Fundamentals of Corporate Finance

by Robert Parrino (University of Texas, Austin); David S. Kidwell (University of Minnesota)

• ISBN13: 9780471270560
• ISBN10: 0471270563
• Edition: 1
• Format: Hardcover
• Copyright: 2008-09-01
• Publisher: WILEY

Summary

Parrino/Kidwell, Fundamentals of Corporate Finance offers an innovative integration of conceptual understanding and problem-solving... of intuition and decision-making... of the authors' industry and classroom/research experience...with current real-world examples and online practice. Fundamentals of Corporate Finance helps students develop the intuition and analytical skills necessary to effectively apply financial tools in real-world decision-making situations. Authors Robert Parrino and David Kidwell provide a fully integrated framework for understanding how value creation relates to all aspects of corporate finance; whether it be evaluating an investment opportunity, determining the appropriate financing for a business, or managing working capital. This unique and integrated framework also provides robust coverage of problem solving and decision-making skills.The authors of Fundamentals of Corporate Finance believe that students who understand the intuition underlying the basic concepts of finance are better able to develop the critical judgments necessary to apply financial tools in real-world decision- making situations. This text develops intuitive thinking while simultaneously helping students develop problem solving and computational skills. It then shows students how to apply intuition and analytical skills to decision making while integrating it all with valuation and building shareholder value.

Author Biography

Dr. David S. Kidwell is Professor of Finance and Dean Emeritus at the Curtis L. Carlson School of Management at the University o Minnesota. He holds an undergraduate degree in mechanical engineering from California State University at San Diego, an MBA from California Sate University at San Francisco, and a PhD in finance from the University o Oregon.

Before joining the University of Minnesota, Dr. Kidwell was Dean of the School of Business Administration at the University of Connecticut. Prior to joining the University of Connecticut, he held endowed chairs in banking and finance at Tulane University, the University of Tennessee, and Texas tech University. He was also on the faculty at the Krannert Graduate School of Management, Purdue University, where he was twice voted the outstanding undergraduate teacher of the year. Dr. Kidwell has published research in the leading journals, including Journals of Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Financial Management, and Journal of Money, Credit, and Banking.

Dr. Kidwell has been a management consultant for Coopers & Lybrand and a sales engineer for Bethlehem Steel Corporation. He is an expert on the U.S. financial system and is the author of more than 80 articles dealing with the U.S. financial system and capital markets. Dr. Kidwell has participated in a number of research grants funded by the National Science Foundation to study the efficiency of U.S. capital markets, and to study the impact of government regulation upon the delivery of consumer financial services.

Dr. Kidwell currently serves on the Board of the Schwan Food Company. He is the past Secretary-Treasurer of the Board of Directors of AACSB, the International Association for Management Education. he is a past member of the Boards of the Minnesota Council for Quality, the Stonier Graduate School of Banking, and the Minnesota Center for Corporate responsibility. he has also served as an Examiner for the 1995 Malcolm Baldrige National Quality Award, on the Board of Directors of the Juran Center for Leadership in Quality and on the Board of the Minnesota Life Insurance Company.

Table of Contents

Introduction

The Financial Manager and the Firm

The Role of the Financial Manager

Forms of Business Organization

Managing the Financial Function

The Goal of the Firm

Agency Conflicts: Separation of Ownership and Control

The Importance of Ethics in Business

Summary of Learning Objectives

Self-Study Problems

Solutions to Self-Study Problems

Critical Thinking Questions

Questions and Problems

Sample Test Problems

Foundations

The Financial Environment and the Level of Interest Rates

The Financial System

Direct Financing

Types of Financial Markets

The Stock Market

Financial Institutions and Indirect Financing

The Determinants of Interest Rate Levels

Summary of Learning Objectives

Summary of Key Equations

Self-Study Problems

Solutions to Self-Study Problems

Critical Thinking Questions

Questions and Problems

Sample Test Problems

Financial Statements, Cash Flows, and Taxes

Financial Statements and Accounting Principles

The Balance Sheet

Market Value versus Book Value

The Income Statement and the Statement of Retained Earnings

Cash Flows

Tying the Financial Statements Together

Federal Income Tax

Summary of Learning Objectives

Summary of Key Equations

Self-Study Problems

Solutions to Self-Study Problems

Critical Thinking Questions

Questions and Problems

Sample Test Problems

Analyzing Financial Statements

Background for Financial Statement Analysis

Common-Size Financial Statements

Financial Statement Analysis

The DuPont System: A Diagnostic Tool

Selecting a Benchmark

Using Financial Ratios

Summary of Learning Objectives

Summary of Key Equations

Self-Study Problems

Solutions to Self-Study Problems

Critical Thinking Questions

Questions and Problems

Sample Test Problems

Ethics Case: A Sad Tale: The Demise of Arthur Andersen

Valuation of Future Cash Flows and Risk

The Time Value of Money

The Time Value of Money

Future Value and Compounding

Present Value and Discounting

Additional Concepts and Applications

Summary of Learning Objectives

Summary of Key Equations

Self-Study Problems

Solutions to Self-Study Problems

Critical Thinking Questions

Questions and Problems

Sample Test Problems

Discounted Cash Flows and Valuation

Multiple Cash Flows

Level Cash Flows: Annuities and Perpetuities

Cash Flows That Grow at a Constant Rate

The Effective Annual Interest Rate

Summary of Learning Objectives

Summary of Key Equations

Self-Study Problems

Solutions to Self-Study Problems

Critical Thinking Questions

Questions and Problems

Sample Test Problems

Appendix: Deriving the Formula for the Present Value of an Ordinary Annuity

Problem

Ethics Case: Buy It on Credit and Be True to Your School

Risk and Return

Risk and Return Building Intuition: More Risk Means a Higher Expected Return

Quantitative Measures of Return

The Variance and Standard Deviation as Measures of Risk

Risk and Diversification

Systematic Risk

Compensation for Bearing Systematic Risk

The Capital Asset Pricing Model

Summary of Learning Objectives

Summary of Key Equations

Self-Study Problems

Solutions to Self-Study Problems

Critical Thinking Questions

Questions and Problems

Sample Test Problems

Bond Valuation and the Structur

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