corporate finance

Corporate FinanceDownload free books at... Download free eBooks at bookboon.com2 Corporate Finance... Download free eBooks at bookboon.comClick on the ad to read more Corporate Finance 4

Corporate Finance

Download free books at

Download free eBooks at bookboon.com

2 Corporate Finance

Download free eBooks at bookboon.com

3

Corporate Finance

1st edition

© 2008 bookboon.com

ISBN 978-87-7681-273-7

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Corporate Finance

4

Contents

Contents

1 Introduction 8

2 he objective of the irm 9

3 Present value and opportunity cost of capital 10

3.1 Compounded versus simple interest 10

3.4 Principle of value additivity 11

3.5 Net present value 12

3.6 Perpetuities and annuities 12

3.7 Nominal and real rates of interest 15

3.8 Valuing bonds using present value formulas 16

3.9 Valuing stocks using present value formulas 19

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Corporate Finance

5

Contents

4 he net present value investment rule 22

5 Risk, return and opportunity cost of capital 25

5.1 Risk and risk premia 25

5.2 he efect of diversiication on risk 27

5.3 Measuring market risk 29

5.4 Portfolio risk and return 30

5.5 Portfolio theory 33

5.6 Capital assets pricing model (CAPM) 36

5.7 Alternative asset pricing models 38

6 Capital budgeting 40

6.1 Cost of capital with preferred stocks 40

6.2 Cost of capital for new projects 41

6.3 Alternative methods to adjust for risk 42

6.4 Capital budgeting in practise 42

6.5 Why projects have positive NPV 45

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