Contemporary Financial Management with infotrac (Student Edition)

, by Moyer, R. Charles; McGuigan, James R.; Kretlow, William J.

Note: Supplemental materials are not guaranteed with Rental or Used book purchases.

ISBN: 9780324289084 | 0324289081
Cover: Hardcover
Copyright: 1/11/2005

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The tenth edition of this successful text provides a comprehensive and contemporary introduction to financial management, focusing on shareholder wealth maximization and cash flow management, the international aspects of financial management, the ethical behavior of managers, and the increased impact of the Internet in business practice. In addition, content has been added or enhanced to reflect the changing focus on finance areas including topics such as risk management, behavioral finance, the effects of inflation on financial decision-making, ethics in business, and real options.

Preface

xiii

Part 1: Introduction

The Role and Objective of Financial Management

(28)

Key Chapter Concepts

(1)

Financial Challenge: Financial Management Questions

(1)

Introduction

(1)

Forms of Business Organization

(3)

Foundation Concept: Maximizing Shareholder Wealth as the Primary Goal

(5)

Maximization of Shareholder Wealth: Managerial Strategies

(4)

Foundation Concept: Cash Flow

(2)

Foundation Concept: Net Present Value Rule

(1)

Organization of the Financial Management Function

(3)

Ethical Issues: The Practice of Financial Management

(2)

Financial Management and Other Disciplines

(2)

Entrepreneurial Issues: Shareholder Wealth Maximization

(1)

Career Opportunities in Finance

(1)

Professional Finance Affiliations

(1)

Organization of the Text

(5)

Summary

(1)

Questions and Topics for Discussion

(2)

The Domestic and International Financial Marketplace

(34)

Key Chapter Concepts

(1)

Financial Challenge: Long-Term Capital Management, L.P.

(1)

Introduction

(1)

Income Taxes and Financial Management

(1)

An Overview of the U.S. Financial System

(5)

The Structure and Operation of U.S. Security Markets

(2)

The Global Economy and Multinational Enterprises

(2)

Foreign Currency Markets and Exchange Rates

(5)

Foundation Concept: Market Efficiency

(6)

Ethical Issues: Insider Trading

(1)

Foundation Concept: Holding Period Returns

(6)

International Issues: Market Efficiency Outside the United States

(1)

Summary

(1)

Questions and Topics for Discussion

(1)

Self-Test Problems

(1)

Problems

(3)

Appendix 2A: Taxes

(1)

Corporate Income Taxes

(5)

Entrepreneurial Issues: S Corporations

(1)

Questions and Topics for Discussion

(1)

Self-Test Problems

(1)

Problems

(2)

Evaluation of Financial Performance

(45)

Key Chapter Concepts

(1)

Financial Challenge: Earnings Management and Financial Performance Measurement

(1)

Introduction

(1)

Uses of Financial Analysis

(1)

Interpreting Financial Ratios

(1)

Basic Classifications of Financial Ratios

(13)

Summary of Financial Ratio Analysis

(3)

Trend Analysis

(1)

Analysis of Profitability: Return on Investment

(3)

Foundation Concept: Analyzing Profitability Through Return on Stockholders' Equity

(1)

Sources of Comparative Financial Data

(2)

A Word of Caution About Financial Ratio Analysis

(1)

Earnings and Balance Sheet Quality and Financial Analysis

(2)

Ethical Issues: The Sarbanes-Oxley Act and the Financial Reporting Process

(1)

Market Value Added: An Alternative Measure of Performance

(4)

International Issues: Financial Analysis of Multinational Corporations

(1)

Inflation and Financial Statement Analysis

(13)

Summary

(1)

Questions and Topics for Discussion

(1)

Self-Test Problems

(2)

Problems

100

(9)

Financial Planning and Forecasting

109

(27)

Key Chapter Concepts

109

(1)

Financial Challenge: Financial Forecasting in the Telecom Industry: What Went Wrong?

