Capital Investment & Financing (eBook)
448 Seiten
Elsevier Science (Verlag)
978-0-08-047638-4 (ISBN)
This book provides practical guidance on the application of financial evaluation techniques and methods (mainly covered in Appendices), as well as comprehensive coverage of traditional corporate finance topics, discussed in the context of capital investment, raising and management and financial risk management (using derivatives). Models, formulae and other quantitative techniques are illustrated in over 100 examples (using only basic mathematics).
Topics discussed include the following:
* business appraisal using financial ratios
* corporate valuation (mainly discounted cash flow and real options)
*investment appraisal techniques
* acquisition structuring and evaluation
* the nature of loans and loan agreements
* features and pricing of bonds (straight and convertible)
* leasing (including leveraged leasing)
* equity raising (Initial Public Offerings)
* long and short term capital management
* basic pricing of derivatives (forwards, futures, options, swaps)
* interest rate and currency risk management using derivatives
Capital Investment & Financing provides a comprehensive, in-depth coverage of concepts, methods and techniques involved when evaluating acquisitions and other investments, assessing financing opportunities, and managing capital. The core chapters provide practical guidance on key corporate finance topics, the Appendices contain more quantitative material, focusing on pricing techniques. Examples are used throughout, and an integrated case study (fictional) in the final Appendix uses many of the techniques discussed.
*Discusses all key areas of corporate investing and financing, focusing on key financial issues
*Concise, thorough and technical, it enables to reader to acquire knowledge effectively
*Can be used in everyday analysis and decision making
The requirement to maximise value for shareholders is at the core of any corporate investment or financing decision. The intrinsic value of proposed investments should be assessed before deciding how much capital to allocate; the benefits and risks associated with each available source of finance should be considered when capital is being raised; and capital, and any associated financial risks, should be managed in a way that continues to maximise value. At every stage, an analysis should be carried out to ensure the decision is optimal for shareholders and other capital providers.This book provides practical guidance on the application of financial evaluation techniques and methods (mainly covered in Appendices), as well as comprehensive coverage of traditional corporate finance topics, discussed in the context of capital investment, raising and management and financial risk management (using derivatives). Models, formulae and other quantitative techniques are illustrated in over 100 examples (using only basic mathematics). Topics discussed include the following:* business appraisal using financial ratios* corporate valuation (mainly discounted cash flow and real options)*investment appraisal techniques* acquisition structuring and evaluation* the nature of loans and loan agreements* features and pricing of bonds (straight and convertible)* leasing (including leveraged leasing)* equity raising (Initial Public Offerings)* long and short term capital management* basic pricing of derivatives (forwards, futures, options, swaps)* interest rate and currency risk management using derivativesCapital Investment & Financing provides a comprehensive, in-depth coverage of concepts, methods and techniques involved when evaluating acquisitions and other investments, assessing financing opportunities, and managing capital. The core chapters provide practical guidance on key corporate finance topics; the Appendices contain more quantitative material, focusing on pricing techniques. Examples are used throughout, and an integrated case study (fictional) in the final Appendix uses many of the techniques discussed.*Discusses all key areas of corporate investing and financing, focusing on key financial issues *Concise, thorough and technical, it enables to reader to acquire knowledge effectively *Can be used in everyday analysis and decision making
