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Chapter 1	Chapter 2	Chapter 3	Chapter 4	Chapter 5	Chapter 6
Chapter 7	Chapter 8	Chapter 9	Chapter 10	Chapter 11	Chapter 12

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Spreadsheets	Overheads	Datasets	References
Solutions	Derivations and Discussion	Live Case Study	Powerpoint Presentations

Chapter 1: The Foundations

Overheads	Big Picture
Companies: Background	Disney Deutsche Bank Aracruz Celulose Tata Chemicals
Companies: Annual Reports	Disney Deutsche Bank Aracruz Celulose Tata Chemicals
Companies: Bloomberg Description	Disney Deutsche Bank Aracruz Celulose Tata Chemicals

Chapter 2: The Objective

Overheads	Download as pdf file
Illustrations	2.1: Assessing Disney’s Corporate Governance 2.2: Corporate Governance at Aracruz: Voting and Non-voting Shares 2.3: Corporate Governance at Deutsche Bank: Two Boards 2.4: Corporate Governance at Tata Chemicals: Family Group Companies 2.5: Interaction with financial markets – A Case Study with Disney 2.6: Assessing Social Costs: Disney, Aracruz, Deutsche Bank and Tata Chemicals 2.7: Restive Stockholders and Responsive Managers: The Disney Case
Answers to Concept Questions	2.1 - 2.10
Data Sets	CEO Compensation Inside versus Outside Directors Corporate Governance Scores
Spreadsheets
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	What is the difference between stock price maximization, firm value maximization and stockholder wealth maximization? What is the objective function in corporate finance for a private firm? What is the objective function for a non-profit organization? Are markets short term? What is the German/Japanese alternative to stockholder wealth maximization and does it work?
Readings	Stop whining about Wall Street Bull Market Charges Ahead, lead by Activist Investors The Civilized Hostile Takeover For more readings, click here.
Live Case Study	Analyzing a Company's Corporate Governance Structure

Chapter 3: The Basics of Risk

Overheads	Download as pdf file
Illustrations	3.1: Calculation of standard deviation using historical returns: Disney 3.2: Variance of a portfolio: Disney and Aracruz 3.3: Identifying the Marginal Investor
Answers to Concept Questions	3.1 - 3.6
Data Sets	Standard deviations of stock prices and firm value - by sector Interest Coverage Ratios, Ratings and Default Spreads
Spreadsheets
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	A Derivation of the Capital Asset Pricing Model Variants of the Capital Asset Pricing Model Testing the CAPM: Issues and Discussion More on the Arbitrage Pricing Model Estimating the Macro Economic Factors in a Multi-Factor Model Building a Regression Model Why not use bond betas to arrive at the cost of debt? Credit Scores as Alternatives to Bond Ratings
Readings	Operating Risk as a Measure of Risk Market Risk and Time Horizon Investors must recall risk For more readings, click here.
Live Case Study	Analyzing a Firm's Stockholders

