Spreadsheet Modeling in Corporate Finance (Generic edition)

by Holden, Craig W.

• ISBN13: 9780130499059
• ISBN10: 0130499056
• Edition: CD
• Format: Paperback w/CD
• Copyright: 2002-01-01
• Publisher: Pearson College Div

Summary

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Table of Contents

Preface

Part 1 Time Value of Money

Single Cash Flow

Present Value

Future Value

Problems

Annuity

Present Value

Future Value

System of Four Annuity Variables

Problems

Net Present Value

Constant Discount Rate

General Discount Rate

Problems

Real and Inflation

Constant Discount Rate

General Discount Rate

Problems

Loan Amortization

Basics

Sensitivity Analysis

Problems

Part 2 Valuation

Bond Valuation

Basics

By Yield To Maturity

System of Five Bond Variables

Dynamic Chart

Problems

Stock Valuation

Two Stage

Dynamic Chart

Problems

The Yield Curve

Obtaining It from Bond Listings

Using It to Price A Coupon Bond

Using It to Determine Forward Rates

Problems

U.S. Yield Curve Dynamics

Dynamic Chart

Problems

Part 3 Capital Budgeting

Project NPV

Basics

Forecasting Cash Flows

Working Capital

Sensitivity Analysis

Problems

Cost-Reducing Project

Basics

Sensitivity Analysis

Problems

Break-Even Analysis

Based On Accounting Profit

Based On NPV

Problems

Three Valuation Methods

Adjusted Present Value

Flows To Equity

Weighted Average Cost of Capital

Problems

Part 4 Financial Planning

Corporate Financial Planning

Actual

Forecast

Cash Flow

Ratios

Sensitivity

Full-Scale Real Data

Problems

Du Pont System of Ratio Analysis

Basics

Problems

Life-Cycle Financial Planning

Basics

Problems

Part 5 Options and Corporate Finance

Binomial Option Pricing

Single Period

Multi-Period

Risk Neutral

Full-Scale Real Data

Problems

Black Scholes Option Pricing

Basics

Dynamic Chart

Continuous Dividend

Implied Volatility

Problems

Debt and Equity Valuation

Two Methods

Impact of Risk

Problems

Real Options

Using Black-Scholes

Using The Binomial Model

Sensitivity to Standard Deviation

Problems

Excerpts

For nearly 20 years, since the emergence of PCs, Lotus 1-2-3, and Microsoft Excel in the 1980's, spreadsheet models have been the dominant vehicles for finance professionals in the business world to implement their financial knowledge. Yet even today, most Corporate Finance textbooks rely on calculators as the primary tool and have little (if any) coverage of how to build spreadsheet models. This book fills that gap. It teaches students how to build financial models in Excel. It provides step-by-step instructions so that students can build models themselves (active learning), rather than handing students canned "templates" (passive learning). It progresses from simple examples to practical, real-world applications. It spans nearly all quantitative models in corporate finance. Why I Wrote This Book My goal is simply to change finance education from being calculator based to being spreadsheet modeling based. This change will better prepare students for the 21 st century business world. This change will increase student satisfaction in the classroom by allowing more practical, real-world applications and by enabling a more hands-on, active learning approach. There are many features which distinguish this book from anything else on the market: Teach By Example. I believe that the best way to learn spreadsheet modeling is by working through examples and completing a lot of problems. This book fully develops this hands-on, active learning approach. Active learning is a well-established way to increase student learning and student satisfaction with the course / instructor. When students build financial models themselves, they really "get it." As I tell my students, "If you build it, you will learn." Supplement For All Popular Corporate Finance Textbooks. This book is a supplement to be combined with a primary textbook. This means that you can keep using whatever textbook you like best. You don't have to switch. It also means that you can take an incremental approach to incorporating spreadsheet modeling. You can start modestly and build up from there. Alternative notation versions are available that match the notation of all popular corporate finance textbooks. Plain Vanilla Excel. Other books on the market emphasize teaching students programming using Visual Basic for Applications (VBA) or using macros. By contrast, this book does everything in plain vanilla Excel. Although programming is liked by a minority of students, it is seriously disliked by the majority. Plain vanilla Excel has the advantage of being a very intuitive, user-friendly environment that is accessible to all. It is fully capable of handling a wide range of applications, including quite sophisticated ones. Further, your students already know the basics of Excel and nothing more is assumed. Students are assumed to be able to enter formulas in a cell and to copy formulas from one cell to another. All other features of Excel (graphing, built-in functions, Solver, etc.) are explained as they are used. Build From Simple Examples To Practical, Real-World Applications. The general approach is to start with a simple example and build up to a practical, real-world application. In many chapters, the previous spreadsheet model is carried forward to the next more complex model. For example, the chapter on binomial option pricing carries forward spreadsheet models as follows: (a.) single-period model with replicating portfolio, (b.) eight-period model with replicating portfolio, (c.) eight-period model with risk-neutral probabilities, (d.) full-scale, fifty-period model with volatilities estimated from real returns data. Whenever possible, this book builds up to full-scale, practical applications using real data. Students are excited to learn practical applications that they can actually use in their future jobs. Employers are excited to hire students with sp