I-16 Index
bre44380_idx_I1-I24 16 09/30/15 01:56 PM
Prince, Charles, 304
Principal, bond, 47
Principals, agents and, 12
Private benefits, 303, 361
Private companies, 385, 385n
Private-equity deals, 843
Private equity investing, 382–383, 385, 843,
853–858
Private Export Funding Corporation
(PEFCO), 802n
Private placements, 399, 627–629
Privatization, 851–852
Privileged subscription issues, 398–399
Probabilities, beliefs about, 340–341
Procter & Gamble (P&G), 2, 3, 345–346
Procurement, 584, 585–587
Production option, 265–266, 583–587
Professional corporations (PC), 6
Profitability index, 107, 120–121
Profitability measures, 113
biases in, 314–320
calculating profitability, 316–317
economic value added (EVA), 313–314,
738–739
net return on investment, 312
Profit diagrams, 529–530, 530n
Profit margin, 743
Profit maximization, 794
Progress Energy, 816
Project analysis, 249–271
capital investment process, 250–252
decision trees, 263–269
Monte Carlo simulation, 259–262
net present value and, 144–145
real options, 262–266
sensitivity analysis, 252–258
Project beta, 222–225
Project cost of capital, 222–242
Project finance, 649–651
adjusted present value for international
investments, 511
common features, 650
defined, 649
discount rates for international
projects, 235
example, 649–650
role of, 651
weighted-average cost of capital (WACC),
224–225
Project life, abandonment value and, 581
Project risk, 890
analyzing, 229–235
capital budgeting and, 222–225
Prospect theory, 340
Prospectus, 386, 406–409
Prosper and Lending Club, 373n
Protective put, 531n
Prowse, S., 873n
Proxy contests, 306, 361, 831
PRS Group, Inc., 723, 724n
Prudhoe Bay Royalty Trust, 363
Public companies, 5–6
closely-held companies versus, 5–6
defined, 5
dispersal of ownership, 359
security sales, 394–399
costs, 395–396
general cash offers, 394–398Porter, Michael E., 285, 285n, 295, 881n
Portfolio beta, 227, 229
Portfolio insurance, 562
Por tfol io r isk, 162 –186
beta and, 181–184, 199–202
calculating, 176–184, 182–183
diversification and, 173–176, 184
historic performance of capital markets
a nd, 162 –169
individual securities and, 180–184
measuring, 169–176
relationship to return, 199–202
security beta and, 182–184
standard deviation in, 169–173, 182–183
variance in, 169–172, 173–180
Portfolio theory, 192–212
birth of, 192–199
borrowing and lending in, 197–199
developing stock portfolios, 193–197
efficient portfolios in, 196, 197–199, 201
standard deviation and, 192–193, 198n
Portfolio variance, 169–172, 173–180
Position diagrams, 527–530
Postaudits, in capital budgeting process,
251–252
Postbank, 851
Poterba, J. M., 333n, 339 n
Powers, E., 849n
PPG, 80
Prediction markets, 347
Preferred stock, 363, 805
Premium, bond, 48
Prescott, E. C., 186
Present value (PV), 19–40. See also Adjusted
present value (APV); Net present value
(NPV)
of annuities, 28–30
in bond valuation, 47–50
calculating, 20–21
defined, 20–21, 105
of investment opportunity, 21–23
in Monte Carlo simulation, 261–262
net present value rule, 25, 132–151
net present value versus, 23, 23n
nominal interest rates and, 61–63
opportunity cost of capital and, 26
of perpetuity, 27–28
present value formula, 27n
rates of return and, 24–25
real interest rates and, 60–63
risk and, 23–24
Present value of growth opportunities (PVGO),
92–93, 264, 319n
in business valuation, 96–97
calculating, 92–93
defined, 92
examples of growth opportunities,
92–93
President’s Council on Jobs and
Competitiveness, 386
Pretty Woman (f i l m), 11
Price discovery, 686n
P r ice- dividend ratio, 168 –169
Price-earnings (P/E) ratio, 78–81, 95–96
Price-to-book (P/B) ratio, 79–81
Primary issues, 367–368, 384. See also Initial
public offerings (IPOs)
Primary markets, 77, 367–368payout decision in, 4
pecking order of financing choices
and, 481
rightist position, 421–422
stock repurchases, 410, 418–421
Payout ratio, 86–87, 422. See also Payout
policy, controversy concerning
Pecking order of financing choices, 479–484
financial slack, 482–483, 496–498
impact of asymmetric information,
479 – 481
implications of, 481
trade-off theory versus, 481–482
Peer-to-peer lending firms (P2PLs), 373n
Pemex, 678
Penman, S., 752
Pen ney (J.C.), 612 – 613, 620, 624, 626,
627–629
Pension Benefit Guarantee Corporation
(PBGC), 607, 858
Pension funds, 366, 370, 382–383, 423, 607,
635, 704n
PeopleSoft, 832–835
PepsiCo, 339, 827
Percentage of sales model, 776
Performance measurement, 311–320
incentives and. See Incentives; Stock
options
Performance ratios, 737–741
Performance shares, 309
Perkins, C. A., 592
Perks, 303, 305
Perpetuities, 27–28
defined, 27
growing, 34, 85
valuation of, 27–28
Peso loans, 710
Petersen, M. A., 806
Peters, F., 835n
Peterson, M. A., 796n
Petrobas, 852
Pettway, R., 393n
Pfizer, 80, 132–133, 308, 412, 601, 830,
849, 850
Phaup, Marvin, 607
Philips Electronics, 330–331, 331
Phillips, G., 851, 851n
Phillips Petroleum, 114
Piedmont Natural Gas Co., 87
PIK (pay in kind), 635
Pindyck, R. S., 271, 582n, 592
Pinkerton, J., 334n
Pinkowitz, L., 761n, 762, 762n, 806
Pinnacle Foods, 855
Plains All American Pipeline LP, 362
Plains GP Holdings, 396
Playing for time game, in financial
distress, 474
P&O, 828
Poison pill defense, 832–833, 834
Poison-put clauses, 627
Poison put defense, 834
Political risk, 723–725
Ponzi, Charles, 12n
Ponzi schemes, 11–12, 12n
Pooling risks, 373, 676–678
Porsche, 342–343
Payout policy—Cont.