Chapter 4: Risk Measurement and Hurdle Rates

Overheads	Download as pdf file
Illustrations	4.1: Estimating Riskfree Rates 4.2: Estimating Equity Risk Premiums 4.3: Estimating CAPM risk parameters for Disney and diagnostics 4.4: Regression Beta Diagnostics for Aracruz, Tata Chemicals and Deutsche Bank 4.5: Measuring Operating Leverage for Disney Corporation 4.6:  Effects of Financial Leverage on betas: Disney 4.7: Bottom Up Beta for Disney 4.8: Bottom-up Beta for Bookscape Books 4.9: Bottom up Beta for Aracruz and Tata Chemicals 4.10: Bottom Up Beta for Deutsche Bank 4.11: Beta of a Firm After an Acquisition: Disney / Capital Cities 4.12: Estimating Accounting Betas –– Bookscape Books 4.13: Estimating the Cost of Equity: Disney, Aracruz, Tata Chemicals, Deutsche Bank, Bookscape 4.14: Estimating the Cost of Debt. and synthetic ratings for Aracruz, Disney, Tata and Bookscape. 4.15: Calculating the Cost Of Preferred Stock: Disney and Deutsche Bank 4.16: Breaking down a convertible bond into debt and equity components: Disney 4.17: Market value and book value debt ratios 4.18: Estimating Cost of Capital: Disney, Aracruz, Tata Chemicals, Deutsche Bank, Bookscape
Answers to Concept Questions	4.1 - 4.11
Data Sets	Historical Returns on Stocks, Bonds and Bills: United States Country Ratings, Country Spreads and Equity Premiums Implied Premiums for the United States: 1960 - Present Unlevered and Levered Betas by Industry Group: United States Historical Earnings Changes per Year: S&P 500
Spreadsheets	Estimating Implied Equity Premium in a Market Estimating CAPM parameters for a firm Unlevering and Levering Betas Estimating Synthetic rating for a firm Cost of Capital Estimation
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	Riskfree Rate Estimating the riskfree rate when the government is not default free Real versus Nominal Riskfree Rates Risk Premium Geometric versus Arithmetic Risk Premiums: Which is better? The Mechanics of Implied Equity Premiums Estimating equity risk premium for an emerging market or a market with limited history? Beta Setting Regression Parameters for Beta Estimates: How far back? Daily, weekly or monthly data? Why do beta estimates vary across services? What is the right market index to use? Historical Betas versus Expected Betas: Reversion and Financial Fundamentals Betas and Leverage: Derivation and Extensions Accounting Betas Estimating Bottom-up Betas Cost of Debt What is debt? Which is a better estimate of the cost of debt - the rating-based interest rate or the yield to maturity on an issued bond? Estimating Synthetic Ratings Weights Gross Debt or Net Debt Estimating market value of debt when debt is not traded Dealing with Operating Leases Estimating market value of equity Dealing with Preferred Stock
Readings	Risk Premium in Emerging Markets Classic Rule of Risk Premium under Attack Are risk premiums too low? (Greenspan testimony) For more readings, click here.
Live Case Study	Developing a Firm's Risk Profile

Chapter 5: Measuring Returns on Investments

Overheads	Download as pdf file
Illustrations	5.1: Project Descriptions – Disney, Aracruz and Bookscape 5.2: Estimating hurdle rates for individual projects: Bookscape, Rio Disney, Tata acquisition 5.3: Dealing with Allocated Costs 5.4: Estimating Cash Flows for an On-line Book Ordering Service: Bookscape 5.5: Estimating Incremental Cash Flows:  Disney Theme Park 5.6: Estimating Cash Flows to Equity for a New Plant: Aracruz 5.7: Estimating Cash Flows from an Acquisition: Sensient Technologies 5.8: Estimating and Using Return on Capital in Decision Making: Disney and Bookscape 5.9: Estimating Return on Equity - Aracruz Cellulose 5.10: Estimating Payback for the Bookscape Online Service 5.11: NPV From The Firm’s Standpoint - Bookscape On-line 5.12: NPV From The Firm’s Standpoint - Disney’s Theme Park in Rio 5.13: NPV In R$- Disney’s Theme Park in Rio 5.14: NPV from the Equity Investors’ Standpoint- Paper Plant for Aracruz 5.15: Valuing a company for an acquisition: Sensient Technologies 5.16: NPV Calculation With Time-Varying Discount Rates 5.17: Estimating the IRR based on FCFF - Disney Theme Park in Rio 5.18: Estimating IRR Based Upon FCFE - Aracruz Cellulose 5.19: Multiple IRR Projects 5.20: Aracruz Paper Plant: Sensitivity Analysis and Breakeven 5.21: Rio Disney: Simulation
Answers to Concept Questions	5.1 - 5.13
Data Sets	Operating Income and Cash Flows: By Sector EVA and Equity EVA: By Sector (Also has ROE and ROC by sector)
Spreadsheets	Estimating Cash Flows to Firm and Return Diagnostics on Project Estimating Cash Flows to Equity and Return Diagnostics on Project Present Value Calculator
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	Working Capital, Net Working Capital and Non-Cash Working Capital Operating versus Capital Expenditures Depreciation, Amortization and Other Non-cash Charges Capital Expenditures and Depreciation ROC, Cost of Capital, NPV and EVA ROE, Cost of Equity and Equity EVA Equity Analysis versus Firm Analysis Currency Effects on Investment Analysis Real versus Nominal Investment Analysis Net Present Value, IRR or Modified IRR Corporate Strategy and Project Quality
Readings	Measuring Earnings The Content of an Annual Report EVA as elixir For more readings, click here
Live Case Study	Measuring a Firm's Investment Returns

