Company Index

A Accel Partners, 472 Accenture, 122 Acme United, 274, 275 Adams Resource & Energy, 274, 275 AdCare Health Systems, 274, 275 Adeona Pharmaceuticals, 274, 275 Advanced Micro Devices (AMD), 215217 Advanced Photonix, 274, 275 AdvanSource Biomaterials, 274, 275 Advantage Medical Services, Inc., 503 ADVENTRX Pharmaceuticals, 274, 275 Aerocentury, 274, 275 Aerosonic, 274, 275 AIG Corporation, 669, 670 AirTran Airways, 341 Alexco Resource, 274, 275 Allied Nevada Gold, 274, 275 Almaden Minerals, 274, 275 Amazon.com, 690 AMD (Advanced Micro Devices), 215217 Ameriquest Mortgage Company, 269 Anheuser-Busch InBev, 1 Apple, Inc., 28, 48, 213, 287, 350, 351, 472, 504 Archers Daniels Midland Company, 374 Arthur Andersen LLP, 122123 AT&T, 271, 328 Aura Mira Energy Company Private Limited, 569, 570 AXA Group, 674 B Banco Santander S.A., 692 Bank of America Corporation, 26, 28, 193, 414, 419, 674, 692, 698700 Bank of India, 698 Barclays, 692, 698 Berkshire Hathaway, Inc., 562 Best Buy, 455 Biogenesis Inc., 192 Blackstone Group, 1 Blockbuster Inc., 200 BMW, 50, 142143, 304, 609, 690, 697 BNP Paribas, 692 Boeing Company, 5, 54, 83, 411, 434, 656, 699 Boston Chicken, Inc., 625, 631 Boston Market Corporation, 625 Bplans, 579 BP p.l.c. (British Petroleum), 280, 673, 674

Bradley Corporation, 298 BrightStar Corporation, 501 Bristol Myers, 299 British Petroleum, see BP p.l.c. Burger King, 625 Busch Entertainment Corporation, 1, 493n.6 C Cadbury PLC, 159, 160 Callan Associates, 202 Cargill Company, 492 Carlson Companies, 492 Caterpillar, Inc., 405, 699 CCH Incorporated, 308, 392, 570, 571 Chevron Corporation, 328, 674 China National Petroleum, 674 Chipotle Mexican Grill, 478 Chrysler LLC, 601 Cisco Systems, Inc., 117, 328, 504 Citibank, 694, 698, 699 Citigroup, 28, 669, 692 Colnago, 177179 Colonial Realty, 122 Compaq, 673 ConocoPhillips Company, 422 Conseco, Inc., 117 Credit Agricole, 692 CSX Corporation, 548 D Dairy Queen, 29 Daiwa Bank, 698, 700 Datsun, 203 Dean Foods Company, 498 Dell, Inc., 202205, 236, 304, 344, 345, 441443, 446448, 456, 504, 656, 673 Deloitte Touche, 122 Delta Air Lines, Inc., 93 Deutsche Bank, 642, 692, 699, 700 Dominos IP Holder LLC, 422, 423 The Dow Chemical Company, 502, 503 Dun & Bradstreet, 106 Dunkin Donuts, 606 DuPont Company, 101 E Edison Electric Company, 671 eFunda, 185 Enron Corporation, 16, 1820, 48, 122, 123

Ernst & Young, 122 Exxon Mobil Corporation, 218, 673, 674 F Facebook Incorporated, 472, 473 FedEx, 411, 543 Fidelity Investment Company, 256 Fitch, Inc., 256257 FITCO, 376 Ford Motor Company, 8384, 107, 319322, 327, 328, 373, 601, 609, 610, 619, 645, 690, 698 Ford Motor Credit Company, 453 FPL Group, Inc., 415, 416, 555 G GE Capital Corporation, 26, 462 General Electric Company (GE), 225227, 229, 671672, 674, 697 General Motors Company, 84, 124, 518 Global Crossing, 16, 18 Global Partners, 500 The Goldman Sachs Group, Inc., 28, 670 Goodwill Industries International, Inc., 375 The Goodyear Tire & Rubber Company, 669 Google Inc., 20, 31, 211, 287, 500, 504 H Harrods Ltd., 697 Hartford Life, 502 Hatteras Hammocks, 160 Hershey Company, 159 Hewlett-Packard Company (HP), 30, 127, 137, 455, 596, 691 Honda Motor Company, 193 Hoovers, Inc., 611 HP, see Hewlett-Packard H&R Block, 90, 93, 95 HSBC Group Holdings, 692, 694 Hyundai Motor, 375 I IBM, 5, 152, 643, 644, 648, 649, 699 ImClone Systems, Inc., 299 Industrial and Commercial Bank of China, 692 Infosys Technologies Limited, 157 ING Group, 674, 692 Intel Corporation, 215217, 301, 329, 504 International Finance Corporation, 569

