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Intermediate Financial Management

By Eugene F. Brigham, Phillip R. Daves

12th Edition © 2016
Discipline:Finance
Course:Corporate Finance
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The only textbook written specifically for Intermediate or Advanced Corporate Finance courses, Brigham/Daves' INTERMEDIATE FINANCIAL MANAGEMENT, 12E equips students with a solid understanding of both conceptual theories and practical financial skills. Offering a clear presentation, this comprehensive text from renowned author team Gene Brigham and Phillip Daves reinforces coverage from earlier corporate finance courses while providing new, progressive material to challenge and advance learners. The authors use corporate valuation as a unifying theme to emphasize the theoretic groundwork for value maximization and the practical skills to analyze business decisions. The book's reader-friendly approach incorporates actual business examples and integrated cases as well as Excel® spreadsheet models to demonstrate how financial theory in practice leads to solid financial decisions.

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About this product

The only textbook written specifically for Intermediate or Advanced Corporate Finance courses, Brigham/Daves' INTERMEDIATE FINANCIAL MANAGEMENT, 12E equips students with a solid understanding of both conceptual theories and practical financial skills. Offering a clear presentation, this comprehensive text from renowned author team Gene Brigham and Phillip Daves reinforces coverage from earlier corporate finance courses while providing new, progressive material to challenge and advance learners. The authors use corporate valuation as a unifying theme to emphasize the theoretic groundwork for value maximization and the practical skills to analyze business decisions. The book's reader-friendly approach incorporates actual business examples and integrated cases as well as Excel® spreadsheet models to demonstrate how financial theory in practice leads to solid financial decisions.

UNIQUE BALANCE OF THEORY AND PRACTICE DIFFERENTIATES BOOK'S APPROACH. Using its signature clear, focused presentation, the text provides an in-depth introduction to core financial theories as well as emerging financial management issues. This comprehensive coverage provides the background material necessary for student success without sacrificing the rigor you need to equip advanced students.

RELIABLE PRESENTATION PROVIDES TRUSTED ACCURACY. The author team's meticulous attention to detail and time-tested content deliver a complete text and powerful package of author-driven supplements that you can trust with confidence in your intermediate or advanced course.

PROVEN LEARNING FEATURES HIGHLIGHT PRACTICAL APPLICATIONS. Students see how today's financial theories and trends are applied through the text's wealth of engaging learning features, including real-world examples, practical problem sets, and integrated Mini-Cases.

Table of contents

Chapters

Cover Page
Title Page
Copyright Page
Preface
Acknowledgments
Part I. Fundamental Concepts of Corporate Finance
Part II. Corporate Valuation
Part III. Project Valuation
Part IV. Strategic Financing Decisions
Part V. Tactical Financing Decisions
Part VI. Working Capital Management
Part VII. Special Topics
Part VIII. Web Chapters
Part IX. Web Extensions
Appendix A. Values of the Areas under the Standard Normal Distribution Function
Appendix C. Selected Equations
Additional Glossary Terms
Show more

