We have great pleasure in presenting First edition “Corporate Finance” written for students of UG courses. The related matters are written in a simple and easily understandable.
This volume is an attempt to pro vide the students with thorough understanding of Corporate Finance. We have presented the subject matter in a systematic manner with liberal use of charts and diagrams where ever necessary so as to make it interesting and sustain students’ interest.
Contents –
Module – 1 Introduction
Introduction
Financial Management
Meaning of Financial Management
Scope of Financial Management
Objectives of Financial Management
Role of Finance Managers
Functions of Finance Managers
Interface of Financial Management with other Functional Areas
Agency Problem
Mathematics of Finance:
Time Value of Money
Future Value of Single Cash Flow & Annuity
Present Value of Single Cash Flow
Annuity
Perpetuity
Growing Perpetuity
Simple Interest
Compound Interest
Capital Recovery Factor
Loan Amortization Schedule (Theory & Problem)
Logarithms
Cost of Capital:
Sources of Financing Long Term Finance
Cost of Capital:
Basic Concepts
Components and Computation of Cost of Capital
Cost of Debentures
Cost of Term Loans
Cost of Preferential Capital
Cost of Equity (Dividend discounting and CAPM Model)
Cost of Retained Earnings
Determination of Weighted Average Cost of Capital
(WACC) (Theory & Problem).
Review Questions
Module – 2 Financing and Dividend Decisions
Introduction
Capital Structure Decisions
Leverages
Operating
Financial and Combined Leverage
Point of Indifference
Optimal Capital Structure
Determination of the Optimal Capital Structure
EBIT
EPS Approach
Concept
Problems
Capital Structure Theories
Net Income Approach
Net Operating Income Approach
The Traditional Approach
Modigliani & Miller Approach
Static Theory
Signalling Theory
Trade-Off-Theory
Pecking Order Theory
Dividend Decisions:
Meaning of Dividend Decisions
Definition of Dividend Decisions
Forms of Dividend
Types of Dividend Policy
Significance of Dividend
Impact of Dividend Policy on Company
Factors affecting Dividend Policy
Dividend Decision Theories
Walter’s Model
Gordon’s Model
MM Theory
Assumptions
Formula
Criticisms
Problems
Review Questions
Module – 3 Long Term Investment Decisions
Introduction
Investment Decisions
Meaning of Investment Decisions
Need for Investment Decisions
Factors
Efficient Investment Analysis
Types of Investment Decisions
Introduction to Capital Budgeting Decisions
Meaning of Capital Budgeting Decisions
Features of Capital Budgeting Decisions
Process of Capital Budgeting Decisions
Factors of Capital Budgeting Decisions
Capital Budgeting Techniques
Traditional and Modern Techniques
PBP
ARR
NPV
PI
IRR
Incremental IRR
Modified Internal Rate of Return (MIRR)
Concept
Evaluation Criteria & Problems
Project Selection under Capital Rationing
Problems on Divisible & Indivisible Projects
Capital Budgeting under Inflationary Conditions
Utility Theory
Capital Budgeting
Lease Financing
Asset Replacement Decisions
Abandonment Decisions
Review Questions
Module – 4 Risk Analysis in Capital Budgeting
Introduction
Risk Analysis in Capital Budgeting
Meaning of Capital Budgeting
Risk and Uncertainty
Sources of Risk
Perspectives of Risk
Measurement of Risk
Sensitivity Analysis
Scenario Analysis
Simulation
Standard Deviation
Co-efficient of Variation
Techniques for Risk Analysis (Risk Management)
Risk Adjusted Discount Rate
Certainty Equivalent Method
Normal Distribution Method (Hiller Model)
Decision Tree Analysis
Sequential Investment Decisions
Review Questions
Module – 5 Working Capital Decisions
Introduction
Working Capital
Meaning of Working Capital
Definition of Working Capital
Types of Working Capital
Determinants of Working Capital
Approaches to Working Capital Management
Sources of Short-term Capital
Estimation of Working Capital Requirements
Concept &
Problems
Managing Components of Working Capital Management
Management on Inventory
Management of Receivables
Cash Management
Review Questions