110

(1)

Introduction

111

(1)

Financial Planning

111

(1)

Foundation Concept: Cash Flow Analysis

112

(4)

Financial Forecasting

116

(20)

Summary

127

(1)

Questions and Topics for Discussion

128

(1)

Self-Test Problems

128

(1)

Problems

129

(7)

Part 2: Determinants of Valuation

The Time Value of Money

136

(44)

Key Chapter Concepts

136

(1)

Financial Challenge: The Powerball Winner's ``Dilemma''

137

(1)

Introduction

137

(1)

The Use of Financial Calculators and Spreadsheets

138

(2)

Interest

140

(1)

Simple Interest

141

(1)

Compound Interest and Future Value

142

(4)

Present Value

146

(3)

Annuities

149

(9)

Present Value: Some Additional Cash Flow Patterns

158

(5)

Compounding Periods and Effective Interest Rates

163

(3)

Solving the Financial Challenge

166

(10)

Summary

167

(1)

Questions and Topics for Discussion

167

(2)

Self-Test Problems

169

(1)

Problems

169

(7)

Integrative Case Problem

176

(1)

Appendix 5A: Continuous Compounding And Discounting

177

(1)

Continuous Compounding

177

(1)

Continuous Discounting

177

(1)

Effective Rate Calculations

178

(2)

Self-Test Problems

178

(1)

Problems

178

(2)

Analysis of Risk and Return

180

(46)

Key Chapter Concepts

180

(1)

Financial Challenge: Risk and Return on AT&T Common Stock

181

(1)

Introduction

182

(1)

Meaning and Measurement of Risk

182

(7)

Foundation Concept: Relationship Between Risk and Return

189

(6)

Investment Diversification and Portfolio Risk Analysis

195

(9)

Portfolio Risk and the Capital Asset Pricing Model

204

(10)

International Issues: Diversification and Multinational Corporations

212

(1)

Ethical Issues: High-Risk Securities

213

(1)

Other Dimensions of Risk

214

(12)

Summary

215

(1)

Questions and Topics for Discussion

216

(2)

Self-Test Problems

218

(1)

Problems

219

(7)

Fixed-Income Securities: Characteristics and Valuation

226

(35)

Key Chapter Concepts

226

(1)

Financial Challenge: The Bondholders of MCI Worldcom

227

(1)

Introduction

227

(1)

Characteristics of Long-Term Debt

228

(12)

International Issues: The International Bond Market

240

(1)

Foundation Concept: Valuation of Assets

240

(3)

Bond Valuation

243

(6)

Ethical Issues: Leveraged Buyouts and Bond Values

248

(1)

Characteristics of Preferred Stock

249

(3)

Valuation of Preferred Stock

252

(9)

Summary

253

(1)

Questions and Topics for Discussion

254

(2)

Self-Test Problems

256

(1)

Problems

256

(5)

Common Stock: Characteristics, Valuation, and Issuance

261

(35)

Key Chapter Concepts

261

(1)

Financial Challenge: Google Goes Public

262

(1)

Introduction

263

(1)

Characteristics of Common Stock

264

(6)

The Security Offering Process: Role of the Investment Banker

270

(6)

Foundation Concept: Valuation of Common Stock

276

(3)

International Issues: Global Equity Markets

277

(2)

Applications of the General Dividend Valuation Model

279

(17)

Entrepreneurial Issues: Valuation of Closely Held Firms

282

(3)

Summary

285

(1)

Questions and Topics for Discussion

286

(1)

Self-Test Problems

287

(1)

Problems

287

(9)

Part 3: The Capital Investment Decision

Capital Budgeting and Cash Flow Analysis

296

(36)

Key Chapter Concepts

296

(1)

Financial Challenge: Capital Investment Opportunities During a Business Downturn: The Case of Cleveland Cliffs Inc.