Chapter 6: Estimating Side Costs and Benefits

Overheads	Download as pdf file
Illustrations	6.1: Using the profitability Index to Select Projects 6.2: Project Replication to compare projects with different lives 6.3: Equivalent Annuities To Choose Between Projects With Different Lives 6.4: Using Equivalent Annuities as a General Approach for Multiple Projects 6.5: Analyzing a Replacement Decision 6.6: Estimating the Opportunity Cost for a Resource with a Current Alternative Use 6.7: Cash Flow Synergies with Existing Projects 6.8: Valuing Synergy in a Merger 6.9: Valuing a patent 6.10: Valuing an Option to Expand: Disney Entertainment 6.11: Valuing Disney’s option to abandon: A Real Estate Investment 6.12: Disney's California Adventure: Terminate, Continue or Expand? 6.13: Estimating CFROI for Tata Chemicals 6.14: Evaluating Current Investments 6.15: Excess Returns and Competitive Advantages
Answers to Concept Questions	6.1 - 6.11
Data Sets	Variances in Firm Value: By Sector
Spreadsheets	Valuing the Option to Delay Valuing the Option to Expand Valuing the Option to Abandon
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	What is the cost of using excess capacity? How should we treat product cannibalization in capital budgeting? When is the option to delay a project a valuable option? When is the option to expand a project a valuable option? The Right Option Pricing Model to Use in Valuing Real Options Are strategic considerations valuable options?
Readings	Synergy in Mergers Making real options real Literature on real options in venture capital and R&D Real Options and Business Strategy How much is flexibility worth For more readings, click here.
Live Case Study

Chapter 7: Capital Structure: An Overview of the Financing Decisions

Overheads	Download as pdf file
Illustrations	7.1: Financing Choices in 2008 – Disney, Tata Chemicals and Aracruz 7.2: The Initial Public Offering for United Parcel Service 7.3:  Valuing a Rights Offering –– Tech Temp Inc. 7.4: Evaluating the Debt Trade off – Disney, Aracruz and Bookscape
Answers to Concept Questions	7.1-7.16
Data Sets	Debt Ratios and Fundamentals by Industry Book and Market Debt Ratios By Industry
Spreadsheets
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	A Simple Test of Debt The Treatment of Hybrid Securities The Treatment of Warrants and Convertibles Valuing Flexibility Dilution as a Bogey
Readings	Miller-Modigliani - Forty years later... For more readings, click here.
Live Case Study	The Financing Choices

Chapter 8: Capital Structure: Model and Applications

Overheads	Download as pdf file
Illustrations	8.1: Estimating Debt Capacity Based Upon Operating Income Distribution: Disney 8.2: Analyzing the Capital Structure for Disney: May 2009 and with debt betas 8.3: Sensitivity Analysis on Disney’s Optimal Debt Ratio 8.4: Disney - Enhanced Cost of Capital Approach 8.5: Applying the Cost of Capital Approach with Normalized Operating Income to Aracruz Cellulose 8.6: Applying the Cost of Capital Approach to Tata Chemicals 8.7: Applying the Cost of Capital Approach to a Private Firm: Bookscape 8.8: Deutsche Bank's Capital Mix 8.9: Using the Adjusted Present Value Approach to calculate Optimal Debt Ratio for Disney in 2004 8.10: Estimating Disney’s debt ratio using the cross sectional approach
Answers to Concept Questions	8.1-8.7
Data Sets	Cross Sectional Debt Ratio Regression for the US Cross Sectional Debt Ratio Regression for Europe Cross Sectional Debt Ratio Regresssion for Emerging markets)
Spreadsheets	Optimal Capital Structure with WACC (Operating Income held constant) Enhanced Capital Stucture with WACC (Operating Income allowed to vary) Optimal Capital Structure with APV
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	Extensions on the WACC Approach Building in Constraints Applying Cost of Capital Approach to Financial Service Firms Normalizing Earnings: Some Simple Approaches Getting Inputs for Present Value Approach Minimizing WACC versus Adjusted Present Value Approaches Building a Cross-Sectional Regression
Readings
Live Case Study	Analyzing a Firm's Optimal Debt Ratio

