Principles of Corporate Finance_ 12th Edition

Index I-3

bre44380_idx_I1-I24 3 09/30/15 01:56 PM

California State Teachers’ Retirement System

(CSTRS), 11

Callable bonds, 628

Call options, 526 –528

American calls, 526, 564–565, 566

defined, 526

European calls, 526–528, 565–566

price determinants, 540

relationship between put prices and,

552, 603

selling/writing, 528–529, 531

valuation of, 548–551, 558–560

Call premium, 625n

Call protection, 624–625

Call provisions, 624–626

Calpine, 858

Cambridge Associates, 383

Campa, J. M., 857n

Campbell, J. Y., 212, 232n

Campbell Soup, 174, 181, 196, 19 7, 200,

225–227, 226

Canadian Pacific, 77, 80, 227, 285 n, 305, 503

Cancellation options, 654, 659

Caouette, J. B., 615

CAPEX (capital expenditures). See Capital

expenditures

Capital asset pricing model (CAPM), 199–206,

888, 890

alternatives to, 206–210, 225n

arbitrage pricing theory (APT) versus, 208

assumptions behind, 206

capital structure and, 446

cost of equity capital and, 225–229,

512 –514

defined, 200

estimates of expected returns in, 200–201

evidence against market efficiency,

336 –339

evidence for market efficiency, 332–336

review of, 201

security market line and, 200–202

tests of, 203–206

validity and role of, 202–206

Capital budgeting, 2–4. See also Capital

budgeting decisions; Investment decisions;

Net present value (NPV), investment

decisions and

agency problems in, 303–304

capital budget, defined, 250

capital investment process for, 250–252

capital rationing in, 119–124, 197

discount rates for international

projects, 235

internal rate of return in, 107, 119

in long-term financial planning, 772–773

net present value analysis in, 105–109,

14 4 –145

payback period in, 107, 109–111, 119

pitfalls of, 279–282

postaudits, 251–252

project authorizations, 250–251

Capital budgeting decisions, 249–271. See

also Net present value (NPV), investment

decisions and

capital budget, defined, 250

capital investment process, 250–252

decision trees, 263–266

economic rents. See Economic rents

Booth, L., 481n

Bootstrap game, in mergers, 820–821

Borison, A., 271

Borrowing and lending. See also Debt

financing; Financing decisions; Leasing

banks and, 370–371

internal rate of return and, 113–114

in portfolio theory, 197–199

role of financial markets in, 372–373

Bortolotti, B., 395n

Bort, R., 806

Bowie bonds, 623

Bowie, David, 623

Boycko, M., 852n

BP, 174, 182, 363

Bradley, M., 97n, 640 n

Branson, Richard, 230

Brau, J. C., 384n

Brav, A., 414n, 430

Breach, A., 880, 880n

Break-even analysis, 145, 256–258

defined, 256

operating leverage and, 257–258

Break-even points, 257–258

Brealey, Richard A., 169, 234, 251, 643,

777, 890

Brennan, Michael J., 242, 582n, 592, 625n, 643

Bridge loans, 371n, 637

Bris, A., 865

Bristol-Myers Squibb, 835

British Salt, 814

Brown, S. J., 212

Bruner, R., 838

Brunnermeier, M., 339n, 351, 895n

Bubbles, 348–349

Chinese warrant, 564

dot.com stocks, 339, 341, 348, 374, 382,

383, 388, 389

in Japan, 339, 341

market efficiency and, 337–339

subprime crisis, 304–305, 308, 343–344,

374–375, 600–602, 623, 895, 896

Budget Control Act of 2010, 68

Buffett, Warren, 10n, 27, 293, 294

Bullet payments, 637

Bulow, J. I., 561n

Burch, T. R., 849n

Burger King, 844

Burkart, M., 883n

Burroughs, B., 845n, 865

Bush, George W., 375n

Businesses. See Corporations

Business plans, in venture-capital

financing, 380

Business valuation process, 496–501

adjusted present value (APV) in, 509–511

discounted cash flow (DCF) in, 93–98

free cash flow, 94–95, 496–498

weighted-average cost of capital (WACC)

in, 224–225

C

Cable, 708n

Caesar’s Entertainment, 597–598, 599

California Public Employee Retirement

System (CALPERS), 563

using, 558–560
to evaluate implied volatilities,
562–563
for executive stock options, 561,
562,  563
to value portfolio insurance, 562
to value warrants, 561–562
Blackstone Group, 844, 853–854, 855
“Black swans,” 193n
Bloomberg, 221
Blue-sky laws, 386
BM W, 6
BN P, 819
BNP Paribas, 388, 635 n
Board of directors
compensat ion com m it tee, 310 –311
connections with CEO, 305–306, 308
control rights and, 359–360, 871–880
role of, 5, 305–306, 310–311
staggered (classified), 834
voting procedures and, 360–361
Bodie, Zvi, 319n, 366 n
Boeing, 137, 263, 613–614
Bohr, Niels, 13
Bolton, P., 884
Bond(s). See also Bond ratings; Bond
valuation; Debt financing; Debt policy
alpine, 629
bearer, 47n, 621
callable, 628
catastrophe, 635, 677–678
convertible, 365, 630–634
corporate. See Corporate bonds
coupon, 47–50, 619
eurobonds, 365, 395, 629
global bonds, 395, 629
innovation in bond market, 634–636
international, 365, 629
market size, 46
registered, 47n, 621
samurai, 629
sold by foreign company, 629
Treasury. See Treasury bonds
valuation of. See Bond valuation
yankee, 629
Bond covenants, 626–627
Bond ratings, 66, 66, 67–68, 375, 602,
6 08 – 6 0 9, 613 – 614, 613n, 622, 636, 792
Bond valuation, 46–71
convertible bonds, 630–634
default risk in, 64–69, 601, 602–607, 626
duration in, 52–54
inflation in, 60–63
interest rates in, 47–54, 60–63
international finance, 49–50
present value formulas in, 47–50
spreadsheet functions, 69
term structure of interest rates in, 54–60
in the U.S., 48–50
volatility in, 54
yield to maturity, 48, 49
Bond-warrant packages, 633–634
Bookbuilding method, 392–393
Book rate of return, 107, 108–109, 119, 740
Book-to-market effect, 205, 205n, 206,
208–210
Book value, 78–79
Boone, P., 880, 880n