1、FinanceMcGrawHill PrimisISBN: 0390320013Text: Fundamentals of Corporate Finance, Third EditionBrealeyMyersMarcusCourse:Fundamentals of Corporate FianceDavid WhitehurstUMISTMcGraw-Hill/IrwinG61G62G63Financehttp:/ 2003 by The McGrawHill Companies, Inc. All rights reserved. Printed in the United States
2、 of America. Except as permitted under the United States Copyright Act of 1976, 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 prior written permission of the publisher. This McGrawHill Primis text may in
3、clude materials submitted to McGrawHill for publication by the instructor of this course. The instructor is solely responsible for the editorial content of such materials.111 FINA ISBN: 0390320013This book was printed on recycled paper.FinanceContentsBrealeyMyersMarcus Fundamentals of Corporate Fina
4、nce, Third Edition Front Matter 1Preface 1Cross Reference System 6Some Useful Facts and Formulas 7I. Introduction 101. The Firm and the Financial Manager 102. Accounting and Finance 39II. Value 613. The Time Value of Money 614. Valuing Bonds 1086. Net Present Value and Other Investment Criteria 1325
5、. Valuing Stocks 1677. Using Discounted CashFlow Analysis to Make Investment Decisions 1988. Project Analysis 227III. Risk 2549. Introduction to Risk, Return, and the Opportunity Cost of Capital 25410. Risk, Return, and Capital Budgeting 28211. The Cost of Capital 309IV. Financing 33612. Corporate F
6、inancing and the Lessons of Market Efficiency 33613. An Overview of Corporate Financing 35714. How Corporations Issue Securities 380V. Capital Structure and Dividend Policy 40715. The Capital Structure Decision 40716. Dividend Policy 441VI. Financial Planning 46517. Financial Statement Analysis 4651
7、8. Financial Planning 49619. Working Capital Management and ShortTerm Planning 523iiiVII. ShortTerm Financial Decisions 55720. Cash and Inventory Management 55721. Credit Management and Collection 582VIII. Special Topics 60722. Mergers, Acquisitions, and Corporate Control 60723. International Financ
8、ial Management 63724. Options 66425. Risk Management 689IX. Conclusion 71126. What We Do and Do Not Know About Finance 711Back Matter 725Appendix A: Present Value Tables 725Appendix B: Solutions to Selected EndofChapter Problems 734Glossary 748Index 753ivBrealeyMyers: Fundamentals of Corporate Finan
9、ce, Third EditionFront Matter Preface1 The McGrawHill Companies, 20011PrefaceThis book is about corporate finance. It focuses on how companies invest in real assetsand how they raise the money to pay for these investments.Financial management is important, interesting, and challenging. It is importa
10、ntbe-cause todays capital investment decisions may determine the businesses that the firmis in 10, 20, or more years ahead. Also, a firms success or failure depends in large parton its ability to find the capital that it needs.Finance is interesting for several reasons. Financial decisions often inv
11、olve hugesums of money. Large investment projects or acquisitions may involve billions of dol-lars. Also, the financial community is international and fast moving, with colorful he-roes and a sprinkling of unpleasant villains.Finance is challenging. Financial decisions are rarely cut and dried, and
12、the financialmarkets in which companies operate are changing rapidly. Good managers can copewith routine problems, but only the best managers can respond to change. To handlenew problems, you need more than rules of thumb; you need to understand why com-panies and financial markets behave as they do
13、 and when common practice may not bebest practice. Once you have a consistent framework for making financial decisions,complex problems become more manageable.This book provides that framework. It is not an encyclopedia of finance. It focusesinstead on setting out the basic principles of financial m
14、anagement and applying themto the main decisions faced by the financial manager. It explains why the firms ownerswould like the manager to increase firm value and shows how managers value invest-ments that may pay off at different points of time or have different degrees of risk. Italso describes th
15、e main features of financial markets and discusses why companies mayprefer a particular source of finance.Some texts shy away from modern finance, sticking instead with more traditional,procedural, or institutional approaches. These are supposed to be easier or more prac-tical. We disagree emphatica
16、lly. The concepts of modern finance, properly explained,make the subject simpler, not more difficult. They are also more practical. The tools offinancial management are easier to grasp and use effectively when presented in a con-sistent conceptual framework. Modern finance provides that framework.Mo
17、dern financial management is not “rocket science.” It is a set of ideas that can be made clear by words, graphs, and numerical examples. The ideas provide the “why”behind the tools that good financial managers use to make investment and financing decisions.We wrote this book to make financial manage