Chapter 9: Capital Structure: The Financing Details

Overheads	Download as pdf file
Illustrations	9.1: Debt Capacity and Takeovers 9.2: Increasing financial leverage quickly: Nichols Research 9.3: Decreasing financial leverage quickly: Aracruz 9.4: Charting a Framework for Increasing Leverage: Disney 9.5: Decreasing Leverage gradually: Tata Chemicals 9.6: Calculating Duration for Disney Theme Park 9.7: Coming Up With The Financing Details: Disney with regression details 9.8: Estimating the Right Financing Mix for Bookscape, Aracruz, Tata Chemicals and Deutsche Bank
Answers to Concept Questions	9.1-9.10
Data Sets	Macro Economic Data: Historical Sensitivity to Macro-economic Variables: By Industry
Spreadsheets
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	Determinants of whether a firm is a takeover target Determinants of whether a firm is under risk of bankruptcy Determinants of project quality Duration: Traditional Measure versus Regression Simple versus Multi-variate regression
Readings	Stock Buybacks are not always good news Catastrophe Bonds Mismatching Financing: The Indonesian Experience For more readings, click here.
Live Case Study	Developing a Firm's Financial Details

Chapter 10: The Determinants of Dividend Policy

Overheads	Download as pdf file
Illustrations	10.1: Dividends, Dividend Yields and Payout Ratios
Answers to Concept Questions	10.1-10.10
Data Sets	Dividends and Earnings: S&P 500 Dividend Yield and Payout Ratio: By Sector
Spreadsheets
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	Dividends versus Stock Buybacks: The Determinants Spin-offs, Split-offs and Divestitures: The Determinants Stock Dividends and Stock Splits For more readings, click here.
Readings
Live Case Study	Analyzing a Firm's Dividend Trade Offs

Chapter 11: A Framework for Analyzing Dividend Policy

Overheads	Download as pdf file
Illustrations	11.1: Dividends and Stock Buybacks: Disney, Aracruz, Tata Chemicals and Deutsche Bank 11.2: Estimating Free Cash Flows to Equity – Disney, Aracruz, Tata Chemicals and Deutsche Bank 11.3: Comparing Dividend Payout Ratios to FCFE Payout Ratios: Disney, Tata Chemicals and Aracruz 11.4: Evaluating Project Quality at Disney, Tata Chemicals and Aracruz 11.5: Analyzing the Dividend Policy of Disney, Tata Chemicals and Aracruz and Deutsche Bank. 11.6: Analyzing Dividend Payout : Disney and Deutsche Bank 11.7: Analyzing Dividend Payout Using The Cross Sectional Regrssion
Answers to Concept Questions	11.1-11.7
Data Sets	Dividend Policy and Fundamentals: By Sector Dividend Payout and FCFE Payout: By Sector Firms with poor projects, low dividends Firms with good project, low dividends Firms with poor projects, high dividends Firms with good projects, high dividends Cross-Sectional Dividend Regression
Spreadsheets	FCFE versus Dividends: Historical Analysis Assessing Project Quality
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	An Intuitive Explanation of FCFE Estimating FCFE for a financial service firm Analyzing Project Quality for a Firm
Readings	Stock Buybacks: Out of Control? BP's dividend/buyback strategy Buybacks in Europe: A Trend For more readings, click here.
Live Case Study	Analyzing Dividend Policy

