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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

Chapter 2: The Objective

Overheads	Download as pdf file
Illustrations
Answers to Concept Questions	2.1 - 2.9
Data Sets
Spreadsheets
Solutions to Problems	Download as pdf file
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
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
Answers to Concept Questions	3.1 - 3.6
Data Sets	Interest Coverage Ratios, Ratings and Default Spreads
Spreadsheets
Solutions to Problems	Download as pdf file
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
Live Case Study	Analyzing a Firm's Stockholders

Chapter 4: Risk Measurement and Hurdle Rates

Overheads	Download as pdf file
Illustrations	4.1: Estimating the Risk Parameters for Disney 4.2: Measuring Operating Leverage for Disney 4.3: Effects of Leverage on Disney's Beta 4.4: Beta of firm after acquisition: Disney and Capital Cities 4.5: Estimating Accounting Beta for Bookscape 4.6: Cost of Equity based upon Estimated Betas 4.7: Estimating Cost of Debt for Firm 4.8: Estimating Cost of Preferred Stock for GM 4.9: Breaking down a Convertible Bond: Unisys 4.10: Difference between Market Value and Book Value Ratios 4.11: Estimating Cost of Capital
Answers to Concept Questions	4.1 - 4.12
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
Solutions to Problems	Download as pdf file
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)
Live Case Study	Developing a Firm's Risk Profile

Chapter 5: Measuring Returns on Investments

Overheads	Download as pdf file
Illustrations	5.4: Estimating Cash Flows for an On-line Book Ordering Service 5.5: Estimating Cash Flows to Firm on Disney Theme Park 5.6: Estimating Cash Flows to Equity for New Paper Plant: Aracruz 5.8: Using Return on Capital for Projects: Disney and Bookscape 5.9: Return on Equity: Aracruz 5.10: Evaluating Current Investments 5.11: Estimating Payback for Bookscape On-line Service 5.12: Estimating NPV on Project: Bookscape 5.13: Estimating NPV on Project: Disney Theme Park 5.14: Estimating NPV to Equity: Aracruz Paper Plant 5.15: NPV with time-varying discount rates 5.16: IRR on Disney Theme Park 5.17: IRR on Aracruz Paper Plant 5.18: Multiple IRR 5.19: NPV versus IRR: Projects of Different Scale
Answers to Concept Questions	5.1 - 5.14
Data Sets	Operating Income and Cash Flows: By Sector EVA and Equity EVA: 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
Solutions to Problems	Download as pdf file
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
Live Case Study	Measuring a Firm's Investment Returns

Chapter 6: Estimating Side Costs and Benefits

Overheads	Download as pdf file
Illustrations	6.1: Opportunity Costs at Bookscapes 6.2: Cash Flow Synergies: Bookscape 6.3: Valuing the Option to Expand: Disney 6.4: Valuing an Option to Abandon: Disney
Answers to Concept Questions	6.1 - 6.7
Data Sets	Variances in Firm Value: By Sector
Spreadsheets	Valuing the Option to Delay Valuing the Option to Expand Valuing the Option to Abandon
Solutions to Problems	Download as pdf file
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
Live Case Study

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

Overheads	Download as pdf file
Illustrations
Answers to Concept Questions	7.1-7.14
Data Sets	Debt Ratios and Fundamentals Book and Market Debt Ratios By Industry
Spreadsheets
Solutions to Problems	Download as pdf file
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
Live Case Study	The Financing Choices

Chapter 8: Capital Structure: Model and Applications

Overheads	Download as pdf file
Illustrations	8.1: Analyzing Disney's Optimal Capital Structure 8.2: Analyzing a Private Firm's Capital Structure: Bookscape 8.3: Analyzing a Financial Service Firm: Deutsche Bank 8.4: Analyzing Optimal Capital Structure: Aracruz Celulose 8.5: Analyzing Optimal Capital Structure with APV Approach
Answers to Concept Questions	8.1-8.7
Data Sets	Cross Sectional Debt Ratio Regression for the US
Spreadsheets	Optimal Capital Structure with WACC (Operating Income held constant) Optimal Capital Stucture with WACC (Operating Income allowed to vary) Optimal Capital Structure with APV
Solutions to Problems	Download as pdf file
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: Changing Leverage Quickly 9.3: A Framework for Changing Leverage: Disney 9.4: A Framework for Changing Leverage: Time Warner 9.5: Working out the Financing Details
Answers to Concept Questions	9.1-9.11
Data Sets	Macro Economic Data: Historical Sensitivity to Macro-economic Variables: By Industry
Spreadsheets
Solutions to Problems	Download as pdf file
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
Live Case Study	Developing a Firm's Financial Details

Chapter 10: The Determinants of Dividend Policy

Overheads	Download as pdf file
Illustrations
Answers to Concept Questions	10.1-10.18
Data Sets	Dividends and Earnings: S&P 500 Dividend Yield and Payout Ratio: By Sector
Spreadsheets
Solutions to Problems	Download as pdf file
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
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: Estimating FCFE 11.2: Comparing Dividend Payout to FCFE Payout 11.3: Evaluating Project Quality 11.5: Analyzing Disney's dividend policy relative to comparable firms.
Answers to Concept Questions	11.1-11.9
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
Solutions to Problems	Download as pdf file
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
Live Case Study	Analyzing Dividend Policy

Chapter 12: Basics of Valuation

Overheads	Download as pdf file
Illustrations	12.3: Estimating Growth Rate in EPS 12.4: Valuing a Firm in Stable Growth: Deutsche Bank 12.5: Valuing a Private Firm with 2-stage FCFE: Bookscape 12.6: Valuing a Private Firm with 2-stage FCFE: Aracruz 12.7: Estimating Growth in EBIT 12.8: Valuing a firm with 3-stage FCFF Model: Disney 12.10: Comparing PE ratios and Growth Rates 12.11: PBV Ratios and ROE: The Financial Services Sector
Answers to Concept Questions	12.1-12.15
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
Solutions to Problems	Download as pdf file
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
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 Objective of the Firm

Measuring Risk in Investments

Measuring Returns on Investments

Capital Structure

Dividend Policy

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