Fundamentals of Corporate Finance, 4th edition
Published by Pearson (January 3, 2025) © 2025
- Jonathan Berk Stanford University
- Peter DeMarzo Stanford University
- Jarrad Harford University of Washington
- Guy Ford
- Vito Mollica
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Title overview
A practical introduction to modern-day core finance principles.
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Fundamentals of Corporate Finance provides a highly accessible presentation of difficult finance concepts that will help shape future generations of finance professionals, as well as instil financial awareness and skills in non-majors. The text arms students with a problem-solving methodology, real-life financial management practices, and an overarching valuation framework that they can apply in their future careers.
Fully localised and updated with new case studies, examples and exercises, the 4th Australian edition gives students the opportunity to practice and apply course concepts. It achieves the difficult task of capturing all the relevant elements of investment, financing, dividend and risk-management decisions in both a regional and an international setting, connecting students to the latest financial issues and policy in today's world of business.
Key features
Bridging theory and practice: Study aids with a practical focus
- The Valuation Principle is presented as the foundation of all financial decision making. First introduced in Chapter 3, revisited in the part openers and integrated throughout the text.
- Guided problem solutions (GPS) accompany key concepts and use a consistent problem-solving methodology (Plan>Execute>Evaluate) to guide students to the correct answer.
- Personal finance GPS examples showcase the use of financial analysis in everyday life by setting the problems in scenarios such as purchasing a new car or house, and saving for retirement.
- Finance in focus boxes highlight contemporary examples of how the theory works in the real world, including how it impacts business problems and company practices.
- Common mistake boxes alert students to frequently made mistakes, both in the classroom and in the field, that stem from misunderstanding core concepts and calculations.
Teaching every student to think finance: Simplified presentation of mathematics
- Notation boxes at the beginning of each chapter define the variables and the acronyms used in the chapter and serve as a 'legend'.
- Equations are numbered the first time they are given in notation form, and key equations are titled and revisited in the summary and in end papers.
- Timelines are emphasised as the important first step in solving every problem that involves cash flow.
- Integrated support for Excel and a financial calculator show students how to use these technologies to solve problems.
Practise finance to learn finance
- Concept check questions at the end of each chapter enable students to test their understanding and identify target areas needing further review.
- End-of-chapter problems offer first-rate materials to practise and build confidence.
- Data cases present in-depth scenarios in a business setting with questions designed to guide students' analysis.
- Integrative cases present a capstone extended problem for each part of the text, with a scenario and data to analyse based on that subset of chapters.
New and updated in this edition
- NEW and UPDATED local case studies, examples and exercises highlighting around 50 Australian firms, such as a discounted cash flow valuation of JB Hi-Fi.
- UPDATED content to reflect the current business environment, including crowd funding, CDOs, subprime mortgages, the Global Financial Crisis, Brexit and Ponzi schemes.
- NEW 'Finance in Focus' sections in many chapters.
Key features
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Table of contents
- Part 1 Introduction
- 1. Corporate Finance and the Financial Manager
- 2. Introduction to financial statement analysis
- Part 2 Interest rates and valuing cash flows
- 3. Time value of money: An introduction
- 4. Time value of money: valuing cash flow streams
- 5. Interest rates
- 6. Bond valuation
- 7. Share valuation: the dividend-discount model
- Part 3: Valuation and the firm
- 8. Investment decision rules
- 9. Fundamentals of capital budgeting
- 10. Share valuation: a second look
- Part 4: Risk and Return
- 11. Risk and return in capital markets
- 12. Systematic risk and equity risk premium
- 13. The cost of capital
- Part 5: Long-term financing
- 14. Raising capital
- 15. Debt financing
- Part 6: Capital structure and valuation
- 16. Introduction: Capital Structure
- 17. Payout policy
- Part 7: Financial planning
- 18. Financial modelling and proforma analysis
- 19. Working capital management
- Part 8: Special topics
- 20. Option applications and corporate finance
- 21. Mergers and acquisitions
- 22. International corporate finance
- 23. Insurance and risk management
Author bios
Jonathan Berk is the A.P. Giannini Professor of Finance at the Graduate School of Business, Stanford University and is a Research Associate at the National Bureau of Economic Research.
Professor Berk's research interests in finance include corporate valuation, capital structure, mutual funds, asset pricing, experimental economics, and labor economics. His work has won a number of research awards including the Stephen A. Ross Prize in Financial Economics, TIAA-CREF Paul A. Samuelson Award, the Smith Breeden Prize, Best Paper of the Year in The Review of Financial Studies, and the FAME Research Prize. His paper, 'A Critique of Size-Related Anomalies,' was selected as one of the two best papers ever published in The Review of Financial Studies.
Peter DeMarzo is the Staehelin Family Professor of Finance at the Graduate School of Business, Stanford University and Faculty Director of the Stanford LEAD program. He teaches MBA and Ph.D. courses in Corporate Finance and Financial Modeling. In addition to his experience at the Stanford Graduate School of Business, Professor DeMarzo has taught at the Haas School of Business and the Kellogg Graduate School of Management, and he was a National Fellow at the Hoover Institution.
Jarrad Harford is the Paul Pigott - PACCAR Professor of Finance at the University of Washington's Foster School of Business. Prior to Washington, Professor Harford taught at the University of Oregon. Professor Harford has taught the core undergraduate finance course, Business Finance, for over twenty years, as well as an elective in Mergers and Acquisitions, and 'Finance for Non-financial Executives' in the executive education program. He has won numerous awards for his teaching, including the UW Finance Professor of the Year (2010, 2012, 2016), Panhellenic/Interfraternity Council Business Professor of the Year Award (2011, 2013), ISMBA Excellence in Teaching Award (2006), and the Wells Fargo Faculty Award for Undergraduate Teaching (2005). Professor Harford is currently a Managing Editor of the Journal of Financial and Quantitative Analysis and serves as an Associate Editor for the Journal of Financial Economics, and the Journal of Corporate Finance. His main research interests are understanding the dynamics of merger and acquisition activity as well as the interaction of corporate cash management policy with governance, payout and global tax considerations.
Guy Ford is a Professor and Director of the MBA program at the University of Sydney Business School. Professor Ford has designed and delivers MBA and executive education programs in the areas of financial analysis, financial management, strategic finance, and mergers and acquisitions. His research centres on risk assessment and risk management in financial institutions. Prior to academia, he worked in various roles in the Group Treasury of the Commonwealth Bank of Australia. He has served as an expert witness for Blake Dawson Waldron, Ashurst and Corrs Chambers Westgarth.
Vito Mollica is Head of the Applied Finance Department at Macquarie University. He received his PhD in economics from the University of Sydney and was awarded a Marie Curie Fellowship from Aarhus University. Professor Mollica's research centres on securities market design, FinTech, asset selection criteria, quantitative investment research and residential property price dynamics. He is currently working on issues related to cryptocurrency, high frequency traders, market transparency, institutional execution costs and real estate. Professor Mollica has provided policy advice to the Australian Financial Markets Association, Financial Services Council, Australian Securities Exchange and Financial Conduct Authority (UK), he was also the Head of the Market Quality-Finance of the $32.3m Capital Markets CRC.
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