: Valuation       

    Tools and Concepts Discussed in This Book   

    Finance as Art, Not Science     

    Bottom Lines    

    An Intelligent Approach to Finance     

    Keeping Current           

    Larry’s Last (Really a True) Story        

    Paul’s Theory of Pies    

    Rules to Live By          

    Glossary

    Index

  • Paul Asquith (Boston, MA) is the Gordon Y. Billard Professor of Finance at M.I.T.'s Sloan School where he has been on the faculty for 25 years and is also a Research Associate of the National Bureau of Economic Research.  At the Sloan School, he served as Senior Associate Dean and as Chairman of Sloan’s New Building Committee.  He teaches in the Finance Area, most recently Introduction to Corporate Finance.  Professor Asquith has also developed and taught three other courses at M.I.T.: Advanced Corporate Finance, Mergers and Acquisitions, and Security Design.

    Lawrence A. Weiss (Boston, MA) is Professor of International Accounting at The Fletcher School of Law and Diplomacy at Tufts University.  Professor Weiss has taught the introductory to advanced financial as well as managerial accounting and finance courses.  He previously taught at Georgetown University, IMD, HEC Lausanne, M.I.T.’s Sloan School, INSEAD, Tulane, Babson and McGill University.

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