T publication T may T be T reproduced T or T distrib- Tuted T in T any T form T or T by T any T means, T or T stored T in T a T data
T base T retrieval T system, T without T prior T written T permission T of T the T pub- Tlisher.
This T book T contains T select T material T from:
Fundamentals T of T Corporate T Finance, TThird T Edition T by T Richard TA. T Brealey, T Stewart T C. T Myers, T and TAlan T J. T Marcus.
T Copyright
, Contents
SECTION 1 T 1
The Firm and the
T T T
How Tto TValue TPerpetuities
T 50 THow Tto TValue TAnnuities
Financial Manager
T T 3 T 51 TAnnuities TDue T 54
Organizing T a T Business 4 Future TValue Tof Tan TAnnuity T T 57
Sole T Proprietorships T T 4
Inflation T and T the TTime TValue T of T Money 61
Partnerships T T 5
Real Tversus TNominal TCash TFlows
Corporations T T 5
T 61 TInflation Tand TInterest TRates
Hybrid T Forms T of T Business TOrganization T T 6
T 63 TValuing TReal TCash TPayments
The T Role T of T the T Financial T Manager 7 T T 65 T Real Tor TNominal? T 67
The TCapital TBudgeting TDecision Effective TAnnual T Interest T Rates 67
T 8 TThe TFinancing TDecision T 9
Summary 69
Financial T Institutions T and T Markets 10 TRelated TWeb TLinks
Financial T Institutions T T 10 T 69 TKey TTerms
Financial T Markets T T 11 T 70
Other TFunctions Tof TFinancial TMarkets Tand Quiz T T 70
TInstitutions T 12 Practice TProblems T T 72
Who T Is T the T Financial T Manager? 13 Challenge T Problems T T 75
Careers T in T Finance T T 15 Solutions Tto TSelf-Test TQuestions
T 77 TMinicase T 79
Goals T of T the T Corporation 17
Shareholders TWant TManagers Tto TMaximize Financial Planning
T 81
TMarket TValue T 17 What T Is T Financial T Planning? 82
Ethics T and T Management T Objectives T T 19 Financial TPlanning TFocuses Ton Tthe TBig TPicture
Do TManagers TReally TMaximize TFirm TValue? T 83 TFinancial TPlanning TIs TNot TJust TForecasting
T 21 TSnippets Tof THistory T 25
T 84 TThree TRequirements Tfor TEffective TPlanning
T 84
Summary 25
Related TWeb TLinks 28 Financial T Planning T Models 86
TKey TTerms T 28
Components Tof Ta TFinancial TPlanning TModel
Quiz 28 T 87 TAn TExample Tof Ta TPlanning TModel T 88
Practice T Problems 29 An TImproved T Model T T 89
Solutions T to T Self-Test T Questions T 31
Planners T Beware 93
The Time Value of Money 33
T T T T
Pitfalls T in T Model T Design T T 93
Future TValues T and T Compound T Interest34 The TAssumption Tin TPercentage Tof TSales TModels
T 94 TThe TRole Tof TFinancial TPlanning TModels
Present TValues 38 T 95
Finding T the T Interest T Rate 44
External T Financing T and T Growth 96
Multiple T Cash T Flows 46
Future TValue Tof T Multiple T Cash T Flows46 Summary 100
Present TValue T of T Multiple T Cash T Flows49 TRelated TWeb TLinks
T 101 TKey TTerms
Level T Cash T Flows: T Perpetuities T and TAnnuities T 101
50 Quiz T T 101
Practice TProblems T T 102
Challenge T Problems T T 106
Solutions T to T Self-Test T Questions T T 106
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