Chapter 12: Basics of Valuation

Overheads	Download as pdf file
Illustrations	12.1: Length of High Growth Period 12.2: Growth in Earnings per share: Deutsche Bank in early '08 12.3: Valuing equity using the Dividend Discount Model: Deutsche Bank in January 2008 12.4: Valuing Equity in unsettled times: Deutsche Bank in 2009 12.5: Estimating Growth Rate in Net Income 12.6: FCFE Valuation: Tata Chemicals 12.7: Estimating Growth Rate in Operating Income - Disney 12.8: Cost of capital - Disney 12.9: Stable Growth Inputs and Transition Period - Disney 12.10: Value of Non-Operating Assets at Disney 12.11: Value of Equity Options 12.12: FCFF Valuation: Disney 12.13: Valuing a Private Business: Bookscape 12.14: Value Enhancement at Disney 12.15: Comparing PE ratios and growth rates across firms: Entertainment companies 12.16: Price to Book Value Ratios and Return on Equity: European Banks 12.17: Applying Market Regression to Estimate Multiples - Disney 12.18: Valuing Equity as an Option 12.19: Firm Value and Equity Value 12.20: Equity Value and Volatility 12.21: Probabilities of Default and Default Spreads 12.22: Valuing Equity as an Option- Aracruz (with firm valuation)
Answers to Concept Questions	12.1-12.12
Data Sets	Fundamental Growth Rate in EPS: By Sector Fundamental Growth Rate in EBIT: By Sector Net Capital Expenditure Ratios: By Sector Working Capital: By Sector PE, PEG and Fundamentals: By Sector PBV, ROE and Fundamentals: By Sector PS, Net Margin and Fundamentals: By Sector Value/EBITDA: By Sector
Spreadsheets	Model Chooser: Helps choose the right model for a firm Stable Growth DDM Two Stage DDM Three Stage DDM Stable Growth FCFE Model Two Stage FCFE Three Stage FCFE Stable Growth FCFF Two Stage FCFF Three Stage FCFF Capital Expenditure Estimator Estimating Equity Multiples Estimating Firm Value Multiples
Problems and Solutions	Download the problems and solutions
Derivations, In-Practice Questions and Discussion	How do you choose between firm and equity valuation? How do you estimate an expected growth rate? How do you estimate how long expected growth will last? What is terminal value and how is it estimated? What is a stable growth rate and why can it not be greater than the discount rate? What is an exit multiple andhow is it used in DCF valuation? What are the most common errors in dividend discount model valuation? What are the most common errors in FCFE/FCFF model valuation? How do you value a firm that is losing money? How do you value a financial service firm? How do you value a private firm?
Readings	Estimating Earnings Growth Top-down versus Bottom-up Growth Revamping the Earnings Statement For more readings, click here.
Live Case Study	Valuing a Firm

Spreadsheets

Risk Analysis	Estimating Implied Equity Premium in a Market Estimating CAPM parameters for a firm Unlevering and Levering Betas Estimating Synthetic rating for a firm Cost of Capital Estimation
Return Estimation	Estimating Cash Flows to Firm and Return Diagnostics on Project Estimating Cash Flows to Equity and Return Diagnostics on Project Present Value Calculator Valuing the Option to Delay Valuing the Option to Expand Valuing the Option to Abandon
Capital Structure	Optimal Capital Structure with WACC (Operating Income held constant) Optimal Capital Stucture with WACC (Operating Income allowed to vary) Optimal Capital Structure with APV
Dividend Policy	Analyzing Dividend Policy (looking at FCFE and Project Choice)
Valuation	Model Chooser: Helps choose the right model for a firm Stable Growth DDM Two Stage DDM Three Stage DDM Stable Growth FCFE Model Two Stage FCFE Three Stage FCFE Stable Growth FCFF Two Stage FCFF Three Stage FCFF Capital Expenditure Estimator Estimating Equity Multiples Estimating Firm Value Multiples

Overheads

The Big Picture

The Objective of the Firm

Models for Risk and Return

Estimating Hurdle Rates

Measuring Returns on Investments

Capital Structure: The Choices

The Optimal Financing Mix

Designing Debt

Dividend Policy: Theory

Dividend Assessment

Valuation

Solutions

Chapter 1	Chapter 2	Chapter 3	Chapter 4	Chapter 5	Chapter 6
Chapter 7	Chapter 8	Chapter 9	Chapter 10	Chapter 11	Chapter 12

Derivations and Discussion

General	The Objective of the Firm	Basics of Risk	Appplying Risk and Return Models	Measuring Returns	Side Costs, Benefits and Options in Projects
Choices in Financing	The Optimal Debt Ratio	Moving to the Optimal	Dividend Policy: Trade Offs	Dividend Analysis	Valuation