18、ment clear, useful, interesting and funfor the beginning student. We set out to show that modern finance and good financialpractice go together, even for the financial novice.BrealeyMyers: Fundamentals of Corporate Finance, Third EditionFront Matter Preface2 The McGrawHill Companies, 20012 PREFACEFu
19、ndamentals and Principles of Corporate FinanceThis book is derived in part from its sister text Principles of Corporate Finance. Thespirit of the two books is similar. Both apply modern finance to give students a work-ing ability to make financial decisions. However, there are also substantial diffe
20、rencesbetween the two books.First, we provide much more detailed discussion of the principles and mechanics ofthe time value of money. This material underlies almost all of this text, and we spend alengthy chapter providing extensive practice with this key concept.Second, we use numerical examples i
21、n this text to a greater degree than in Princi-ples. Each chapter presents several detailed numerical examples to help the reader be-come familiar and comfortable with the material.Third, we have streamlined the treatment of most topics. Whereas Principles has 35chapters, Fundamentalshas only 26. Th
22、e relative brevity of Fundamentalsnecessitatesa broader-brush coverage of some topics, but we feel that this is an advantage for a be-ginning audience.Fourth, we assume little in the way of background knowledge. While most users willhave had an introductory accounting course, we review the concepts
23、of accounting thatare important to the financial manager in Chapter 2.Principles is known for its relaxed and informal writing style, and we continue thistradition in Fundamentals. In addition, we use as little mathematical notation as possi-ble. Even when we present an equation, we usually write it
24、 in words rather than sym-bols. This approach has two advantages. It is less intimidating, and it focuses attentionon the underlying concept rather than the formula.ORGANIZATIONAL DESIGNFundamentals is organized in nine parts.Part I (Introduction) provides essential background material. In the first
25、 chapter wediscuss how businesses are organized, the role of the financial manager and the finan-cial markets in which the manager operates. We explain how shareholders want man-agers to take actions that increase the value of their investment and we describe someof the mechanisms that help to align
26、 the interests of managers and shareholders. Ofcourse the task of increasing shareholder value does not justify corrupt and unscrupu-lous behavior. We therefore discuss some of the ethical issues that confront managers.A large corporation is a team effort, and so companies produce financial statemen
27、tsto help the players monitor their progress. Chapter 2 provides a brief overview of thesefinancial statements and introduces two key distinctionsbetween market and bookvalues and between cash flows and profits. The chapter concludes with a summary offederal taxes.Part II (Value) is concerned with v
28、aluation. In Chapter 3 we introduce the concept ofthe time value of money, and, since most readers will be more familiar with their ownfinancial affairs than with the big leagues of finance, we motivate our discussion bylooking first at some personal financial decisions. We show how to value long-li
29、vedstreams of cash flows and work through the valuation of perpetuities and annuities.Chapter 3 also contains a short concluding section on inflation and the distinction be-tween real and nominal returns.BrealeyMyers: Fundamentals of Corporate Finance, Third EditionFront Matter Preface3 The McGrawHi
30、ll Companies, 2001PREFACE 3Chapters 4 and 5 introduce the basic features of bonds and stocks and give studentsa chance to apply the ideas of Chapter 3 to the valuation of these securities. We showhow to find the value of a bond given its yield and we show how prices of bonds fluc-tuate as interest r
31、ates change. We look at what determines stock prices and how stockvaluation formulas can be used to infer the return that investors expect. Finally, we seehow investment opportunities are reflected in the stock price and why analysts focus onthe price-earnings multiple.The remaining chapters of Part
32、 II are concerned with the companys investment de-cision. In Chapter 6 we introduce the concept of net present value and show how to cal-culate the NPV of a simple investment project. We also look at other measures of an in-vestments attractivenessthe internal rate of return rule, payback, and the r
33、eturn onbook. We then turn to more complex investment proposals, including choices betweenalternative projects, machine replacement decisions, and decisions of when to invest.Finally, we show how the profitability index can be used to choose between investmentprojects when capital is scarce.The firs