Part I. Fundamental Concepts of Corporate Finance

Chapter 1. An Overview of Financial Management and the Financial Environment
Preview this section ↗
1-1. How to Use this Text ↗
1-2. The Corporate Life Cycle ↗
1-2a. Starting up as a Proprietorship ↗
1-2b. More than One Owner: A Partnership ↗
1-2c. Many Owners: A Corporation ↗
1-2d. Growing and Managing a Corporation ↗
1-3. The Primary Objective of the Corporation: Value Maximization ↗
1-3a. Intrinsic Stock Value Maximization and Social Welfare ↗
1-3b. Managerial Actions to Maximize Shareholder Wealth ↗
1-4. An Overview of the Capital Allocation Process ↗
1-5. Financial Securities ↗
1-5a. Type of Claim: Debt, Equity, or Derivatives ↗
1-5b. The Process of Securitization ↗
1-6. The Cost of Money ↗
1-6a. Fundamental Factors that Affect the Cost of Money ↗
1-6b. Economic Conditions and Policies that Affect the Cost of Money ↗
1-7. The Global Economic Crisis ↗
1-7a. The Globalization of Mortgage Market Securitization ↗
1-7b. The Dark Side of Securitization: The Sub-Prime Mortgage Meltdown ↗
1-7c. From Sub-Prime Meltdown to Liquidity Crisis to Economic Crisis ↗
1-7d. Responding to the Economic Crisis ↗
1-7e. Preventing the next Crisis ↗
1-8. The Big Picture ↗
1-9. e-Resources ↗
Summary ↗
Questions ↗
Mini Case ↗
Chapter 2. Risk and Return: Part I
2-1. Investment Returns and Risk
2-1a. Returns on Investments
2-1b. Stand-Alone Risk versus Portfolio Risk
2-2. Measuring Risk for Discrete Distributions
2-2a. Probability Distributions for Discrete Outcomes
2-2b. Expected Rate of Return for Discrete Distributions
2-2c. Measuring Stand-Alone Risk: The Standard Deviation of a Discrete Distribution
2-3. Risk in a Continuous Distribution
2-4. Using Historical Data to Estimate Risk
2-4a. Calculating the Historical Standard Deviation
2-4b. Calculating MicroDrive’s Historical Standard Deviation
2-5. Risk in a Portfolio Context
2-5a. Creating a Portfolio
2-5b. Correlation and Risk for a Two-Stock Portfolio
2-5c. Diversification and Multi-Stock Portfolios
2-6. The Relevant Risk of a Stock: The Capital Asset Pricing Model (CAPM)
2-6a. Contribution to Market Risk: Beta
2-6b. Estimating Beta
2-6c. Interpreting the Estimated Beta
2-7. The Relationship between Risk and Return in the Capital Asset Pricing Model
2-7a. The Security Market Line (SML)
2-7b. The Impact on Required Return Due to Changes in the Risk-Free Rate, Risk Aversion, and Beta
2-7c. Portfolio Returns and Portfolio Performance Evaluation
2-7d. Required Returns versus Expected Returns: Market Equilibrium
2-8. The Efficient Markets Hypothesis
2-8a. Forms of the Efficient Markets Hypothesis
2-8b. Is the Stock Market Efficient? The Empirical Evidence
2-9. The Fama-French Three-Factor Model
2-10. Behavioral Finance
2-10a. Market Bubbles and Behavioral Finance
2-10b. Other Applications of Behavioral Finance
2-11. The CAPM and Market Efficiency: Implications for Corporate Managers and Investors
Summary
Questions
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases
Chapter 3. Risk and Return: Part II
3-1. Efficient Portfolios
3-1a. The Two-Asset Case
3-1b. The N-Asset Case
3-2. Choosing the Optimal Portfolio
3-2a. The Efficient Frontier
3-2b. Risk–Return Indifference Curves
3-2c. The Optimal Portfolio for an Investor
3-3. The Basic Assumptions of the Capital Asset Pricing Model
3-4. The Capital Market Line and the Security Market Line
3-5. Calculating Beta Coefficients
3-5a. Calculating the Beta Coefficient for a Single Stock: General Electric
3-5b. The Market Model versus the CAPM
3-5c. Calculating the Beta Coefficient for a Portfolio: The Magellan Fund
3-5d. Performance Measures
3-5e. Additional Insights into Risk and Return
3-5f. Advanced Issues in Calculating Beta
3-6. Empirical Tests of the CAPM
3-6a. Tests of the Stability of Beta Coefficients
3-6b. Tests of the CAPM Based on the Slope of the SML
3-6c. Current Status of the CAPM
3-7. Arbitrage Pricing Theory
Summary
Questions
Problems
Spreadsheet Problem
Mini Case
Selected Additional Case
Chapter 4. Bond Valuation
4-1. Who Issues Bonds?
4-2. Key Characteristics of Bonds
4-2a. Par Value
4-2b. Coupon Interest Rate
4-2c. Maturity Date
4-2d. Provisions to Call or Redeem Bonds
4-2e. Sinking Funds
4-2f. Other Provisions and Features
4-2g. Bond Markets
4-3. Bond Valuation
4-3a. Time Line, Cash Flows, and Valuation Formulas for a Bond
4-3b. Solving for the Bond Price
4-3c. Interest Rate Changes and Bond Prices
4-4. Changes in Bond Values over Time