746

Company Index
Nike, Inc., 226, 227 Nissan Motor Company, 203, 375 Nordstrom, Inc., 106 Northern Manufacturing Company, 467 Northwest Airlines, 291 O Oakley, Inc., 498 Oracle, 504 P Pfizer Inc., 538 Piper Aircraft, Inc., 83 Pitney Bowes, Inc., 502 PlanWare, 579 Polo Ralph Lauren Corporation, 102, 103 Praxair, Inc., 545, 547 PricewaterhouseCoopers International Limited (PwC), 5, 122, 429 Procter & Gamble, 6, 117, 218, 285286, 502 Public Service of New Mexico, 502 PwC, see PricewaterhouseCoopers Q Qualcomm, 504 R Regatta Inc., 263 Ronco Corporation, 607 The Royal Bank of Scotland International Limited, 692 Royal Dutch Shell plc, 673, 674, 697 Ryder System, Inc., 540 S San Diego Gas and Electric Company (SDG&E), 291 Sealed Air Corporation, 547, 554 Sharp Electronics Corporation, 127, 137 Shearson Lehman Hutton Inc., 255 Siemens International, 694 Sinopec Group, 674 SmartMoney, 143, 258 Southwest Airlines, Inc., 121, 219223, 341 Spear, Leeds, and Kellogg Specialists LLC, 670 Standard & Poors, 106, 238, 256257 Starbucks Corporation, 606607 State Bank of India, 698 State Farm Mutual Automobile Insurance Company, 26 State Grid, 674 Stride Rite Corporation, 498 Sumitomo Corporation, 675 Sunbeam Corporation, 122 T Target Corporation, 81, 415 Texas Instruments, Inc., 127, 137, 434 3M Corporation, 36, 37 Tiffany & Company, 102, 103 Total S.A., 674 Toyota Motor Company, 84, 107, 456, 673, 674, 700 Treeplan, 398 TXU Corporation, 493 Tyco International, Ltd., 16, 18 U U-Haul, 540 Unilever PLC, 378379 United Airlines Inc., 619 United Parcel Service (UPS), 411, 543 Universal Pictures, 5 V Volkswagen AG, 696 W Wal-Mart Stores, Inc., 81, 90, 93, 102, 103, 106, 117, 502, 550, 551, 673, 674 Walt Disney Company, 409, 410 Waste Management, Inc., 122 Wells Fargo & Company, 427 Weyerhaeuser Company, 67 Whole Foods Markets, Inc., 102, 103 Winn-Dixie Stores, Inc., 502 WorldCom, 16, 1820, 48, 518 Y Yahoo!, Inc., 52, 240, 270, 423, 424

apan Post Holdings, 674 PMorgan Chase & Co., 28, 419, 692, 698

K Kellogg Company, 328 Kia Motors, 699 Kingston, Inc., 334 Kirby Manufacturing, 463 Kmart, 51 Knight, Inc., 263 KPMG International, 122 Kraft Foods, 159, 160 Krispy Kreme Doughnuts, 485

aurel Electronics, Inc., 117 loyds Banking Group, 692

M Magna International, 561 Marriott Corporation, Inc., 524 Mason Corporation, 298 MaxLinear Inc. (MXL), 380, 381 MBNA Corporation, 199 McDonalds Corporation, 478, 606, 625 Merrill Lynch & Co., Inc., 26 Microsoft Corporation, 31, 127, 138, 334, 472, 504 Mitsubishi, 675 Mitsubishi UFJ Financial Group, 692 Mitsui Group, 675 Mizuho Financial Group, 692 Moneychimp, 134 Moodys Investors Service, 256257 Morgan Construction Company, 638, 639 Morgan Stanley, 28, 37 MXL (MaxLinear Inc.), 380, 381

N Nalco Holding Company, 500 Nestl, 159, 502 Netflix, 200, 219223, 287 Newell Corporation, 636 New York Life Insurance Company, 168

