Expert answer:Pick an appropriate topic about Financial manageme

Answer & Explanation:Financial+Management+Theory+&%3+Practice+14+edition.pdf Bosed on chapter 8, 12, 14, 15, 17Pick an appropriate topic, do external research on it and post information about that topic over and above what is presented in the textbook on that particular topic.
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FREQUENTLY USED SYMBOLS
ACP
ADR
APR
AR
b
bL
bU
BEP
BVPS
CAPM
CCC
CF
CFPS
CR
CV

Dps
Dt
DCF
D/E
DPS
DRIP
DRP
DSO
EAR
EBIT
EBITDA
EPS
EVA
F
Average collection period
American Depository Receipt
Annual percentage rate
Accounts receivable
Beta coefficient, a measure of an asset’s market risk
Levered beta
Unlevered beta
Basic earning power
Book value per share
Capital Asset Pricing Model
Cash conversion cycle
Cash flow; CFt is the cash flow in Period t
Cash flow per share
Conversion ratio
Coefficient of variation
Difference or change (uppercase delta)
Dividend of preferred stock
Dividend in Period t
Discounted cash flow
Debt-to-equity ratio
Dividends per share
Dividend reinvestment plan
Default risk premium
Days sales outstanding
Effective annual rate, EFF%
Earnings before interest and taxes; net operating income
Earnings before interest, taxes, depreciation, and amortization
Earnings per share
Economic Value Added
(1) Fixed operating costs
(2) Flotation cost
FCF
FVN
FVAN
g
I
I/YR
INT
IP
IPO
IRR
LP
M
Free cash flow
Future value for Year N
Future value of an annuity for N years
Growth rate in earnings, dividends, and stock prices
Interest rate; also denoted by r
Interest rate key on some calculators
Interest payment in dollars
Inflation premium
Initial public offering
Internal rate of return
Liquidity premium
M/B
MIRR
MRP
MVA
n
N
N(di)
NOPAT
NOWC
NPV
P
Market-to-book ratio
Modified Internal Rate of Return
Maturity risk premium
Market Value Added
Number of shares outstanding
Calculator key denoting number of periods
Area under a standard normal distribution function
Net operating profit after taxes
Net operating working capital
Net present value
Pc
(1) Maturity value of a bond
(2) Margin (profit margin)
(1) Price of a share of stock in Period t; P0 = price of the stock today
(2) Sales price per unit of product sold
Conversion price
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Pf
Ph
PN
P/E
PM
PMT
PPP
PV
PVAN
Q
QBE
r
−r
^r
r*
rd
re
rf
rh
ri
rM
rNOM
rps
rPER
rRF
rs
r
ROA
ROE
RP
RPM
RR
S
SML
∑
s
s2
t
T
TVN
TIE
V
VB
VL
Vop
Vps
VU
VC
w
wd
wps
ws
WACC
X
YTC
YTM
Price of good in foreign country
Price of good in home country
A stock’s horizon, or terminal, value
Price/earnings ratio
Profit margin
Payment of an annuity
Purchasing power parity
Present value
Present value of an annuity for N years
Quantity produced or sold
Breakeven quantity
(1) A percentage discount rate, or cost of capital; also denoted by i
(2) Nominal risk-adjusted required rate of return
“r bar,” historic, or realized, rate of return
“r hat,” an expected rate of return
Real risk-free rate of return
Before-tax cost of debt
Cost of new common stock (outside equity)
Interest rate in foreign country
Interest rate in home country
Required return for an individual firm or security
Return for “the market” or for an “average” stock
Nominal rate of interest; also denoted by iNOM
(1) Cost of preferred stock
(2) Portfolio’s return
Periodic rate of return
Rate of return on a risk-free security
(1) Required return on common stock
(2) Cost of current outstanding common stock
Correlation coefficient (lowercase rho); also denoted by R when using historical data
Return on assets
Return on equity
Risk premium
Market risk premium
Retention rate
(1) Sales
(2) Estimated standard deviation for sample data
(3) Intrinsic value of stock (i.e., all common equity)
Security Market Line
Summation sign (uppercase sigma)
Standard deviation (lowercase sigma)
Variance
Time period
Marginal income tax rate
A stock’s horizon, or terminal, value
Times interest earned
Variable cost per unit
Bond value
Total market value of a levered firm
Value of operations
Value of preferred stock
Total market value of an unlevered firm
Total variable costs
Proportion or weight
Weight of debt
Weight of preferred stock
Weight of common equity raised internally by retaining earnings
Weighted average cost of capital
Exercise price of option
Yield to call
Yield to maturity
Copyright 201 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
financial
management
14e
theor y & practice
E U G E N E F. B R I G H A M
University of Florida
MICHAEL C. EHRHARDT
University of Tennessee
Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
This is an electronic version of the print textbook. Due to electronic rights restrictions,
some third party content may be suppressed. Editorial review has deemed that any suppressed
content does not materially affect the overall learning experience. The publisher reserves the right
to remove content from this title at any time if subsequent rights restrictions require it. For
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formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for
materials in your areas of interest.
