A recognized classic, Financial Theory and Corporate Policy is thoroughly updated in this third edition. The authors provide a concise, unified treatment of finance, combining theory, empirical evidence, and applications. Recent major contributions in financial literature are discussed and all current literature is summarized. The book provides MBA and doctoral students with an excellent bridge to prevailing scholarship in finance. Two new chapters discuss futures markets and financial applications for the corporate financial officer, including pension fund management, debt defeasance, hedging strategies, executive compensation, and interest rate swaps. The fundamentals of discounting, management of cash flows, capital budgeting, utility theory, portfolio theory, the CAPM, APM, and OPM, capital structure, the cost of capital, dividend policy , leasing, international finance, and mergers and acquisitions are integrated into the modern theory of finance.

Contents:

Part I. The theory of finance

1. Introduction : capital markets, consupmtion, and investment

2. Investment decisions : the certainty

3. More advanced capital budgeting topics

4. The theory of choice : utility theory given uncertainty

5. State-preference theory

6. Objects of choice : mean-variance uncertainty

7. Market equilibrium : CAPM and APT

8. Pricing contingent claims : option pricing theory and evidence

9. Futures contracts and markets

10. Efficient capital markets : theory

Part II. Corporate policy : theory, evidence, and applications

11. Efficient capital markets : evidence

12. Capital budgeting under encertainty : the multiperiod case

13. Capital structure and the cost of capital : theory

14. Capital structure

Part II. Corporate policy : theory, evidence, and applications

11. Efficient capital markets : evidence

12. Capital budgeting under uncertainty : the multiperiod case

13. Capital structure and the cost of capital : theory

14. Capital structure : empirical evidence and applications

15. Dividend policy : theory

16. Dividend policy : empirical evidence and applications

17. The economics of leasing

18. Applied issues in corporate finance

19. Mergers, restructuring, and corporate control : theory

20. Mergers and restructuring : tests and applications

21. Exchange rate systems and parity conditions

22. International financial management : tests and implications

Appendix A. Discounting

Appendix B. Matrix algebra

Appendix C. An introduction to multiple regression

Appendix D. Calculus and optimization

Index