Name: Fundamentals of Corporate Finance 3rd Edition Parrino Test Bank
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ISBN-10 ‏ : ‎ 0730363465
ISBN-13 ‏ : ‎ 978-0730363460
Author: Robert Parrino (Author), Hue Hwa Au Yong (Author), Michael Dempsey (Author), Nigel Morkel-Kingsbury (Author), Samson Ekanayake (Author), Jennifer James (Author), James Murray (Author)

Fundamentals of Corporate Finance, 3rd Edition presents finance in a cutting-edge interactive digital format designed to motivate students by taking the road blocks out of self-study and to facilitate mastery through drill-and-skill practice.

Available as a full colour printed textbook with an interactive eBook code, this title enables every student to master concepts and succeed in assessment. Lecturers are supported with an extensive, easy-to-use teaching and learning package.

Table of Content:

Part 1 Introduction
Chapter 1 The financial manager and the company
Chapter preview
1.1 The role of the financial manager
Stakeholders
It’s all about cash flows
Three fundamental decisions in financial management
1.2 Forms of business organisation
Sole traders
Partnerships
Companies
1.3 Managing the financial function
Organisation structure
Positions reporting to the CFO
External auditors
The audit committee
1.4 The goal of the company
What should management maximise?
Why not maximise profits?
Maximise the value of the company’s shares
Can management decisions affect share prices?
1.5 Agency conflicts: separation of ownership and control
Ownership and control
Agency relationships
Do managers really want to maximise share price?
Aligning the interests of management and shareholders
1.6 The importance of ethics in business
Business ethics
Are business ethics different from everyday ethics?
Types of ethical conflicts in business
The importance of an ethical business culture
Serious consequences
Concept check
Summary
Key terms
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 2 The financial environment and the level of interest rates
Chapter preview
2.1 The financial system
The financial system at work
How funds flow through the financial system
2.2 Direct financing
A direct financing transaction (without using the market)
Direct financing (using the market)
2.3 Types of financial markets
Primary and secondary markets
Exchanges and over-the-counter markets
Money and capital markets
Public and private markets
Futures and options markets
2.4 Financial institutions and indirect financing
Indirect market transactions
Financial institutions and their services
Companies and the financial system
2.5 The determinants of interest rate levels
The real rate of interest
Loan contracts and inflation
The Fisher equation and inflation
Cyclical and long-term trends in interest rates
Planning ahead by financial managers
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Part 2 Valuation of future cash flows and risk
Chapter 3 The time value of money
Chapter preview
3.1 The time value of money
Consuming today or tomorrow?
Time lines as aids to problem solving
The financial calculator
3.2 Future value and compounding
Single-period investment
Two-period investment
The future value equation
The future value factor
Applying the future value formula
Calculator tips for future value problems
3.3 Present value and discounting
Single-period investment
Multiple-period investment
The present value equation
Future and present value equations are the same
Applying the present value formula
The relationship between time, the discount rate and present value
Calculator tips for present value problems
Future value versus present value
3.4 Additional concepts and applications
Finding the interest rate
Finding how many periods it takes an investment to grow to a certain amount
Compound growth rates
Concluding comments
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 4 Discounted cash flows and valuation
Chapter preview
4.1 Multiple cash flows
Future value of multiple cash flows
Present value of multiple cash flows
4.2 Level cash flows: annuities and perpetuities
Present value of an annuity
Future value of an annuity
4.3 Perpetuities
Annuities due
4.4 The effective annual interest rate
Why the confusion?
Calculating the effective annual interest rate
Comparing interest rates
Consumer protection acts and interest rate disclosure
The appropriate interest rate factor
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Appendix: Deriving the formula for the present value of an ordinary annuity
Endnotes
Acknowledgements
Chapter 5 Risk and return
Chapter preview
5.1 Risk and return
5.2 Quantitative measures of return
Holding period returns
5.3 Expected returns
5.4 The variance and standard deviation as measures of risk
Calculating the variance and standard deviation
Interpreting the variance and standard deviation
Historical market performance
5.5 Risk and diversification
Single-asset portfolios
Portfolios with more than one asset
The limits of diversification
5.6 Systematic risk
Why systematic risk is all that matters
Measuring systematic risk
Compensation for bearing systematic risk
5.7 The Capital Asset Pricing Model
The Security Market Line
The Capital Asset Pricing Model and portfolio returns
A word of caution for the CAPM
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 6 Bond valuation and the structure of interest rates
Chapter preview
6.1 Capital market efficiency
Efficient market hypotheses
6.2 Corporate bonds
Market for corporate bonds
Bond price information
Types of corporate bonds
6.3 Bond valuation
The bond valuation formula
Calculator tip: bond valuation problems
Par, premium and discount bonds
Semiannual compounding
Zero coupon bonds
6.4 Bond yields
Yield to maturity
Effective annual yield
Realised yield
6.5 Interest rate risk
Bond theorems
Bond theorem applications
6.6 The structure of interest rates
Marketability
Call provision
Default risk
6.7 The term structure of interest rates
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 7 Share valuation
Chapter preview
7.1 The market for shares
Secondary markets
Secondary markets and their efficiency
Reading the share market listings
7.2 Ordinary and preference shares
Preference shares: debt or equity?