Copyright 201 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Financial Management: Theory and
Practice, Fourteenth Edition
Eugene F. Brigham and Michael C. Ehrhardt
Editorial Director, Business & Economics:
Erin Joyner
Editor-in-Chief: Joe Sabatino
Executive Editor: Mike Reynolds
ª 2014, 2011 South-Western, Cengage Learning
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Cover and Internal Designer: c miller design
Library of Congress Control Number: 2012956039
Cover Image: © Fernando Bueno/Getty Images,
Inc.; © Adalberto Rios Szalay/Sexto Sol/
Getty Images, Inc.
Student Edition ISBN-13: 978-1-111-97221-9
Student Edition ISBN-10: 1-111-97221-4
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Copyright 201 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
© lulu/fotolia.com
Preface xviii
PART
1
CHAPTER 1
Web Extensions
CHAPTER 2
Web Extensions
CHAPTER 3
PART
2
Brief Contents
Web Extensions
The Company and
Its Environment 1
An Overview of Financial
Management and the Financial
Environment 3
1A: An Overview of Derivatives
1B: A Closer Look at the Stock
Markets
Financial Statements, Cash Flow,
and Taxes 51
2A: The Federal Income Tax
System for Individuals
Analysis of Financial Statements 95
CHAPTER 7
Web Extensions
CHAPTER 8
PART
4
9A: The Required Return Assuming
Nonconstant Dividends and Stock
Repurchases
The Basics of Capital Budgeting:
Evaluating Cash Flows 397
10A: The Accounting Rate of
Return (ARR)
CHAPTER 10
Web Extensions
4A: The Tabular Approach
4B: Derivation of Annuity
Formulas
Web Extensions
4C: Continuous Compounding
CHAPTER 11
CHAPTER 5
Bond, Bond Valuation, and
Interest Rates 187
Web Extensions
Web Extensions
5A: A Closer Look at Zero Coupon
Bonds
5B: A Closer Look at TIPS:
Treasury Inflation-Protected
Securities
PART
CHAPTER 6
Risk and Return 235
5
Cash Flow Estimation and Risk
Analysis 437
11A: Certainty Equivalents and
Risk-Adjusted Discount Rates
Corporate Valuation and
Governance 485
CHAPTER 12
Corporate Valuation and Financial
Planning 487
CHAPTER 13 Agency Conflicts and Corporate
Governance 523
PART
Stocks and Options 233
Projects and Their
Valuation 355
Web Extensions
Time Value of Money 133
3
7A: Derivation of Valuation
Equations
Financial Options and Applications
in Corporate Finance 325
The Cost of Capital 357
CHAPTER 4
PART
6B: Estimating Beta with a
Financial Calculator
Valuation of Stocks and
Corporations 289
CHAPTER 9
Fixed Income Securities 131
5C: A Closer Look at Bond Risk:
Duration
5D: The Pure Expectations Theory
and Estimation of Forward Rates
6A: Continuous Probability
Distributions
6
CHAPTER 14
Cash Distributions and
Capital Structure 545
Distributions to Shareholders:
Dividends and Repurchases 547
Copyright 201 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
iii
iv
Brief Contents
CHAPTER 15
Web Extensions
Capital Structure Decisions 589
15A: Degree of Leverage
CHAPTER 24
Web Extensions
PART
7
CHAPTER 16
Web Extensions
CHAPTER 17
PART
8
CHAPTER 18
Managing Global
Operations 629
Supply Chains and Working
Capital Management 631
16A: Secured Short-Term
Financing
Tactical Financial
Decisions 727
Web Extensions
CHAPTER 19
Lease Financing 771
Web Extensions
19A: Leasing Feedback
19B: Percentage Cost Analysis
19C: Leveraged Leases
CHAPTER 20 Hybrid Financing: Preferred Stock,
Warrants, and Convertibles 799
PART
9
20A: Calling Convertible Issues
Strategic Finance in
a Dynamic
Environment 827
CHAPTER 21
Dynamic Capital Structures 829
CHAPTER 22
Mergers and Corporate
Control 867
22A: Projecting Consistent Debt
and Interest Expenses
Web Extensions
CHAPTER 23
10
Enterprise Risk Management 909
Special Topics 975
CHAPTER 25
Portfolio Theory and Asset Pricing
Models 977
CHAPTER 26 Real Options 1011
Web Extensions
Multinational Financial
Management 681
Public and Private Financing: Initial
Offerings, Seasoned Offerings, and
Investment Banks 729
18A: Rights Offerings
Web Extensions
PART
Bankruptcy, Reorganization, and
Liquidation 943
24A: Multiple Discriminant
Analysis
26A: The Abandonment Real
Option
26B: Risk-Neutral Valuation
____________________________________
Appendixes
APPENDIX A
Solutions to Self-Test
Problems 1035
APPENDIX B Answers to End-of-Chapter
Problems 1067
APPENDIX C
Selected Equations 1077
APPENDIX D Values of the Areas under the
Standard Normal Distribution
Function 1091
____________________________________
Glossary 1093
____________________________________
Name Index 1121
____________________________________
Subject Index 1127
____________________________________
Web Chapters:
CHAPTER 27
Providing and Obtaining Credit
CHAPTER 28 Advanced Issues in Cash