Cover 1
Contents 8
List of Equations, Examples and Exhibits 12
Preface 20
Capital Investment 24
Introduction 24
Capital Expenditure on Tangible Assets 25
Acquisitions – An Overview 26
Introduction 26
The Acquisition Process 27
Financial Due Diligence 29
Financial Evaluation 32
Corporate Valuation 34
Introduction 34
Discounted Cash Flow Valuation 36
Valuing Real Options 49
Valuation Using Multiples 52
Acquisition Structuring & Evaluation
Introduction 54
Purchase Price 54
Purchase Consideration 57
Capital Raising 64
Introduction 64
Debt 65
Introduction 65
Loans 67
Corporate Bonds 82
Equity 89
Introduction 89
Initial Public Offerings 89
Rights Issues 91
Warrants 93
Capital Management 94
Introduction 94
Long term Capital Management 95
Debt 95
Equity 97
Short Term Capital Management 103
Working Capital 103
Short Term Instruments – the Money Market 108
Financial Risk Management 112
Introduction 112
Interest Rate Risk 113
Measuring Interest Rate Risk 113
Managing Interest Rate Risk with Derivatives 114
Forward Interest Rate Contracts 114
Short Term Interest Rate Futures 117
Long Term Interest Rate Futures (Bond Futures) 132
Interest Rate Swaps 149
Interest Rate Options 153
Currency Risk 155
Nature of Currency Risk 155
Managing Currency Risk with Derivatives 156
Forward Currency Contracts 156
Currency Futures 159
Currency Swaps 159
Currency Options 161
Financial Ratios 164
Equity Ratios 164
Debt Ratios 174
Pricing Techniques 176
Corporate DCF Valuation 178
Discounting and Present Values 178
The Cost of Capital (and CAPM) 187
The Discount Rate for Domestic Investment 187
The Discount Rate for International Investment 205
DCF Valuation Methods 208
Valuation Approaches 208
Terminal Values 216
Straight Bond Pricing 226
Introduction to Interest Rates 226
Bond Prices 232
Bond Yields 235
Bond Price Volatility 239
Forward Pricing 246
Forward Prices 246
Forward Interest Rates 250
Forward Interest Rates and FRAs 252
Forward Rates and Spot Rates 254
Forward Bond Prices 258
Basic Option Pricing 264
Overview of Pricing Approach 264
Binomial Model 265
Probability Distributions - Towards Black-Scholes 283
Black-Scholes Model 294
Convergence of Binomial and Black-Scholes Models 297
Binomial Model Revisited – Setting the Parameters 300
Option Price Sensitivity 304
Advanced Option Pricing - further study 308
Option Pricing Applications 310
Real Options 310
Convertible Bonds 318
Warrants 329
Interest Rate and Currency Options 330
Leasing 336
Nature and Characteristics 336
Lease Classification 337
Lease Financial Evaluation 338
Leveraged Leasing 347
Examples 364
Management Buyout 366
Bank Lending Review 378
Initial Public Offering 388
Valuation 396
Acquisition 408
Short Term Interest Rate Futures Hedging 420
Bibliography 430
Index 434
Equations 34
1.1 Constituents of Enterprise Value 34
1.2 Terminal Value-Perpetuity 40
1.3 Terminal Value-Multiples 40
1.4 Real Rate vs. Nominal Rate 42
1.5 Dividend Discount Model 44
1.6 International DCF Approaches 46
1.7 Minimum Exchange Ratio 58
1.8 Maximum Exchange Ratio 58
2.1 Risk Adjusted Return On Capital(RAROC) 73
3.1 Money Market Yield to Maturity 108
3.2 Money Market Realised yield 109
3.3 Money Market Yield/Discount Rate Comparison 110