Ordinary share valuation
A one-period model
A perpetuity model
7.3 The general dividend valuation model
The growth share pricing paradox
7.4 Share valuation: some simplifying assumptions
Zero growth dividend model
Constant growth dividend model
Calculating future share prices
The relationship between R and g
Mixed (supernormal) growth dividend model
7.5 Valuing preference shares
Preference shares with a fixed maturity
Perpetuity preference shares
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Part 3 Capital budgeting decisions
Chapter 8 The fundamentals of capital budgeting
Chapter preview
8.1 An introduction to capital budgeting
The importance of capital budgeting
The capital budgeting process
Sources of information
Classification of investment projects
Basic capital budgeting terms
8.2 Net present value
Valuation of real assets
NPV — the basic concept
NPV and value creation
Framework for calculating NPV
Net present value technique
Concluding comments on NPV
8.3 The payback period
Calculating the payback period
How the payback period performs
Discounted payback period
Evaluating the payback rule
8.4 The accounting rate of return
8.5 Internal rate of return
Calculating the IRR
When the IRR and NPV methods agree — independent projects and conventional cash flows
When the IRR and NPV methods disagree — mutually exclusive projects and unconventional cash flows
Modified internal rate of return (MIRR)
IRR versus NPV: a final comment
8.6 Capital budgeting in practice
Practitioners’ methods of choice
Ongoing and postaudit reviews
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Appendix: An example using a financial calculator for capital budgeting calculations
Endnotes
Acknowledgements
Chapter 9 Cash flows and capital budgeting
Chapter preview
9.1 Calculating project cash flows
Cash flow versus accounting earnings
Incremental after-tax free cash flows
The FCF calculation
Cash flows from operations
Cash flows associated with investments
The FCF calculation: an example
9.2 Estimating cash flows in practice
Five general rules for incremental after-tax free cash flow calculations
Nominal versus real cash flows
Tax rates and depreciation
Calculating the terminal-year FCF
Expected cash flows
9.3 Projects with different lives
9.4 When to harvest an asset
When to replace an existing asset
The cost of using an existing asset
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 10 Evaluating project economics and capital rationing
Chapter preview
10.1 Variable costs, fixed costs and project risk
Cost structure and sensitivity of EBITDA to revenue changes
Cost structure and sensitivity of EBIT to revenue changes
10.2 Calculating operating leverage
Degree of pre-tax cash flow operating leverage
Degree of accounting operating leverage
10.3 Break-even analysis
Pre-tax operating cash flow break-even
Accounting break-even
10.4 Risk analysis
Sensitivity analysis
Scenario analysis
Simulation analysis
Decision tree analysis
10.5 Investment decisions with capital rationing
Capital rationing in a single period
Capital rationing across multiple periods
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 11 The cost of capital
Chapter preview
11.1 The company’s overall cost of capital
The finance balance sheet
How companies estimate their cost of capital
11.2 The cost of debt
Key concepts for estimating the cost of debt
Estimating the current cost of a bond or an outstanding loan
Tax and the cost of debt
Estimating the cost of debt for a company
11.3 The cost of equity
Ordinary shares
Preference shares
11.4 Using the WACC in practice
Calculating WACC: an example
Limitations of WACC as a discount rate for evaluating projects
Alternatives to using WACC for evaluating projects
Consistency of the WACC and Dividend Discount Models
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Sample test problems
Endnotes
Acknowledgements
Part 4 Working capital management and financing decisions
Chapter 12 Working capital management
Chapter preview
12.1 Working capital basics
Working capital terms and concepts
Working capital accounts and trade-offs
12.2 The operating and cash conversion cycles
Operating cycle
Cash conversion cycle
12.3 Working capital management strategies
Flexible current asset management strategy
Restrictive current asset management strategy
The working capital trade-off
12.4 Accounts receivable
Terms of sale
Ageing accounts receivable
12.5 Inventory management
Economic order quantity
Just-in-time inventory management
12.6 Cash management and budgeting
Reasons for holding cash
Cash collection
12.7 Financing working capital
Strategies for financing working capital
Financing working capital in practice
Sources of short-term financing
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 13 How companies raise capital
Chapter preview
13.1 Bootstrapping
How new businesses get started
Initial funding of the company
13.2 Venture capital
The venture capital industry
Why venture capital funding is different
The venture capital funding cycle
The cost of venture capital funding
13.3 Initial public offering