297

(1)

Introduction

298

(1)

Key Terms and Concepts in Capital Budgeting

299

(1)

Basic Framework for Capital Budgeting

300

(2)

Generating Capital Investment Project Proposals

302

(1)

Foundation Concept: Principles of Estimating Cash Flows

303

(2)

Net Investment (NINV)

305

(2)

Net (Operating) Cash Flows

307

(4)

Asset Expansion Projects

311

(1)

Asset Replacement Projects

312

(3)

Problems in Cash Flow Estimation

315

(1)

The Practice of Cash Flow Estimation for Capital Budgeting

315

(11)

Ethical Issues: Cash Flow Estimation Biases

318

(1)

Summary

318

(1)

Questions and Topics for Discussion

319

(1)

Self-Test Problems

320

(1)

Problems

320

(6)

Appendix 9A: Depreciation

326

(1)

Introduction to Depreciation

326

(1)

Straight-Line Depreciation

326

(1)

Accelerated Depreciation

327

(1)

Modified Accelerated Cost Recovery System

328

(2)

Real Property

330

(2)

Questions and Topics for Discussion

331

(1)

Problems

331

(1)

Capital Budgeting: Decision Criteria and Real Option Considerations

332

(42)

Key Chapter Concepts

332

(1)

Financial Challenge: Real Options and the Automobile Production Process: The Case of Honda and Toyota

333

(1)

Introduction

334

(1)

Foundation Concept: Decision Models for Evaluating Alternatives

334

(12)

Capital Rationing and the Capital Budgeting Decision

346

(3)

Reviewing and Post-Auditing an Accepted Project

349

(1)

A Comprehensive Example of Capital Budgeting: Opening a New Bank Branch

350

(4)

International Issues: A Framework for International Capital Expenditure Decisions

352

(2)

Entrepreneurial Issues: Capital Budgeting

354

(1)

Inflation and Capital Expenditures

354

(1)

Real Options in Capital Budgeting

355

(13)

Ethical Issues: The Use of Shareholder Resources

356

(3)

Summary

359

(1)

Questions and Topics for Discussion

359

(1)

Self-Test Problems

360

(1)

Problems

360

(8)

Integrative Case Problem

368

(1)

Appendix 10A: Mutually Exclusive Investments Having Unequal Lives

369

(1)

Replacement Chains

369

(1)

Equivalent Annual Annuities

370

(4)

Problems

372

(2)

Capital Budgeting and Risk

374

(30)

Key Chapter Concepts

374

(1)

Financial Challenge: Boeing Makes a Gutsy Decision

375

(1)

Introduction

376

(1)

Total Project Risk Versus Portfolio Risk

376

(1)

Adjusting for Total Project Risk

377

(9)

Adjusting for Beta Risk in Capital Budgeting

386

(16)

International Issues: Special Elements of Capital Budgeting Risk

388

(1)

Ethical Issues: Johnson & Johnson and Proprietary Competitive Information

389

(3)

Summary

392

(1)

Questions and Topics for Discussion

392

(1)

Self-Test Problems

393

(1)

Problems

394

(8)

Integrative Case Problem

402

(2)

Part 4: The Cost of Capital, Capital Structure, and Dividend Policy

The Cost of Capital

404

(36)

Key Chapter Concepts

404

(1)

Financial Challenge: Cost of Equity Capital for Mountain Fuel Supply Company

405

(1)

Introduction

406

(1)

Summary of Notation

407

(1)

Foundation Concept: Weighted Cost of Capital

407

(3)

Relative Costs of Capital

410

(1)

Computing the Component Costs of Capital

411

(9)

Divisional Costs of Capital

420

(2)

Determining the Weighted (Marginal) Cost of Capital Schedule

422

(3)

International Issues: The Cost of Capital for Multinational Companies

424

(1)

Determining the Optimal Capital Budget

425

(2)

Entrepreneurial Issues: The Cost of Capital

426

(1)

Cost of Depreciation-Generated Funds

427

(11)

Summary

428

(1)

Questions and Topics for Discussion

429

(1)

Self-Test Problems

429

(1)

Problems

430

(8)

Integrative Case Problem

438

(2)

Capital Structure Concepts

440

(30)

Key Chapter Concepts

440

(1)

Financial Challenge: Optimal Capital Structure in the Airline Industry: Delta Air Lines Versus Southwest Airlines

441

(1)

Introduction

442

(1)

Capital Structure Decisions and Maximization of Shareholder Wealth

442

(1)

Foundation Concept: Business Risk

443

(2)

Foundation Concept: Financial Risk and Financial Leverage

445

(3)

Capital Structure Theory

448

(22)

Ethical Issues: LBO Stakeholder Impacts

461

(1)

International Issues: Capital Structure

462

(1)

