Corporate Finance: The Core, Global Edition Pearson eText, 4th Edition

Jonathan Berk all

Corporate Finance: The Core, Global Edition Pearson eText, 4th Edition

By Jonathan Berk, Peter DeMarzo
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Jonathan Berk all
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For MBA/graduate students taking a course in corporate finance.

An Emphasis on Core Financial Principles to Elevate Individuals’ Financial Decision Making

Berk and DeMarzo's Corporate Finance uses a unifying valuation framework, the Law Of One Price, to present the core content instructors expect, the new ideas they want, and the pedagogy their students need to succeed. 

Corporate Finance: The Core fits programs and individual professors who desire a streamlined book that is specifically tailored to the topics covered in the first one-semester course. For programs and professors who would like to use a text in a two semester, or more, sequence, please see Corporate Finance, the 31-chapter book also by Jonathan Berk and Peter DeMarzo.

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Methodology that Connects Theory to Practice

  • The Law of One Price: A Unifying Principle of Valuation. The Law of One Price is used as a framework, reflecting the modern idea that the absence of arbitrage is the unifying concept in valuation. This theme is explicitly introduced in Chapter 3, revisited in each Part Opener, and integrated throughout the text--motivating all major concepts. This methodology directly connects theory to practice, and unifies what might appear to students as disparate topics that comprise the course syllabus (corporate finance, investments, and valuation).
  • Options for Teaching Risk and Return. Chapter 3 briefly introduces the concept of risk and return. Using the no-arbitrage concept, the reasoning behind evaluating risk relative to a benchmark is explained conceptually and allows for use of the concept of risk and return in early chapters. Later, the structure of Part IV is flexible and allows instructors to opt for brief or comprehensive coverage of the topic.
  • Emphasis of Capital Budgeting and Valuation. Capital budgeting and valuation is presented in two distinct stages. The first, which appears in Chapter 8, focuses on cash flows, while the second stage focuses on capital budgeting and valuation in the real world in Chapter 18 and the capstone Chapter 19.


Learning Aids that Teach Students to ‘Think Finance’

  • A Simplified Presentation of Mathematics. One of the hardest parts of learning finance is mastering the jargon, math, and non-standardised notation. Corporate Finance: The Core systematically uses:
    • Notation Boxes: Each chapter opens by defining the variables and acronyms used in the chapter as a 'legend' for students' reference.
    • Timelines: Introduced in Chapter 4, timelines are emphasised as the important first step in solving every problem that involves cash flows.
    • Numbered and Labeled Equations: The first time a full equation is given in notation form it is numbered. Key equations are titled and revisited in the summary and in end papers.
    • Using Excel boxes: Provide hands-on instruction of Excel techniques and include screenshots to serve as a guide for students.
    • Practice Finance to Learn Finance: Working problems are the proven way to cement and demonstrate an understanding of 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 written personally by Jonathan Berk and Peter DeMarzo offer instructors the opportunity to assign first-rate materials to students for homework and practice with the confidence that the problems are consistent with chapter content. Both the problems and solutions, which were also written by the authors, have been class-tested and accuracy checked to ensure quality.
      • Data Cases present in-depth scenarios in a business setting with questions designed to guide students' analysis. Many questions involve the use of Internet resources and Excel techniques.
    • Study Aids with a Practical Focus. To be successful, students need to master the core concepts and learn to identify and solve problems that today's practitioners face.
      • Common Mistakes boxes alert students to frequently made mistakes stemming from misunderstanding core concepts and calculations—in the classroom and in the field.

 Coverage of The Latest Developments in the Field

  • Modern Research. Berk and DeMarzo introduce recent advances in finance research throughout the book. For example, Chapter 16 is a full-chapter treatment of the effects of financial distress, agency issues, and asymmetric information on the firm's choice of capital structure.
  • Modern Practice. Throughout Corporate Finance the authors connect finance concepts to practice. Chapter 18 shows the relationship between the WACC, APV, and Flow-to-Equity methodologies, and stresses the role of the firm's leverage policy. Then, a unique capstone to capital budgeting, Chapter 19 illustrates the application and real-world implementation of valuation techniques.
  • UPDATED! Focus on the 2007—2009 Financial Crisis and Sovereign Debt Crisis. Twenty-two Global Financial Crisis boxes reflect the reality of the recent financial crisis and ongoing sovereign debt crisis, noting lessons learned. Boxes across the book illustrate and analyse key details.
  • Applications that Reflect Real Practice. Corporate Finance features actual companies and leaders in the field:
    • NEW! Six interviews with notable practitioners highlight leaders in the field and address the effects of the financial crisis and ongoing European sovereign debt crisis.
    • General Interest boxes highlight timely material from financial publications that shed light on business problems and real-company practices.
  • NEW! Nobel Prize boxes reflect recent Nobel prizes awarded for material covered in the book.
Table of contents
  • 1. The Corporation
  • 2. Introduction to Financial Statement Analysis
  • 3. Financial Decision Making and the Law of One Price
  • 4. The Time Value of Money
  • 5. Interest Rates
  • 6. Valuing Bonds
  • 7. Investment Decision Rules
  • 8. Fundamentals of Capital Budgeting
  • 9. Valuing Stocks
  • 10. Capital Markets and the Pricing of Risk
  • 11. Optimal Portfolio Choice and the Capital Asset Pricing Model
  • 12. Estimating the Cost of Capital
  • 13. Investor Behavior and Capital Market Efficiency
  • 14. Capital Structure in a Perfect Market
  • 15. Debt and Taxes
  • 16. Financial Distress, Managerial Incentives, and Information
  • 17. Payout Policy
  • 18. Capital Budgeting and Valuation with Leverage
  • 19. Valuation and Financial Modeling: A Case Study