e-book
Corporate Finance
The teaching and the practicing of corporate finance are more challenging and exciting
than ever before. The last decade has seen fundamental changes in financial markets and
financial instruments. In the early years of the 21st century, we still see announcements in
the financial press about such matters as takeovers, junk bonds, financial restructuring, initial
public offerings, bankruptcy, and derivatives. In addition, there is the new recognition
of “real” options (Chapters 21 and 22), private equity and venture capital (Chapter 19), and
the disappearing dividend (Chapter 18). The world’s financial markets are more integrated
than ever before. Both the theory and practice of corporate finance have been moving
ahead with uncommon speed, and our teaching must keep pace.
These developments place new burdens on the teaching of corporate finance. On one
hand, the changing world of finance makes it more difficult to keep materials up to date.
On the other hand, the teacher must distinguish the permanent from the temporary and
avoid the temptation to follow fads. Our solution to this problem is to emphasize the modern
fundamentals of the theory of finance and make the theory come to life with contemporary
examples. Increasingly, many of these examples are outside the United States. All
too often, the beginning student views corporate finance as a collection of unrelated topics
that are unified largely because they are bound together between the covers of one book.
As in the previous editions, our aim is to present corporate finance as the working of a
small number of integrated and powerful institutions.
This book has been written for the introductory courses in corporate finance at the MBA
level, and for the intermediate courses in many undergraduate programs. Some instructors
will find our text appropriate for the introductory course at the undergraduate level as well.
We assume that most students either will have taken, or will be concurrently enrolled in,
courses in accounting, statistics, and economics. This exposure will help students understand
some of the more difficult material. However, the book is self-contained, and a prior knowledge
of these areas is not essential. The only mathematics prerequisite is basic algebra
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