Index
Capital budgeting (continued)
overview, 336–338
risk analysis in, 374–375
Capital budgeting methods,
conclusions, 355–356
Capital component, 309
Capital gain(s),
reasons preferred, 443
vs. dividends, 441–444
Capital gain or loss, 70
Capital gains yield, 276
Capital intensity ratio, 517
Capital market, 30
international money and, 551–554
Capital rationing, 385
Capital structure,
auto companies, 438
determining optimal, 413–419
effect of bankruptcy, 421
effect of taxes, 420
global, 428
international, 558–559
optimal, 416
signaling theory, 423
target, 401–402
trade-off theory, 422
variations in, 427–429
Capital structure and
leverage, 400
debt and, 400
Capital structure changes, WACC
and, 414
Capital structure decisions,
checklist for, 425–427
Capital structure theory, 419–425
CAPM, 240–249
and Beta, concerns about, 257
approach, 314
Captive " nance companies, 492
Carolina Power & Light
(CP&L), 28, 31
Cash,
and marketable securities,
485–488
currency, 486
demand deposits, 486
Cash budget, 482–485
Cash conversion cycle (CCC),
479 –481
Cash! ow,
incremental, 366
timing of, 366
earnings, and dividends, 451
normal and nonnormal, 344
Cash # ow (CF 1 ), 143
Cash! ow estimation,
and risk analysis, 364
concepts in, 364–368
Home Depot growth, 364
Cash! ow statement, 63–67
massaging, 66
Cash! ow vs. accounting
income, 365
CCC,
calculating the targeted,
479, 480
see also cash conversion cycle
Changing ratios, analyzing effects
of, 524–525
Chevron Corporation, 271, 451,
452, 453, 459
Chrysler, 492
Circuit City, 270
Cisco Systems, 45
Citi Smith Barney, 34, 316
Citibank, 34
Citigroup, 16, 29, 36, 37, 47, 54,
229, 273, 499, 534
Citrus Products Inc., 563
Class life, 397
Classi" ed stock, 272
Clientele effect, 445
Clienteles, 445
Closely held corporation, 40
Coca-Cola, 14, 19, 178, 179, 198,
460, 534
Coef" cient of variation (CV), 238
Coleman Technologies, 333
Colgate-Palmolive, 534
Collection! oat, 487
Collection policy, 490
Commercial bank, 34
Commercial paper, 499
Common size analysis, 87
Common stock,
cost of new, 318–320
external equity, 320
! otation costs, 318
increased cost of capital, 318
market for, 40–43
types of, 272–273
valuing, 290
Compensating balance, 495
Compound interest, 126
Compounding process, graphic
view, 130
Compounding, 125
Conservative approach, 478
Consol, 141
Constant growth (Gordon)
model, 278
Constant growth model, conditions
for, 282
Constant growth stocks, 278–283
illustration, 279
Constraints, dividend, 456
Convertible bond, 199
Corporate (within-" rm) risk, 375
Corporate bonds, 196
types of, 215
Corporate governance, 15
Corporate objectives, statement
of, 51 1
Corporate raider, 19
Corporate scope, 51 1
Corporate strategies, 51 1
Corporate taxes, 72
Corporate valuation model,
286 –291
Corporate valuation vs. discounted
dividend models, 290
Corporation, 7
closely held, 40
global, 535–538
multinational, 535–538
publicly owned, 41
valuing the entire, 286–291
Correlation, 243
Correlation coef" cient (!), 243
Cost of capital, 306
adjusting for risk, 323
After-tax cost of debt,
rd(1 – T), 311
creating value at GE, 306
global variations in, 322
problems with estimates, 325
risk-adjusted, 375
Cost of
debt, rd(1 – T), 310–312
money, 163–164
new common stock (re), 313
preferred stock (rp), 312
retained earnings (rs), 313
Costly trade credit, 495
Country risk, 554
measuring, 555
Coupon interest rate, 197
Coupon payment, 197
Coupons, semiannual, bonds
with, 209–210
Credit period, 490
Credit policy, 490
Credit policy, setting and
implementing, 491
Credit score, 491
Credit standards, 490
Credit terms, 491
Cross rate, 542
Crossover rate, 350
Cumulative voting, 271
Currency board
arrangement, 541
Currency, 486
Current asset
" nancing policies, 475–478
" nancing policy, 476
investment policies, 474–475
I-2
