Financial Management
- 10th ed.
- New Delhi Vikas Publishing House 2011
- 879p
includes index and biblioraphy
NATURE OF FINANCIAL MANAGEMENT Learning Objectives Scope of Finance Finance Function Financial Manager`s Role Financial Goal: Profit Maximization usWealth Maximization Agency Problems: Managers vs Shareholders Goals Financial Goal and Firm`s Mission and Objectives Exhibit: BHEL`s Mission and Objectives Organization of the Finance Functions CONCEPTS OF VALUE AND RETURN Learning Objectives Introduction Time Preference for Money Future Value U Future Value of a Single Cash Flow HI Future Value of an Annuity HI Annuity of a Future Value (Sinking Fund Present Value HI Present Value of a Single Cash Flow HI Present Value of an Annuity B Capital Recovery HJ Present Value of an Uneven Cash Flow HI Constantly Growing Annuity Value of an Annuity Due Multi-period Compounding Present Value and Rate of Return HI Multi-period Compounding D Yield or IRR Calculation VALUATION OF BONDS AND SHARES Learning Objectives Introduction Concepts of Value Features of a Bond Bonds Values and Yields B Yield to Maturity B Present Value of a Bond Bond Values and Interest Rates The Term Structure of Interest Rates Valuation of Preference Shares Valuation of Ordinary Shares B Two-stage Growth Equity Capitalization Rate Linkages Between Share Price, Earnings and Dividends Price-Earnings (P/E) Ratio: Is it Significant? Exhibit: Myths about EPS and P/E Ratio: A Manager`s Views RISK AND RETURN: AN OVERVIEW OF CAPITAL MARKET THEORY Learning Objectives Introduction Return on a Single Asset Risk of Rates of Return: Variance and Standard Deviation B Calculation of Variance and Standard Deviation Historical Capital Market Returns Expected Return and Risk: Incorporating Probabilities in Estimates RISK AND RETURN: PORTFOLIO THEORY AND ASSETS PRICING MODELS Learning Objectives Introduction Portfolio Return: Two-asset Case Portfolio Risk: Two-asset Case Portfolio Risk-Return Analysis: Two-asset Case B Calculation of Portfolio Return and Risk and Minimum Variance Portfolio Efficient Portfolio and Mean-Variance Criterion Portfolio Risk: The n-asset Case Risk Diversification: Systematic and Unsystematic Risk Combining a Risk-free Asset and a Risky Asset Multiple Risky Assets and a Risk-free Asset Capital Asset Pricing Model (CAPM) Implications and Relevance of CAPM The Arbitrage Pricing Theory (APT) JETA ESTIMATION AND THE COST OF EQUITY Learning Objectives Introduction Beta Estimation Beta Estimation in Practice B Beta Estimation Determinants of Beta CAPM and the Opportunity Cost of Equity Capital OPTIONS AND THEIR VALUATION Learning Objectives Introduction Options Call Option Put Option Options Trading in India N VESTMENT DECISIONS Combinations of Put, Call and Share Factors Determining Option Value Binomial Model for Option Valuation Black-Scholes Model for Option Valuation B Black-Scholes Model for Valuing Call and Put Options Ordinary Share as an Option CAPITAL BUDGETING DECISIONS Learning Objectives Introduction Nature of Investment Decisions Types of Investment Decisions Investment Evaluation Criteria Net Present Value H Calculation of NPV InternalRateof Return B Calculation of IRR Profitability Index Payback Exhibit: Capital Budgeting Methods in Practice Discounted Payback Accounting Rate of Return NPV os IRR Reinvestment Assumption and Modified Internal Rate of Return (MIRR) Varying Opportunity Cost of Capital NPV vs PI COST OF CAPITAL Significance of the Cost of Capital The Concept of the Opportunity Cost of Capital Determining Component Costs of Capital Cost of Debt Cost of Preference Capital Cost of Equity Capital Cost of Equity and the Capital Asset Pricing Model (CAPM) Cost of Equity: CAPM vs Dividend-Growth Model The Weighted Average Cost of Capital Flotation Costs, Cost of Capital and Investment Analysis Calculation of the Cost of Capital in Practice: Case of Lar