4-5. Bonds with Semiannual Coupons
4-6. Bond Yields
4-6a. Yield to Maturity
4-6b. Yield to Call
4-6c. Current Yield
4-6d. The Cost of Debt and Intrinsic Value
4-7. The Pre-Tax Cost of Debt: Determinants of Market Interest Rates
4-8. The Real Risk-Free Rate of Interest, r∗
4-9. The Inflation Premium (IP)
4-10. The Nominal, or Quoted, Risk-Free Rate of Interest, rRF
4-11. The Default Risk Premium (DRP)
4-11a. Bond Contract Provisions that Influence Default Risk
4-11b. Bond Ratings
4-11c. Bond Rating Criteria, Upgrades, and Downgrades
4-11d. Bond Ratings and the Default Risk Premium
4-12. The Liquidity Premium (LP)
4-13. The Maturity Risk Premium (MRP)
4-13a. Interest Rate Risk
4-13b. Reinvestment Rate Risk
4-13c. Comparing Interest Rate Risk and Reinvestment Rate Risk: The Maturity Risk Premium
4-14. The Term Structure of Interest Rates
4-15. Financing with Junk Bonds
4-16. Bankruptcy and Reorganization
Summary
Questions
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases
Chapter 5. Financial Options
5-1. Overview of Financial Options
5-2. The Single-Period Binomial Option Pricing Approach
5-2a. Payoffs in a Single-Period Binomial Model
5-2b. The Hedge Portfolio Approach
5-2c. Hedge Portfolios and Replicating Portfolios
5-3. The Single-Period Binomial Option Pricing Formula
5-3a. The Binomial Option Pricing Formula
5-3b. Primitive Securities and the Binomial Option Pricing Formula
5-4. The Multi-Period Binomial Option Pricing Model
5-5. The Black-Scholes Option Pricing Model (OPM)
5-5a. OPM Assumptions and Results
5-5b. Application of the Black-Scholes Option Pricing Model to a Call Option
5-5c. The Five Factors that Affect Call Option Prices
5-6. The Valuation of Put Options
5-6a. Put–Call Parity
5-6b. The Five Factors that Affect Put Option Prices
5-7. Applications of Option Pricing in Corporate Finance
5-7a. Real Options
5-7b. Risk Management
5-7c. Capital Structure Decisions
5-7d. Compensation Plans
Summary
Questions
Problems
Spreadsheet Problem
Mini Case
Chapter 6. Accounting for Financial Management
6-1. Financial Statements and Reports
6-2. The Balance Sheet
6-2a. Assets
6-2b. Liabilities and Equity
6-3. The Income Statement
6-4. Statement of Stockholders’ Equity
6-5. Statement of Cash Flows
6-5a. Operating Activities
6-5b. Investing Activities
6-5c. Financing Activities
6-5d. Putting the Pieces Together
6-6. Net Cash Flow
6-7. Free Cash Flow: The Cash Flow Available for Distribution to Investors
6-7a. Net Operating Profit after Taxes (NOPAT)
6-7b. Net Operating Working Capital
6-7c. Total Net Operating Capital
6-7d. Net Investment in Operating Capital
6-7e. Calculating Free Cash Flow
6-7f. The Uses of FCF
6-7g. FCF and Corporate Value
6-8. Performance Evaluation
6-8a. The Return on Invested Capital
6-8b. Market Value Added (MVA)
6-8c. Economic Value Added (EVA)
6-8d. Intrinsic Value, MVA, and EVA
6-9. The Federal Income Tax System
6-9a. Corporate Income Taxes
6-9b. Taxation of Small Businesses: S Corporations
6-9c. Personal Taxes
Summary
Questions
Problems
Spreadsheet Problems
Mini Case
Chapter 7. Analysis of Financial Statements
7-1. Financial Analysis
7-1a. Gather Data
7-1b. Examine the Statement of Cash Flows
7-1c. Calculate and Examine the Return on Invested Capital and Free Cash Flow
7-1d. Begin Ratio Analysis
7-2. Liquidity Ratios
7-2a. The Current Ratio
7-2b. The Quick, or Acid Test, Ratio
7-3. Asset Management Ratios
7-3a. Evaluating Total Assets: The Total Assets Turnover Ratio
7-3b. Evaluating Fixed Assets: The Fixed Assets Turnover Ratio
7-3c. Evaluating Receivables: The Days Sales Outstanding
7-3d. Evaluating Inventories: The Inventory Turnover Ratio
7-4. Debt Management Ratios
7-4a. How the Firm Is Financed: Leverage Ratios
7-4b. Ability to Pay Interest: Times-Interest-Earned Ratio
7-4c. Ability to Service Debt: EBITDA Coverage Ratio
7-5. Profitability Ratios
7-5a. Net Profit Margin
7-5b. Basic Earning Power (BEP) Ratio
7-5c. Return on Total Assets
7-5d. Return on Common Equity
7-6. Market Value Ratios
7-6a. Price/Earnings Ratio
7-6b. Price/Cash Flow Ratio
7-6c. Market/Book Ratio
7-7. Trend Analysis, Common Size Analysis, and Percentage Change Analysis
7-8. Tying the Ratios Together: The DuPont Equation
7-9. Comparative Ratios and Benchmarking
7-10. Uses and Limitations of Ratio Analysis
7-11. Looking beyond the Numbers
Summary
Questions
Problems
Spreadsheet Problem
Mini Case
Selected Additional Cases

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