Throughout the book important finance principles and concepts are identified and emphasized in Building Intuition boxes. These boxes restate an important finance concept that has been discussed in the main text, such as the importance of cash flows, and provide an intuitive example or explanation of the concept. The Building Intuition boxes and the pages on which they appear are as follows:

BUILDING INTUITION

PAGE

Cash Flows Matter Most to Investors Sound Investments are Those Where the Value of the Benefits Exceeds Their Cost Financing Decisions Affect the Value of the Firm The Timing of Cash Flows Affects Their Value The Riskiness of Cash Flows Affects Their Value The Financial Managers Goal Is to Maximize the Value of the Firms Stock The Value of Money Changes with Time Compounding Drives Much of the Earnings on Long-Term Investments More Risk Means a Higher Expected Return Diversified Portfolios are Less Risky Systematic Risk Is the Risk That Matters Investment Decisions Have Opportunity Costs Capital Budgeting Is Forward Looking Incremental After-Tax Free Cash Flows Are What Stockholders Care About in Capital Budgeting We Discount Expected Cash Flows in an NPV Analysis High Fixed Costs Mean Larger Fluctuations in Cash Flows and Profits

4 5 5 11 12 12 126 134 202 223 224 305 342 344 362 385

PAGE

Revenue Changes Drive Profit Volatility Through Operating Leverage The Market Value of a Firms Assets Equals the Market Value of the Claims on Those Assets A Firms Cost of Capital Is a Weighted Average of All of Its Financing Costs The Current Cost of Long-Term Debt Is What Matters When Calculating WACC Investors View Seasoned Securities as Less Risky Than Unseasoned Securities The Optimal Capital Structure Minimizes the Cost of Financing a Firms Activities Capital Structure Choices Do Not Affect Firm Value If They Do Not Affect the Value of the Free Cash Flows to Investors The Cost of Equity Increases With Financial Leverage People Behave Differently toward a Firm in Financial Distress, and This Increases Bankruptcy Costs Leasing Is an Alternative Means of Financing the Acquisition of an Asset Splitting the Rights to an Asset Between the Lessee and Lessor Can Create Costly Conflicts Dividends Reduce the Stockholders Investment in a Firm Dividend Announcements Send Signals to Investors The Value of a Business Is Specific to a Point in Time The Value of a Business Is Not the Same to All Investors A Firms Strategy Drives Its Business Decisions Payoff Functions for Options Are Not Linear The Basic Principles of Finance Apply No Matter Where You Do Business

390 412 414 416 481 506 506 510 522 535 539 546 549 580 581 609 646 676

Selected Abbreviations and Notation

b5 5 r5 s2 (s) 5 x5 Add WC 5 APR 5 ARR 5 b5 C5 Cap Exp 5 CF 5 CF Opns 5 CFI 5 CFLTA 5 CFNWC 5 CFOA 5 CIP 5 CO 5 COGS 5 CV 5 D5 D&A 5 DOL 5 DPO 5 DRP 5 DSI 5 DSO 5 E() 5 EAC 5 EAR 5 EAY 5 EBIT 5 EBITDA 5 EBT 5 EFN 5 EOQ 5 EROA 5 F5 FC 5 FCF 5 FCFE 5 FCFF 5 beta (a measure of systematic risk) change (e.g., DP 5 change in price level, DS 5 change in sales level) correlation variance (standard deviation) fractional weight of investment or component of capital addition to working capital annual percentage rate accounting rate of return dividend payout ratio coupon payment (bond), call option value capital expenditures cash flow cash flow from operations cash flow to investors cash flow invested in long-term assets cash flow invested in net working capital cash flow from operating activity call interest premium crossover level of unit sales cost of goods sold coefficient of variation dividend (stock) depreciation and amortization degree of operating leverage days payables outstanding default risk premium days sales in inventory days sales outstanding expected value (E(R) 5 expected return, etc.) equivalent annual cost effective annual rate (yield) earnings before interest and taxes earnings before interest, taxes, depreciation, and amortization earnings before taxes external funding needed economic order quantity EBIT return on assets face value (bond) fixed costs free cash flows free cash flow to equity free cash flow from the firm