4.1 Forward Rate Agreement(FRA)-Settlement Amount 115
4.2 Interest Rate Futures(Short Term)-pricing 117
4.3 Interest Rate Futures(Short Term)-Hedge Ratio I 121
4.4 Interest Rate Futures(Short Term)-Hedge Ratio II 122
4.5 Interest Rate Futures(Short Term)-Hedge Ratio III 123
4.6 Interest Rate Futures(Short Term)-Number of Contracts 127
4.7 Interest Rate Futures(Short Term)-Hedge Ratio Using Regression 128
4.8 Interest Rate Futures(Short Term)-Hedge Ratio Using Duration 128
4.9 Interest Rate Futures(Short Term)-Hedge Ratio For Spot Instrument 128
4.10 Interest Rate Futures(Long Term)-Invoiced Amount 133
4.11 Interest Rate Futures(Long Term)-Forward Bond Price 136
4.12 Interest Rate Futures(Long Term)-Basis 139
4.13 Interest Rate Futures(Long Term)-Number of contracts 141
4.14 Interest Rate Futures(Long Term)-Hedge Ratio Using Duration 142
4.15 Forward Exchange Rate 157
A1.1 Return on Equity –Leverage Effect 168
A1.2 P/E Components 169
A1.3 Constant Growth Formulae 170
A1.4 Price-to-Book Ratio And Constant Growth 171
A1.5 Dividend Cover and P/E 173
B1.1 Future Value After n Years 178
B1.2 Simplex Discount Factor 178
B1.3 Cumulative Discount Factor (No Growth) 179
B1.4 Annuity 179
B1.5 Present Value Of Perpetuity(No Growth) 179
B1.6 Present Value Of Perpetuity(Constant Growth) 180
B1.7 Cumulative Discount Factor (Constant Growth) 180
B1.8 Cumulative Discount Factor(Two Growth Rates) 180
B1.9 Shareholder’s Rate of Return 187
B1.10 Cost of Equity under Caotial Asset Pricing Model(CAPM) 190
B1.11 Equity Beta Components 192
B1.12 Stock Risk Components 193
B1.13 Equity Beta vs Asset Beta 195
B1.14 Weighted Average cost of capital(WACC) 198
B1.15 Traditional Theory of Captial Structure 199
B1.16 Modigliani & Miller: no taxes
B1.17 Modigliani & Miller:Taxes
B1.18 Modigliani & Miller:WACC and Cost of Equity
B1.19 Modigliani & Miller:WACC and Cost of Equity I
B1.20 WACC in terms of the Ungeared Cost of Equity II 203
B1.21 WACC in terms of the Risk Free Rate I 204
B1.22 WACC in terms of the Risk Free Rate II 204
B1.23 Enterprise/Equity Value DCF Methods 209
B1.24 Economic Profits 216
B1.25 Marginal Return on Invested Captial 217
B1.26 Reinvestment Rate and Marginal Return 217
B1.27 Terminal Value Perpetuity:No Growth 218
B1.28 Terminal Value Perpetuity:Growth 218
B1.29 Terminal Value Perpetiity:Constant Marginal Return on Capital 219
B2.1 Simple Rate of Interest 226
B2.2 Simple Compound Rate(oneyear,Same frequency) 228
B2.3 Exponentials and Logarithms 229
B2.4 Simple Simple Rate (one year, different frequencies) 229
B2.5 Simple Continuous Rate 230
B2.6 Future Value (Simple and Compound Rates) (more than one year) 231
B2.7 Daycount Conventions 231
B2.8 Annual Coupon Bond Price at Start of Coupon Period 232
B2.9 Semi – Annual Coupon Bond Price at Start of Coupon Period 233
B2.10 Macaulay Duration 241
B2.11 Modified Duration 242
B2.12 Effective Duration 243
B2.13 Price change due to Duration 243
B2.14 Effective Convexity 244
B2.15 Price change due to Convexity 244
B3.1 Forward Price (discrete – interim income) 247
B3.2 Forward Price (discrete – no interim income) 248
B3.3 Forward Price (continuous – interim income) 248
B3.4 Forward Rate 252
B3.5 Zero Coupon Discount Factor – Bootstrapping 256
B3.6 Zero Coupon Discount Factor Zero Coupon (Spot) Rate 257
B3.7 Zero Coupon (Spot) Rate Forward Rate 257
B4.1 Replicating Portfolio – Share Component (Hedge Ratio) 267
B4.2 Replicating Portfolio – Debt Component 268
B4.3 Risk Neutral Probability – Call Option Value 268
B4.4 Risk Neutral Probability 268
B4.5 Continuing Value of Option at Binomial Node 270
B4.6 Mean and Variance for Two State Prices (Discrete) 284
B4.7 Mean and Variance for Two State Prices (Continuous) 284
B4.8 Binomial Probability Distribution 287
