Core concepts. Contemporary ideas. Outstanding, innovative resources.
To succeed in your business studies, you will need to master core finance concepts and learn to identify and solve many business problems. Learning to apply financial metrics and value creation as inputs to decision making is a critical skill in any kind of organisation.
Fundamentals of Corporate Finance shows you how to do just that. Berk presents the fundamentals of business finance using the Valuation Principle as a clear, unifying framework. Throughout the text, its many applications use familiar Australian examples and makes consistent use of real-world data.
This Australian adaptation of the highly successful US text Fundamentals of Corporate Finance features a high-calibre author team of respected academics. The second edition builds on the strengths of the first edition, and incorporates updated figures, tables and facts to reflect key developments in the field of finance.
For corporate finance or financial management students, at undergraduate or post-graduate level.
PART 1 Introduction
1 Corporate Finance and the Financial Manager
2 Introduction to Financial Statement Analysis
PART 2 Interest Rates and Valuing Cash Flows
3 Time Value of Money: An Introduction
4 Time Value of Money: Valuing Cash Flow Streams
5 Interest Rates
6 Bond Valuation
7 Share Valuation: The Dividend-Discount Model
PART 3 Valuation and the Firm
8 Investment Decision Rules
9 Fundamentals of Capital Budgeting
10 Share Valuation: A Second Look
PART 4 Risk and Return
11 Risk and Return in Capital Markets
12 Systematic Risk and the Equity Risk Premium
13 The Cost of Capital
PART 5 Long-term Financing
14 Raising Capital
15 Debt Financing
PART 6 Capital Structure
16 Capital Structure
17 Payout Policy
PART 7 Financial Planning
18 Financial Modelling and Pro Forma Analysis
19 Working Capital Management
PART 8 Special Topics
20 Option Applications and Corporate Finance
21 Mergers and Acquisitions
22 International Corporate Finance
23 Insurance and Risk Management
The authors have carefully updated text discussions and figures, tables and facts to reflect key developments in the field and to provide the clearest presentation possible. Specific highlights include the following.
• Reorganised flow of topics in Chapters 3 and 4. Mastering the tools for discounting cash flows is central to students’ success in the introductory course. As always, mastery comes with practice and by approaching complex topics in manageable units.
• New two-pronged approach to share valuation. Immediately following bond valuation, Chapter 7 opens with key background coverage of share quotes and the mechanics of share trades and then presents the dividend-discount model. We delay the discussion of the discounted cash flow model until after we have covered capital budgeting. In Chapter 10, we introduce the discounted cash flow model by building on concepts already developed in the capital budgeting chapters.
• Expanded special topics section
. The mergers and acquisitions chapter looks at the overall market for takeovers, motivations for pursuing acquisitions, and the typical process.
Focus on relevant Australian and global companies-in-practice
Over 70 Australian and global companies are featured throughout the text via chapter-opening vignettes, Finance in Focus boxes, figures, tables and end-of-chapter problems.
Key examples include a discounted cash flow valuation of JB Hi-Fi, walk-though of the Facebook and Google IPOs, debt financing at Woolworths, and dozens more applied cases.
Australian institutional setting
Relevant sections re-written to reflect the unique Australian financial landscape, specifically in relation to ASX, ASIC, RBA, Accounting standards/terminology and AIFRS, corporate governance (CLERP 9) and the Australian bond market.
Original Australian content
The text takes an applied approach to debt finance in Australia, given the reality of a thin domestic bond market.
Addresses the issue of dividend imputation and its impact on valuation in an interesting and accessible way. The text takes students through the valuation of a company using FCF. The ability to value companies this way makes finance accessible and exciting to students. Provides a step-by-step approach to forecasting, the role of interpolation and includes Excel notation.
The sections dealing with working capital include case data drawn from Australian firms, thus incorporating a more realistic perspective on domestic trading environment.
A unique perspective on Sustainable Growth Rate (SGR) that deconstructs growth to identify value drivers, providing a valuable aid for teaching.
Valuation Principle Organizing Framework
The Valuation Principle provides students with a cohesive understanding of why they are learning the concepts and tools in their first finance course: to make decisions that increase firm value.
Chapter 3, The Valuation Principle: The Foundation of Financial Decision Making, introduces the framework and explains the need to value costs and benefits in order to make good financial decisions.
Valuation Principle Connection Part Openers explain how the topics in that part relate back to the Valuation Principle.
Study Aids with a Practical Focus
- Guided Problem Solutions (GPS) are examples that accompany every important concept using a consistent problem-solving methodology that breaks the solution process into three steps: Plan/Approach, Execute and Interpretation.
- Common Mistake boxes alert students to frequently made mistakes stemming from misunderstanding core concepts and calculations.
- Financial Calculator keystrokes within GPS boxes and instructional appendices instruct students to solve problems with this tool.
The book also incorporates Excel models in appendices to serve as a guide for students using this technology.
Simplified Presentation of Mathematics
Because one of the hardest parts of learning finance is mastering the math and non-standardised notation Fundamentals of Corporate Finance systematically uses:
Notation boxes. Each chapter begins with a Notation box that defines the symbols and abbreviations used in the chapter and serves as a ‘legend’ for students’ reference.