Advantages and disadvantages of going public
Investment banking services
Origination
Underwriting
The proceeds
13.4 IPO pricing and cost
The underpricing debate
IPOs are consistently underpriced
The cost of an IPO
13.5 Open offers by a public company
The cost of an open public offer
13.6 Private markets and bank loans
Private versus public markets
Private placements
Private equity companies
13.7 Commercial bank lending
Business overdraft
Bank term loans
The loan pricing model
Concluding comments on funding the company
Concept check
Summary
Key terms
Summary of key equation
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 14 Capital structure policy
Chapter preview
14.1 Capital structure and company value
The optimal capital structure
The Modigliani and Miller propositions
14.2 The benefits and costs of using debt
The benefits of debt
The costs of debt
14.3 Two theories of capital structure
The trade-off theory
The pecking order theory
The empirical evidence
14.4 Practical considerations in choosing a capital structure
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 15 Dividends and dividend policy
Chapter preview
15.1 Dividends
Types of dividends
Dividends and taxation
The dividend payment process
15.2 Share buy-backs
How share buy-backs differ from dividends
How a share buy-back happens
15.3 Dividend policy and company value
Benefits and costs of dividends
Share price reactions to dividend announcements
Dividends versus share buy-backs
15.4 Bonus share issues and share splits
Bonus share issues
Share splits
Reasons for bonus share issues and splits
15.5 Setting a dividend policy
What managers tell us
Practical considerations in setting a dividend policy
Concept check
Summary
Key terms
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Part 5 Business formation, valuation and financial planning
Chapter 16 Business formation, growth and valuation
Chapter preview
16.1 Starting a business
Making the decision to proceed
Choosing the right organisational form
Financial considerations
16.2 The role of the business plan
Why business plans are important
The key elements of a business plan
16.3 Valuing a business
Fundamental business valuation principles
Business valuation approaches
16.4 Important issues in valuation
Public versus private companies
Young (rapidly growing) versus mature companies
Controlling interest versus non-controlling interest
Key people
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 17 Strategic financial planning and forecasting
Chapter preview
17.1 Financial planning
The planning documents
Concluding comments
17.2 Financial planning models
The sales forecast
Building a financial planning model
A simple planning model
17.3 A better financial planning model
Blackwell Sales Ltd
The income statement
The balance sheet
The preliminary pro forma balance sheet
The final pro forma balance sheet
17.4 Beyond the basic planning models
Improving financial planning models
17.5 Managing and financing growth
External funding needed
A graphical view of growth
The internal growth rate
The sustainable growth rate
Growth rates and profits
Growth as a planning goal
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Part 6 Options and corporate finance and international decisions
Chapter 18 Options and corporate finance
Chapter preview
18.1 Financial options
Call options
Put options
American, European and Bermudan options
More on the shapes of option pay-off functions
18.2 Option valuation
Limits on option values
Variables that affect option values
The binomial option pricing model
Put-call parity
Valuing options associated with financial securities issued by companies
18.3 Real options
Options to defer investment
Options to make follow-on investments
Options to change operations
Options to abandon projects
18.4 Agency costs
Agency costs of debt
Agency costs of equity
18.5 Options and risk management
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Chapter 19 International financial management
Chapter preview
19.1 Introduction to international financial management
Globalisation of the world economy
The rise of multinational companies
Factors affecting international financial management
Goals of international financial management
Basic principles remain the same
19.2 Foreign exchange markets
Market structure and major participants
Foreign exchange rates
The equilibrium exchange rate
Foreign currency quotations
19.3 International capital budgeting
Determining cash flows
Exchange rate risk
Country risk
The Barcelona example
19.4 Global money and capital markets
The emergence of the Euromarkets
The Eurocurrency market
The Eurocredit market
International bond markets
19.5 International banking
Risks involved in international bank lending
Eurocredit bank loans
Concept check
Summary
Key terms
Summary of key equations
Self-study problems
Critical thinking questions
Questions and problems
Endnotes
Acknowledgements
Appendix A Present value and future value tables
Appendix B Solutions to self-study problems
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19
EULA