Summary

463

(1)

Questions and Topics for Discussion

464

(1)

Self-Test Problem

464

(1)

Problems

465

(5)

Capital Structure Management in Practice

470

(46)

Key Chapter Concepts

470

(1)

Financial Challenge: A Significant Deleveraging of AT&T's Balance Sheet

471

(1)

Introduction

472

(1)

Operating and Financial Leverage

472

(9)

Other Financial Risk Measures

481

(1)

EBIT-EPS Analysis

482

(5)

Cash Insolvency Analysis

487

(3)

Other Factors to Consider in Making Capital Structure Decisions

490

(15)

International Issues: Balancing Operating and Financial Risks at Nestle

492

(1)

Summary

493

(1)

Questions and Topics for Discussion

494

(1)

Self-Test Problems

495

(1)

Problems

496

(9)

Appendix 14A: Breakeven Analysis

505

(1)

Graphic Breakeven Analysis

505

(1)

Algebraic Breakeven Analysis

506

(4)

Breakeven Analysis and Risk Assessment

510

(1)

Some Limitations of Breakeven Analysis

511

(1)

Cash Breakeven Point

512

(4)

Questions and Topics for Discussion

513

(1)

Self-Test Problems

513

(1)

Problems

514

(2)

Dividend Policy

516

(32)

Key Chapter Concepts

516

(1)

Financial Challenge: Cisco Systems Shareholders Reject a Dividend Payout Proposal

517

(1)

Introduction

518

(1)

Determinants of Dividend Policy

519

(6)

Dividend Policy and Firm Value

525

(3)

Dividend Policies

528

(5)

Entrepreneurial Issues: Dividend Policy

532

(1)

How Dividends Are Paid

533

(2)

International Issues: Dividend Policies for Multinational Firms

535

(1)

Stock Dividends and Stock Splits

535

(2)

Share Repurchases as Dividend Decisions

537

(11)

Summary

540

(1)

Questions and Topics for Discussion

541

(1)

Self-Test Problems

542

(1)

Problems

542

(6)

Part 5: Working Capital Management

Working Capital Policy and Short-Term Financing

548

(53)

Key Chapter Concepts

548

(1)

Financial Challenge: The Costs of Financial Distress: Xerox Renegotiates Its Credit Line

549

(1)

Introduction

550

(1)

Working Capital Policy

550

(3)

Levels of Working Capital Investment

553

(3)

Proportions of Short-Term and Long-Term Financing

556

(5)

Overall Working Capital Policy

561

(1)

Short-Term Credit

561

(2)

Cost of Short-Term Funds

563

(1)

Trade Credit

564

(3)

Accrued Expenses and Deferred Income

567

(1)

Short-Term Bank Credit

568

(5)

Ethical Issues: Tying Bank Loans to Other Services

572

(1)

Commercial Paper

573

(2)

Accounts Receivable Loans

575

(3)

Inventory Loans

578

(20)

International Issues: Foreign Receivables Financing

580

(1)

Summary

581

(1)

Questions and Topics for Discussion

582

(3)

Self-Test Problems

585

(1)

Problems

586

(12)

Integrative Case Problem

598

(3)

The Management of Cash and Marketable Securities

601

(31)

Key Chapter Concepts

601

(1)

Financial Challenge: Does Microsoft Have Too Much Cash?

602

(1)

Introduction

603

(1)

Liquid Asset Balance

604

(5)

Controlling the Collection and Disbursement of Cash

609

(7)

Ethical Issues: Cash Management

615

(1)

Electronic Funds Transfer

616

(1)

Investing in Marketable Securities

617

(15)

Entrepreneurial Issues: Cash Management

618

(4)

International Issues: Cash Management

622

(2)

Summary

624

(1)

Questions and Topics for Discussion

624

(1)

Self-Test Problems

625

(1)

Problems

626

(6)

Management of Accounts Receivable and Inventories

632

(34)

Key Chapter Concepts

632

(1)

Financial Challenge: Trade Credit in the Telecom Industry: Cisco Systems

633

(1)

Introduction

634

(1)

Accounts Receivable Management

634

(8)

Evaluating Individual Credit Applicants

642

(3)