B4.9 Binomial Probability – Call Price I 287
B4.10 Binomial Probability – Call Price II 288
B4.11 Standard Normal Distribution Function 290
B4.12 Approximating the Standard Normal Distribution Function 290
B4.13 Stock Price following a Geometric Brownian Motion 291
B4.14 Mean and Variance of Logarithmic Returns I 291
B4.15 Mean and Variance of Logarithmic Returns II 292
B4.16 Black-Scholes (No Dividends) 294
B4.17 Black-Scholes (Dividends) 296
B4.18 Cox, Ross & Rubinstein Binomial Parameters
B4.19 Jarrow & Rudd Binomial Parameters
B5.1 Convertible Bond Payback 319
B5.2 Convertible Bond pricing with Black-Scholes 320
B5.3 Convertible Bond pricing with Binomial Tree 321
B5.4 Convertible Bonds – Debt and Equity Discounting 322
B5.5 Convertible Bonds – Blended Discount Rate 323
B5.6 Futures Option Pricing 330
B5.7 Futures Option Pricing I 331
B5.8 Futures Option Pricing II 332
Examples 36
1.1 Discounting 36
1.2 Weighted Average Cost of Capital 37
1.3 DCF Equity Value 43
1.4 Dividend vs. Free Cash Flow to Equity Valuation 45
1.5 International DCF Valuation with Parity Conditions 47
1.6 Exchange Ratios and NPV sharing (Unquoted Companies) 59
1.7 EPS Bootstrapping (Quoted Companies) 62
2.1 Loan repayment profiles 70
2.2 Risk Adjusted Return ON Capital (RAROC) 73
2.3 Rights Issue 92
3.1 Bond Refinancing 96
3.2 Share Buyback Impact 98
3.3 Trade Receivables Securitisation 106
3.4 Yield Calculation - Certificate of Deposit (CD) 109
4.1 Forward Rate Agreement (FRA) Hedging 116
4.2 Forward Rates 118
4.3 Hedging with Short Term £ Interest Rate Futures -One Interest Period 120
4.4 Hedging with Short Term Interest Rate Futures – Two Interest Periods 124
4.5 Basis Risk for Short Term Interest Rate Futures 129
4.6 The Price Factor for a Long Term Interest Rate (Bond) Future 135
4.7 The Cheapest - To - Deliver (CTD) Eligible Bond for a Bond Future 137
4.8 The Theoretical Futures Price for a Bond Future 139
4.9 Basis Risk for Bond Futures 140
4.10 Hedging with Bond Futures I 142
4.11 Hedging with Bond Futures II 145
4.12 Plain Vanilla Fixed - Floating Interest Rate Swaps 149
4.13 Basic Pricing of an Interest Rate Swap 151
4.14 Cross Exchange Rates 156
4.15 Forward Exchange Rates 158
4.16 Basic Pricing of a Currency Swap 160
A1 Constant, Sustainable Growth Ratio 172
B1.1 Present Value of single cash flow received after n years 178
B1.2 Present Value of constant cash flow received annually for n years 179
B1.3 Present Value of growing cash flow received annually for n years 180
B1.4 Net Present Value (NPV) and Internal Rate of Return (IRR) 181
B1.5 NPV and IRR using 'Loan Balance' Method 182
B1.6 Pre- and Post-tax IRR 182
B1.7 Multiple IRRs 183
B1.8 Adjusting for Multiple IRRs: Sinking Fund Method 183
B1.9 Adjusting for multiple IRRs: Initial Investment Method 184
B1.10 IRRs and Reinvestment Rates 184
B1.11 NPV and Return On Invested Capital (ROIC) 185
B1.12 Equity Return Components 188
B1.13 Certainty Equivalents 188
B1.14 Estimating the Equity Beta by Regression 193
B1.15 Estimating the Cost of Capital using CAPM 198
B1.16 Modigliani & Miller: WACC
B1.17 WACC in terms of Ungeared Cost of Equity 203
B1.18 Enterprise / Equity Value DCF Methods I - VII 209
B1.19 Terminal Value: Constant Marginal Return on Capital 219
B1.20 Terminal Value: Two Stages - Assumed Growth Rates 220
B1.21 Terminal Value: Two Stages – Reducing Marginal Return on Capital 221
B1.22 Terminal Value: Two Stages – Reducing Average Return on Capital 222
B2.1 Simple Interest, paid annually 226
B2.2 Simple Interest, paid semi-annually 227
B2.3 Nominal Effective: various compounding frequencies 228
B2.4 Effective Nominal: various compounding frequencies 229
B2.5 Nominal Nominal: different frequencies p.a. 230
B2.6 Comparing Nominal, Effective and Continuous rates 230
