The Financial Times Handbook of Corporate Finance is the authoritative introduction to the principles and practices of corporate finance and the financial markets. Whether you are an experienced manager or finance officer, or youOre new to financial decision making, this handbook identifies all those things that you really need to know: a aaaaaaa An explanation of value-based management aaaaaaa Mergers and the problem of merger failures aaaaaaa Investment appraisal techniques aaaaaaa How to enhance shareholder value aaaaaaa How the finance and money markets really work aaaaaaa Controlling foreign exchange rate losses aaaaaaa How to value a company a The second edition of this bestselling companion to finance has been thoroughly updated to ensure that your decisions continue to be informed by sound business principles. New sections include corporate governance, the impact of taxation on investment strategies, using excess return as a new value metric, up-to-date statistics which reflect the latest returns on shares, bonds and merger activities and a jargon-busting glossary to help you understand words, phrases and concepts. Corporate finance touches every aspect of your business, from deciding which capital expenditure projects are worth backing, through to the immediate and daily challenge of share holder value, raising finance or managing risk. a The Financial Times Handbooka of Corporate Finance will help you and your business back the right choices, make the right decisions and deliver improved financial performance. It covers the following areas: a aaaaaaa Evaluating your firmOs objectives aaaaaaa Assessment techniques for investment aaaaaaa Traditional finance appraisal techniques aaaaaaa Investment decision-making in companies aaaaaaa Shareholder value aaaaaaa Value through strategy aaaaaaa The cost of capital aaaaaaa Mergers: failures and success aaaaaaa Merger processes aaaaaaa How to value companies aaaaaaa Pay outs to shareholders aaaaaaa Debt finance aaaaaaa Raising equity capital aaaaaaa Managing risk aaaaaaa Options aaaaaaa Futures, forwards and swaps aaaaaaa Exchange rate risk
Table of Contents CONTENTS Introduction * Some of the financial issues covered * The scope of corporate finance Chapter 1. What is the firm's objective? A common purpose The assumed objective of finance Why should we aim for shareholder wealth? What is shareholder wealth? Profit maximisation is not the same as shareholder wealth maximisation Getting manager's objectives aligned with shareholder's objectives What happens if control over directors is weak? Conclusion PART 1 - IINVESTING IN PROJECTS? Chapter 2. State-of-the-art project assessment techniques How do you know whether an investment generates value for shareholders? State-of-the-art technique 1: net present value State-of-the-art technique 2: internal rate of return Choosing between NPV and IRR Appendix 2.1 Mathematical tools for finance Chapter 3. Traditional appraisal techniques What appraisal techniques businesses actually use Payback Accounting rate of return Internal rate of return: reason for continued popularity Chapter 4. Investment decision-making in companies The managerial art of investment selection More tricky issues in real world project appraisal The stages of investment decision making Chapter 5. Allowing for risk in project appraisal What is risk? Adjusting for risk through the discount rate Sensitivity analysis Scenario analysis Probability analysis Problems with using probability analysis Evidence of risk analysis in practice PART 2 SHAREHOLDER VALUE Chapter 6. Value managed companies versus earnings managed companies The pervasiveness of the value approach Case studies: FT100 companies creating value and destroying value Why shareholder value? Three steps to value Earnings-based management's failings ROCE has failings Focusing on earnings is not the same as value How a business creates value The five actions to create value Chapter 7. Value through strategy Value principles touch every corner of the business Strategic business unit management The firm's objective Strategic assessment Strategic choice Strategy implementation What use is the head office? Targets and motivation Chapter 8. Value creation within strategic business units * Using cash flow to measure value * Shareholder value analysis * Economic profit * Economic value added (EVA) * Cash flow return on investment Chapter 9. Entire firm value measurement Total shareholder return Wealth added index Market added value Market to book ratio Chapter 10. What is the company's cost of capital? A word of warning The required rate of return Two sides of the same coin The weighted average cost of capital The cost of equity capital The cost of retained earnings Debt capital The cost of preference share capital Hybrid secu
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