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