Numbered and labelled equations. The first time a full equation is given in notation form it is numbered. Key equations are titled and revisited in the MyFinanceLab feature at the end of the chapter.
Practice Finance to Learn Finance
Concept Check questions at the end of each section enable students to test their understanding and target areas in which they need further review.
End-of-chapter problems offer lecturers the opportunity to assign first-rate materials to students for homework and practice. Both problems and solutions, which were also written by the authors, have been accuracy-checked to ensure quality.
Jonathan Berk is the A.P. Giannini Professor of Finance at the Graduate School of Business, Stanford University, and is a Research Associate at the National Bureau of Economic Research. Prior to Stanford, he was the Sylvan Coleman Professor of Finance at the Haas School of Business at the University of California, Berkeley, where he taught the introductory Corporate Finance course. Before earning his PhD from Yale University, he worked as an associate at Goldman Sachs, where his education in finance really began. His research has won a number of awards including the TIAA-CREF Paul A. Samuelson Award, the Smith Breeden Prize, Best Paper of the Year in The Review of Financial Studies, and the FAME Research Prize. His paper ‘A Critique of SizeRelated Anomalies’ was selected as one of the two best papers ever published in The Review of Financial Studies. In recognition of his influence on the practice of finance, he has received the Bernstein-Fabozzi/Jacobs Levy Award, the Graham and Dodd Award of Excellence, and the Roger F. Murray Prize. He served as an Associate Editor of the Journal of Finance for eight years and is currently an Advisory Editor at the journal.
Peter DeMarzo is the Mizuho Financial Group Professor of Finance and Senior Associate Dean for Academic Affairs at Stanford Graduate School of Business. He is also a Research Associate at the National Bureau of Economic Research. He currently teaches MBA and PhD courses in Corporate Finance and Financial Modeling. Prior to Stanford, he taught at the Haas School of Business and the Kellogg Graduate School of Management, and he was a National Fellow at the Hoover Institution. Professor DeMarzo received the Sloan Teaching Excellence Award at Stanford in 2004 and 2006 and the Earl F. Cheit Outstanding Teaching Award at the University of California, Berkeley, in 1998. Professor DeMarzo has served as an Associate Editor for The Review of Financial Studies, Financial Management, and the B.E. Journals in Economic Analysis and Policy, as well as a Director of the American Finance Association. He is currently President of the Western Finance Association. Professor DeMarzo has received numerous awards for his research including the Western Finance Association Corporate Finance Award and the Barclays Global Investors/Michael Brennan Best Paper Award from The Review of Financial Studies.
Jarrad Harford is the Marion B. Ingersoll Professor of Finance at the University of Washington. Prior to Washington, Professor Harford taught at the Lundquist College of Business at the University of Oregon. He received his PhD in Finance with a minor in Organisations and Markets from the University of Rochester. Professor Harford has taught the core undergraduate finance course, Business Finance, for over thirteen years, as well as an elective in Mergers and Acquisitions, and ‘Finance for Non-financial Executives’ in the executive education program. He has won numerous awards for his teaching, including the UW Finance Professor of the Year (2010), Interfraternity Council Excellence in Teaching Award (2007 and 2008), ISMBA Excellence in Teaching Award (2006), and the Wells Fargo Faculty Award for Undergraduate Teaching (2005). He is also the Faculty Director of the UW Business School Undergraduate Honors Program. Professor Harford serves as an Associate Editor for The Journal of Financial Economics, Journal of Financial and Quantitative Analysis, and Journal of Corporate Finance.
Guy Ford is an Associate Professor of Finance and Deputy Dean at the Macquarie Graduate school of Management. Guy is formerly of the Treasury Management Division of the Commonwealth Bank of Australia, where he worked primarily in the area of balance sheet risk management. He teaches in the areas of corporate finance, corporate acquisitions and strategic finance. He also delivers a number of custom executive education programs in the area of strategic financial management. He is the author of a number of books and has published his research across local and international journals.
Vito Mollica is Lecturer and Director of Higher Degree Research at the Macquarie Graduate School of Management. He received his PhD in economics from The University of Sydney and was awarded a Marie Curie Fellowship from Aarhus University. Before joining academia, Dr Mollica was a foundation team member of a property funds management group specialising in residential real estate investment and research. Currently Dr Mollica teaches financial management to MBA students and his research interests are in the areas of market microstructure, anomalies in empirical capital markets and real estate.
Nigel Finch is a Senior Lecturer in Accounting at The University of Sydney, having recently left MGSM where he taught accounting and finance and was a previous head of the accounting discipline. Prior to taking up his position with MGSM in 2005, Nigel gained 15 years industry experience as a CFO and fund manager. He is a qualified accountant and consultant to Australian M&A firm. With over 100 publications in journals, book chapters & international conferences, he is an expert in asset impairment under IFRS accounting framework especially, intangible assets, mining assets and goodwill. Nigel is Co-Editor of Journal of Applied Research in Accounting and Finance (JARAF).
Login as educator/teacher to access restricted resources