Management and Inventory
Control
CHAPTER 29
Pension Plan Management
CHAPTER 30 Financial Management in Not-forProfit Businesses
Copyright 201 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Contents
© lulu/fotolia.com
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xviii
PART 1
The Company and Its Environment 1
CHAPTER 1
An Overview of Financial Management and the Financial Environment 3
Box: The Global Economic Crisis 4
The Five-Minute MBA 4
The Corporate Life Cycle 5
Box: Columbus Was Wrong—the World Is Flat! And Hot! And Crowded! 6
The Primary Objective of the Corporation: Value Maximization 9
Box: Ethics for Individuals and Businesses 10
Box: Corporate Scandals and Maximizing Stock Price 12
An Overview of the Capital Allocation Process 13
Financial Securities 14
The Cost of Money 18
Financial Institutions 23
Financial Markets 27
Trading Procedures in Financial Markets 29
Box: Life in the Fast Lane: High-Frequency Trading! 30
Types of Stock Market Transactions 30
The Secondary Stock Markets 31
Box: Measuring the Market 33
Stock Market Returns 34
The Global Economic Crisis 36
Box: Anatomy of a Toxic Asset 43
The Big Picture 45
e-Resources 46
Summary 46
Web Extensions
1A: An Overview of Derivatives
1B: A Closer Look at the Stock Markets
CHAPTER 2
Financial Statements, Cash Flow, and Taxes 51
Box: Intrinsic Value, Free Cash Flow, and Financial Statements 52
Financial Statements and Reports 52
The Balance Sheet 53
Box: The Global Economic Crisis 56
Copyright 201 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
v
vi
Contents
The Income Statement 56
Statement of Stockholders’ Equity 58
Statement of Cash Flows 59
Box: Financial Analysis on the Web 60
Box: Filling in the GAAP 63
Net Cash Flow 64
Free Cash Flow: The Cash Flow Available for Distribution to Investors 65
Box: Sarbanes-Oxley and Financial Fraud 70
Performance Evaluation 72
The Federal Income Tax System 76
Box: When It Comes to Taxes, History Repeats and Repeals Itself! 79
Summary 82
Web Extensions
2A: The Federal Income Tax System for Individuals
CHAPTER 3
Analysis of Financial Statements 95
Box: Intrinsic Value and Analysis of Financial Statements 96
Financial Analysis 96
Liquidity Ratios 97
Asset Management Ratios 100
Box: The Global Economic Crisis 103
Debt Management Ratios 103
Profitability Ratios 107
Box: The World Might Be Flat, but Global Accounting Is Bumpy!
The Case of IFRS versus FASB 108
Market Value Ratios 110
Trend Analysis, Common Size Analysis, and Percentage Change Analysis 113
Tying the Ratios Together: The DuPont Equation 115
Comparative Ratios and Benchmarking 117
Uses and Limitations of Ratio Analysis 118
Box: Ratio Analysis on the Web 119
Looking Beyond the Numbers 119
Summary 120
PART 2
Fixed Income Securities 131
CHAPTER 4
Time Value of Money 133
Box: Corporate Valuation and the Time Value of Money 134
Time Lines 135
Future Values 135
Box: Hints on Using Financial Calculators 139
Present Values 143
Box: It’s a Matter of Trust 144
Finding the Interest Rate, I 147
Finding the Number of Years, N 148
Copyright 201 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Contents
vii
Perpetuities 149
Annuities 150
Future Value of an Ordinary Annuity 151
Box: The Power of Compound Interest 153
Future Value of an Annuity Due 154
Present Value of Ordinary Annuities and Annuities Due 154
Box: Variable Annuities: Good or Bad? 157
Finding Annuity Payments, Periods, and Interest Rates 158
Box: Using the Internet for Personal Financial Planning 160
Uneven, or Irregular, Cash Flows 160
Future Value of an Uneven Cash Flow Stream 163
Solving for I with Irregular Cash Flows 164
Semiannual and Other Compounding Periods 165
Box: Truth in Lending: What Loans Really Cost 168
Fractional Time Periods 169
Amortized Loans 170
Box: What You Know Is What You Get: Not in Payday Lending 171
Box: The Global Economic Crisis An Accident Waiting to Happen: Option Reset Adjustable
Rate Mortgages 174
Summary 176
Web Extensions
4A: The Tabular Approach
4B: Derivation of Annuity Formulas
4C: Continuous Compounding
CHAPTER 5
Bond, Bond Valuation, and Interest Rates 187
Box: Intrinsic Value and the Cost of Debt 188
Who Issues Bonds? 188
Box: The Global Economic Crisis 190
Key Characteristics of Bonds 190
Bond Valuation 194
Changes in Bond Values Over Time 199
Box: Drinking Your Coupons 202
Bonds with Semiannual Coupons 202
Bond Yields 203
The Pre-Tax Cost of Debt: Determinants of Market Interest Rates 206
The Real Risk-Free Rate of Interest, r* 207
The Inflation Premium (IP) 208
The Nominal, or Qu …
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