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

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 you’re new to financial decision making, this handbook identifies all those things that you really need to know:

·        An explanation of value-based management

·        Mergers and the problem of merger failures

·        Investment appraisal techniques

·        How to enhance shareholder value

·        How the finance and money markets really work

·        Controlling foreign exchange rate losses

·        How to value a company

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.

• This new edition is fully updated, including a major new section on taxation, updated sections on derivatives, further additions on corporate governance and corporate responsibility and an updated further reading and glossary section with web links.

• Specifically designed for practitioners and managers.

• First edition (9780273688518) published in 2004 is still a strong seller, selling over 800 copies in 2008 (TCM Nielsen Bookscan).

•Benchmark: The Financial Times Guide to Investing 4,550 copies sold in 2008 (TCM Nielsen Bookscan 2008 full year).