FV 5 FVAn 5 FXR 5 g5 i5 IGR 5 IRR 5 k5 m5 MAT 5 MRP 5 MV 5 n5 NCF 5 NCFOA 5 NOPAT 5 NPV 5 NWC 5 OC 5 Op Ex 5 p5 P5 P/E ratio 5 PB 5 PI 5 PR 5 PV 5 PV annuity factor 5 PVAn 5 PVP 5 r5 R5 ROA 5 ROE 5 S5 SGR 5 t5 TV 5 V5 VC 5 WACC 5

future value future value of an annuity foreign exchange or currency risk premium growth rate nominal rate of interest internal growth rate internal rate of return cost of capital (debt or equity) number of payments per year maturity adjustment to cost of a loan marketability risk premium market value number of periods net cash flow net cash flow from operating activities net operating profits after tax net present value net working capital operating cycle cash operating expenses probability price (P0 5 price at time zero, etc.), put option value price/earnings ratio payback period profitability index prime rate present value present value of annuity factor present value of an annuity present value of a perpetuity real rate of interest return (Rrf 5 risk free, Ri, RPortfolio, etc.) return on assets return on equity Sharpe Ratio sustainable growth rate tax rate terminal value value (e.g.,VFirm 5 VAssets 5 VDebt 1 VEquity) variable costs weighted average cost of capital

Wiley Series in FINANCE

SURVEY OF FINANCE
Melicher, Introduction to Finance: Markets, Investments, and Financial Management 14e Grossman, The Portable MBA in Finance and Accounting 4e Fisher Investments, Fisher Investments on Energy Fisher Investments, Fisher Investments on Industrials Investments, Fisher Investments on Staples

MERGERS AND ACQUISITIONS

Gaughan, Mergers, Acquisitions, and Corporate Restructurings 5e Gilson, Creating Value through Corporate Restructuring 2e Cole, M&A Titans: The Pioneers Who Shaped Wall Streets Mergers and Acquisitions Industry Bruner, Deals from Hell: M&A Lessons that Rise Above the Ashes

CORPORATE FINANCE
Parrino, Fundamentals of Corporate Finance 2e Clayman, Corporate Finance: A Practical Approach

VALUATION
Arzac, Valuation: Mergers, Buyouts and Restructuring 2e Damodaran, Investment Valuation: Tools and Techniques for Determining the Value of Any Asset McKinsey, Valuation University Edition 5e McKinsey, Valuation Workbook Stowe, Equity Asset Valuation Stimes, Equity Valuation, Risk and Investment: A Practitioners Roadmap

VENTURE CAPITAL
Lerner, Venture Capital, Private Equity, and the Financing of Entrepreneurship 1e Lerner, Venture Capital and Private Equity: A Casebook 5e Metrick, Venture Capital and the Finance of Innovation 2e Cumming, Venture Capital: Investment Strategies, Structures, and Policies

PERSONAL FINANCE MANAGEMENT

Bajelsmit, Personal Finance: Planning and Implementing Your Financial Goals Bajelsmit, Personal Finance 1e with Student Financial Planner Package

FINANCIAL MARKETS AND INSTITUTIONS

Kidwell, Financial Institutions, Markets, and Money 11e Acharya, Restoring Financial Stability: How to Repair a Failed System Blackwell, Modern Financial Markets: Prices, Yields, and Risk Analysis

INTERNATIONAL FINANCE
Shapiro, Multinational Financial Management 9e Shapiro, Foundations of Multinational Financial Management 6e

ADVANCED APPLIED CORPORATE FINANCE

Damodaran, Applied Corporate Finance 3e

FINANCIAL THEORY FIXED INCOME SECURITIES

Veronesi, Fixed Income Securities: Valuation, Risk, and Risk Management Tuckman, Fixed Income Securities: Tools for Todays Markets University Edition 3e Fabozzi, Fixed Income Analysis 2e Fabozzi, Introduction to Financial Economics 1e Fabozzi, The Basics of Finance Fabozzi, Finance: Capital Markets, Financial Management, and Investment Management Kolb, Lessons from the Financial Crisis: Causes, Consequences, and our Economic Future Triana, Lecturing Birds on Flying: Can Mathematical Theories Destroy the Financial Markets?

INVESTMENTS
Peck, Investment Ethics Jones, Investments: Analysis and Management 11e Elton, Modern Portfolio Theory and Investment Analysis 8e McMillan, Investments: Principles of Portfolio and Equity Analysis Lawton, Investment Performance Management (CFA) Cuthbertson, Investments 2e Fisher Investments, Fisher Investments on Materials

FINANCIAL RISK MANAGEMENT

Vaughan, Fundamentals of Risk and Insurance 10e

INVESTMENT BANKING
Rosenbaum, Investments Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions www.wiley.com/go/businesscatalog