Inventory Management

645

(3)

Inventory Control Models

648

(18)

Summary

654

(1)

Questions and Topics for Discussion

655

(1)

Self-Test Problems

656

(1)

Problems

657

(9)

Part 6: Additional Topics in Contemporary Financial Management

Lease and Intermediate-Term Financing

666

(30)

Key Chapter Concepts

666

(1)

Financial Challenge: Risks in Leasing Commercial Aircraft: International Lease Finance Corporation

667

(1)

Introduction

668

(1)

Leasing

668

(1)

Types of Leases

669

(3)

Advantages and Disadvantages of Leasing

672

(2)

Entrepreneurial Issues: Leasing by Small Businesses

673

(1)

Tax and Accounting Aspects of Leases

674

(2)

Determining Lease Payments: The Lessor's Perspective

676

(2)

Ethical Issues: Continental Airlines' Leases in Bankruptcy

678

(1)

Lease-Buy Analysis: The Lessee's Perspective

678

(2)

Term Loans

680

(4)

Security Provisions and Protective Covenants

684

(2)

Suppliers of Term Loans

686

(2)

Equipment Loans

688

(7)

Summary

689

(1)

Questions and Topics for Discussion

689

(1)

Self-Test Problems

690

(1)

Problems

691

(4)

Integrative Case Problem

695

(1)

Financing with Derivatives

696

(31)

Key Concepts

696

(1)

Financial Challenge: Repricing ``Underwater Options''

697

(1)

Introduction

698

(1)

Options

699

(3)

Convertible Securities

702

(5)

Warrants

707

(2)

Analysis of Rights Offerings

709

(2)

Interest Rate Swaps

711

(9)

Summary

712

(1)

Questions and Topics for Discussion

713

(1)

Self-Test Problems

714

(1)

Problems

715

(5)

Appendix 20A: The Black-Scholes Option Pricing Model

720

(1)

The Foundations of Option Valuation

720

(1)

The Black-Scholes Option Pricing Model

721

(1)

Applying the Black-Scholes Model

721

(2)

Problems

722

(1)

Appendix 20B: Bond Refunding Analysis

723

(1)

The Bond Refunding Process

723

(4)

Problems

725

(2)

Risk Management

727

(16)

Key Chapter Concepts

727

(1)

Financial Challenge: Risk and the Weakening Dollar

728

(1)

Introduction

728

(1)

Why Manage Risk?

729

(2)

Ethical Issues: Barings Bank PLC and Nick Leeson

730

(1)

Nonhedging Risk Management Strategies

731

(2)

Hedging Strategies for Risk Management

733

(5)

Hedging Price Risk with Options

738

(5)

Summary

739

(1)

Questions and Topics for Discussion

740

(1)

Self-Test Problems

740

(1)

Problems

741

(2)

International Financial Management

743

(21)

Key Chapter Concepts

743

(1)

Financial Challenge: Argentina Takes a Financial Dive

744

(1)

Introduction

745

(1)

Factors That Affect Exchange Rates

745

(7)

Forecasting Future Exchange Rates

752

(1)

Foreign Exchange Risk

753

(11)

Ethical Issues: Payment of Bribes Abroad

757

(2)

Summary

759

(1)

Questions and Topics for Discussion

759

(1)

Self-Test Problems

760

(1)

Problems

760

(4)

Corporate Restructuring

764

Key Chapter Concepts

764

(1)

Financial Challenge: The Swift Collapse of Enron

765

(1)

Introduction

766

(1)

Mergers

766

(9)

Valuation of Merger Candidates

775

(4)

Analysis of a Leveraged Buyout

779

(2)

Business Failure

781

(3)

Alternatives for Failing Businesses

784

(13)

Summary

789

(1)

Questions and Topics for Discussion

790

(2)

Self-Test Problem

792

(1)

Problems

792

(5)

Integrative Case Problem

797

Reference Materials

Tables

(1)

Glossary

(1)

Solutions to Self-Test Problems

(1)

Check Answers to Selected Problems

(1)

Index

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Contemporary Financial Management with infotrac (Student Edition)

Summary

Table of Contents

Supplemental Materials