34、t step in any NPV calculation is to decide what to discount. Therefore, inChapter 7 we work through a realistic example of a capital budgeting analysis, showinghow the manager needs to recognize the investment in working capital and how taxesand depreciation affect cash flows.We start Chapter 8 by l
35、ooking at how companies organize the investment process andensure everyone works toward a common goal. We then go on to look at various tech-niques to help managers identify the key assumptions in their estimates, such as sensi-tivity analysis, scenario analysis, and break-even analysis. We conclude
36、 the chapter bydescribing how managers try to build future flexibility into projects so that they cancapitalize on good luck and mitigate the consequences of bad luck.Part III (Risk) is concerned with the cost of capital. Chapter 9 starts with a historicalsurvey of returns on bonds and stocks and go
37、es on to distinguish between the uniquerisk and market risk of individual stocks. Chapter 10 shows how to measure market riskand discusses the relationship between risk and expected return. Chapter 11 introducesthe weighted-average cost of capital and provides a practical illustration of how to esti
38、-mate it.Part IV (Financing) begins our discussion of the financing decision. In Chapter 12 weintroduce the notion of market efficiency. Few other introductory texts include a chap-ter on this topic. We believe that without a solid understanding of market efficiency itis difficult to think through t
39、he issues that arise when firms issue securities or makecapital structure and dividend decisions. Chapter 13 looks at the role of shareholders inlarge corporations and compares corporate governance in the USA and elsewhere. Italso provides an overview of the securities that firms issue and their rel
40、ative importanceas sources of finance. In Chapter 14 we look at how firms issue securities and we fol-low a firm from its first need for venture capital, through its initial public offering to itscontinuing need to raise debt or equity.Part V (Capital Structure and Dividend Policy) focuses on the tw
41、o classic long-termfinancing decisions. How much the firm should borrow is addressed in Chapter 15, andhow it should set its dividend policy is addressed in Chapter 16. In each case we startwith Modigliani and Millers (MMs) observation that in well-functioning markets thedecision should not matter,
42、but we use this observation to help the reader understandwhy financial managers in practice do pay attention to these decisions.BrealeyMyers: Fundamentals of Corporate Finance, Third EditionFront Matter Preface4 The McGrawHill Companies, 20014 PREFACEPart VI (Financial Planning) starts with financia
43、l statement analysis in Chapter 17and shows how analysts summarize the large volume of accounting information by cal-culating some key financial ratios. Long-term financial planning is discussed in Chap-ter 18, where we look at how the financial manager considers the combined effects ofinvestment an
44、d financing decisions on the firm as a whole. We also show how meas-ures of internal and sustainable growth help managers check that the firms plannedgrowth is consistent with its financing plans. Chapter 19 is an introduction to workingcapital management. It also shows how managers ensure that the
45、firm will have enoughcash to pay its bills over the coming year and describes the principal sources of short-term borrowing.Part VII (Short-Term Financial Decisions) is concerned with two important short-term problems. Chapter 20 explains the mechanics of cash collection and disbursementand shows ho
46、w firms invest idle cash. It also looks at the general problem of managinginventories and shows how the decision to stock up on cash is similar to the decision tostock up on inventories of raw materials or finished goods. The parallel between thetask of inventory management and cash management enabl
47、es us to cover these topicswith less repetition than in most other texts. In Chapter 21 we describe the basic stepsof credit management and we summarize bankruptcy procedures when customers can-not pay their bills.Part VIII (Special Topics) covers several important but somewhat more advanced top-ics
48、mergers (Chapter 22), international financial management (Chapter 23), options(Chapter 24), and risk management (Chapter 25). Some of these topics are touched onin earlier chapters. For example, we introduce the idea of options in Chapter 8, when weshow how companies build flexibility into capital p
49、rojects. However, Chapter 24 gener-alizes this material, explains at an elementary level how options are valued, and providessome examples of why the financial manager needs to be concerned about options. In-ternational finance is also not confined to Chapter 23. As one might expect from a bookthat is written by an international group of authors, examples from different countriesand financial systems are scattered throughout the book. However, Chapter 23 tacklesthe specific problems that arise when a corporation