B2.7 Daycount conversions 231
B2.8 Semi-Annual Coupon Bond Price at start of Coupon Period 233
B2.9 Semi-Annual Coupon Bond Price during Coupon Period 234
B2.10 Impact of Reinvestment of Coupons on Return 236
B2.11 Valuing a Bond with Zero Coupon Discount Rates 238
B2.12 Bond Price Volatility: Coupon and Maturity effect 239
B2.13 Macaulay Duration 242
B2.14 Effective Duration 243
B2.15 Convexity: Coupon and Maturity effect 245
B3.1 Forward Price - ‘Cash and Carry’ 246
B3.2 Forward Price – ‘Reverse Cash and Carry’ 249
B3.3 Replicating Cash Flows – Fixing a Borrowing / Lending Rate 250
B3.4 FRA Settlement Amount 252
B3.5 Zero Coupon Rates & Forward Rates: ‘Bootstrapping’
B3.6 Forward Bond Price and Theoretical Futures Price 258
B4.1 Call Option – No dividends – Replicating Portfolio – One period 266
B4.2 Call Option – No dividends – Risk Neutral Probability – One period 269
B4.3 American Call Option – No dividends – Binomial Tree – 5 periods 271
B4.4 American Call Option - No dividends – Binomial Tree – 12 periods 273
B4.5 American Put Option – No dividends – Binomial Tree – 12 periods 274
B4.6 American Put Option / Call Option – Dividends – Binomial Tree – 12 periods 278
B4.7 Pricing a Call Option using the Binomial Distribution 287
B4.8 Estimating Probability based on the Normal Distribution 291
B4.9 Simulating a Random Walk using a Logarithmic Return 292
B4.10 European Call Option – No dividends – Black – Scholes Model 295
B4.11 European Call Option – Dividends – Black - Scholes Model 296
B4.12 European Call Option – Convergence of Black – Scholes to Binomial 298
B4.13 European Call Option – Interpreting the Black – Scholes Model 299
B4.14 Cox, Ross & Rubinstein Binomial Parameters
B4.15 Jarrow & Rudd Binomial Parameters
B5.1 Real Options Valuation – Binomial Tree 311
B5.2 Convertible Bond Pricing – Debt and Equity components 322
B5.3 Convertible Bond Pricing – Blended Rate (Delta) 323
B5.4 Convertible Bond Pricing – Blended Rate (Probability of Conversion) 324
B5.5 Convertible Bond Pricing – Non-callable – No dividends – Binomial Tree 324
B5.6 Convertible Bond Pricing – Callable – No dividends – Binomial Tree 327
B5.7 Convertible Bond Pricing - Callable - Dividends - Binomial Tree 328
B5.8 Warrant Pricing 329
B5.9 Currency Option Pricing - Black - Scholes adjusted model 332
B5.10 Currency Option Pricing - Binomial Tree 332
C1 The Lessor’s NPV and IRR (Pre-tax) 338
C2 Lessor’s IRR and Residual Values 339
C3 Lessor's Lease vs Purchase decision 340
C4 Lease Yield / Profit measures 344
C5 UK Accounting - 90% Finance Lease Test 351
C6 UK Lessee - Finance Lease Accounting 352
C7 UK Lessor - Finance Lease Accounting 353
C8 UK Lessee - Finance Lease Taxation 354
C9 UK Lessor - Finance Lease Taxation 355
C10 Leveraged Lease 356
Exhibits 27
1.1 Transaction Process for Majority Acquisition – Key Stages 27
1.2 Financial Due Diligence – Key Questions 29
1.3 Accounting Measures used in Valuation 35
1.4 Main valuation multiples 52
1.5 Purchase Consideration - Issues 57
4.1 LIFFE June 2004 Long Gilt Contract 134
C1 UK Accounting and Tax for Leases 350
| Erscheint lt. Verlag | 6.5.2005 |
|---|---|
| Sprache | englisch |
| Themenwelt | Sachbuch/Ratgeber ► Beruf / Finanzen / Recht / Wirtschaft ► Geld / Bank / Börse |
| Recht / Steuern ► Wirtschaftsrecht | |
| Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung | |
| Wirtschaft ► Betriebswirtschaft / Management ► Rechnungswesen / Bilanzen | |
| Betriebswirtschaft / Management ► Spezielle Betriebswirtschaftslehre ► Bankbetriebslehre | |
| ISBN-10 | 0-08-047638-4 / 0080476384 |
| ISBN-13 | 978-0-08-047638-4 / 9780080476384 |
| Haben Sie eine Frage zum Produkt? |
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