Index I-7
bre44380_idx_I1-I24 7 09/30/15 01:56 PM
Efficient-market hypothesis, 328–339, 888
behavioral finance and, 340–344
competition and, 332
evidence against efficient markets,
336 –339
evidence for efficient markets, 332–336
exceptions to, 891–892
forms of market efficiency, 332
irrelevance of dividends and, 416–421
lessons of market efficiency, 344–349
levels of markets, 332
mispricing and, 348
payout policy in, 416–421
price changes as random, 329–332
random walk hypothesis and,
329–332, 539n
trading opportunities versus, 348–349
Efficient portfolios
borrowing and lending in, 197–199
defined, 197, 201
examples, 196
Egan-Jones Ratings, 608n
eHI Car Services, 395
Ehrbar, A., 314, 314n, 322
Eichholtz, P., 229n
Eight O’Clock Coffee, 814
Einstein, Albert, 329n
Eisner, Michael, 831
Eiteman, D. K., 726
Electronic bill presentation and payment
(EBPP), 797
Electronic communication networks
(ECFs), 77
Elizabeth Arden, 66
Ellis, Jim, 880
Ellis, K., 385n
Ellison, Larry, 309, 561
Elton, E. J., 212, 606n, 607 n
Embedded options, 525
Emdeon, 855
Empire building, 303
Encana, 80, 80
Energy Future Holdings, 5, 858, 861
Enriques, L., 875n
Enron, 366, 385, 470, 477, 609, 619, 858,
882, 882n
Entergy, 310
Entrenching investment, 303
EOG, 80
Equal real interest rates, 715–717
Equipment trust certificates, 622
Equity financing. See also Equity valuation
common stock, 358–363
initial public offerings (IPOs),
384 –394
rights issues, 398–399
secondary issues, 394–399
trust, 363
venture capital, 379–383
in disguise, 362–363
in financial distress situations, 473
financing decisions and, 4–5
international security issues, 395
methods of, 4
partnership, 362
preferred stock, 363
rights issues, 398–399
venture capital, 379–383Dow Jones Industrial Average, 78, 174, 369
DP World, 828
Dresdner Bank, 819
Dresdner Kleinwort, 387–388
Drexel Burnham, 846
Dual-class equity, 361–362, 878
Due diligence, 388
Duffie, D., 600n, 615
Duke Energy, 816
Dun and Bradstreet, 792, 880
Dupont, 80
Du Pont formula, 743–744
Durand, David, 438n
Duration
in bond valuation, 52–54
in hedging, 692–693, 693n
Dutch auction, 413E
Earnings before interest and taxes (EBIT),
80 n, 610, 736–737, 745–746
Earnings beta, 230
Earnings per share (EPS)
earnings targets, 319–320
in equity valuation, 78, 79, 90–93
forecasting, 319–320
mergers and, 820–821
Earnings-price ratio, 92
Easterbrook, F., 422n
Eastern Airlines, 470, 860
Eastman Chemical, 80
Eastman Kodak, 79
eBay, 390–392
EBIT (earnings before interest and taxes), 80n,
610, 736–737, 745–746
Ebner, Martin, 360
EBPP (electronic bill presentation and
payment), 797
ECFs (electronic communication networks), 77
Eckbo, B. E., 333n, 400, 838, 864
Eckel, C., 865
Eckel, D., 865
Economic depreciation, 316–317, 319
Economic exposure, 719
E conom ic i ncome, 316 –317
Economic order quantity (EOQ), 789, 789n
Economic profit (EP), 313
Economic rents, 279–295
competitive advantage and, 284–287
examples, 280–282, 288–294
forecasting, 284–287
market value analysis, 279–282
Economic value added (EVA), 311–320,
738–739
applying to companies, 311–312
biases in, 314–320
calculating, 313–314, 738–739
defined, 738
problems with, 741
pros and cons of, 314
Economies of scale, in mergers, 816
Economies of vertical integration, 816–817
Economist, The, 360
EDF (Electricité de France), 851
Edmans, Alex, 877, 877n
Efficiency ratios, 741–743problems in option pricing, 548
rate of return and. See Internal rate of
return (IRR)
in real option valuation, 590–591
risk and
multiple risk-adjusted discount rates
and, 238–239
single risk-adjusted discount rate and,
237–239
safe, nominal cash flows, 521–523
in setting gas and electricity prices, 86–87
spreadsheet functions, 38–39
stock repurchases and, 418–419
two stages of growth, 88–90
Discounted-cash-flow rate of return. See
Internal rate of return (IRR)
Discounted payback rule, 110–111
Discount factor, 21, 57–58
Discount rate. See also Opportunity cost of
capital
avoiding fudge factors in, 230, 234–235,
251, 251n
multiple, 238–239
single, 237–239
Discriminatory auctions, 393–394
Disney, 831
Dittmann, I., 875, 875n
Dittmar, A. K., 806, 849n
Diversifiable (specific) risk, 176, 176n,
181–182, 192, 230, 232–234
Diversification
arbitrage pricing theory and, 208
internal, 879
limits to, 179–180
market risk and, 173–176
mergers and, 819–820
portfolio risk and, 173–176, 184
value additivity and, 184–185
Divestiture, 851
Dividend(s). See also Payout policy
in business valuation, 94
in common stock valuation, 81–90
in convertible valuation, 633
free cash flow and, 97–98
information content of, 413–415, 422
i r releva nce, 418 – 419
in option pricing, 565–566
payout ratio, 86–87, 422
preferred stock, 363
and share issues, 419–421
taxes on capital gains versus, 422– 426
in warrant valuation, 633
Dividend discount model. See Discounted cash
flow (DCF)
Dividend reinvestment plans (DRIPs), 412
Dividends per share, 85n
Dividend yield, 78, 85, 168–169
Dixit, A. K., 271, 582n, 592
Djankov, S., 877–878, 877n
Doherty, N. A., 677n
Dollar loans, 710
Dominion, 525
Dot.com bubble, 339, 341, 348, 374, 383,
388, 389
Double-dipping, 666
Douglas, R., 600n
Dow Chemical, 66, 79, 80, 174, 181, 196, 200,
225–227, 226, 227 n, 600, 601