EXCEL MODELING IN CORPORATE FINANCE Fourth Edition. CRAIG W. HOLDEN Professor of Finance Kelley School of Business Indiana University

Transcription

1 EXCEL MODELING IN CORPORATE FINANCE Fourth Edition CRAIG W. HOLDEN Professor of Finance Kelley School of Business Indiana University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

2 Contents iii CONTENTS Preface Fourth Edition Changes What Is Unique About This Book Conventions Used In This Book Craig's Challenge Excel Modeling Books Suggestions for Faculty Members Acknowledgements About The Author PART 1 TIME VALUE OF MONEY 1 Chapter 1 Single Cash Flow Present Value Future Value 2 Problems 3 Chapter 2 Annuity Present Value Future Value System of Four Annuity Variables 6 Problems 7 Chapter 3 NPV Using Constant Discounting Nominal Rate Real Rate 9 Problems 10 Chapter 4 NPV Using General Discounting Nominal Rate Real Rate 13 Problems 15 Chapter 5 Loan Amortization Basics Sensitivity Analysis 17 Problems 19 PART 2 VALUATION 20 Chapter 6 Bond Pricing Annual Payments 20 6:2 EAR, APR, and Foreign Currencies Duration and Convexity Price Sensitivity Immunization System of Five Bond Variables 36 Problems 37 Chapter 7 Estimating the Cost of Capital 40 vii vii xi xii xiii xiv xiv xv xvi

3 iv Contents 7.1 Static CAPM Using Fama-MacBeth Method APT or Intertemporal CAPM Using Fama-McBeth Method 46 Problems 52 Chapter 8 Stock Valuation Dividend Discount Model 53 Problems 54 Chapter 9 Firm and Project Valuation Cash Flows for Five Equivalent Methods Adjusted Present Value Free Cash Flow To Equity Free Cash Flow to the Firm Dividend Discount Model Residual Income Five Equivalent Methods 63 Problems 72 Appendix: Reconciling the Residual Income Method with Other Approaches to Valuing Firms or Projects 73 Chapter 10 The Yield Curve Obtaining It From Treasury Bills and Strips Using It To Price A Coupon Bond Using It To Determine Forward Rates 81 Problems 82 Chapter 11 US Yield Curve Dynamics Dynamic Chart 83 Problems 87 PART 3 CAPITAL STRUCTURE 89 Chapter 12 Capital Structure Modigliani-Miller With No Taxes Modigliani-Miller With Corporate Taxes Trade-off Model: Tax Shield vs. Distress Cost 93 Problems 95 PART 4 CAPITAL BUDGETING 96 Chapter 13 Project NPV Basics Forecasting Cash Flows Working Capital Sensitivity Analysis 102 Problems 105 Chapter 14 Cost-Reducing Project Basics Sensitivity Analysis 109 Problems 109 Chapter 15 Break-Even Analysis. Ill 15.1 Based On Accounting Profit Ill 15.2 Based On NPV 114 Problems 118

4 Contents v PART 5 FINANCIAL PLANNING Chapter 16 Corporate Financial Planning Actual Forecast Cash Flow Ratios Sensitivity Full-Scale Estimation 131 Problems 137 Chapter 17 Du Pont System Of Ratio Analysis Basics 140 Problems 141 Chapter 18 Life-Cycle Financial Planning Basics Full-Scale Estimation 144 Problems 152 PART 6 INTERNATIONAL CORPORATE FINANCE 153 Chapter 19 International Parity System of Four Parity Conditions Estimating Future Exchange Rates 155 Problems 157 PART 7 OPTIONS AND CORPORATE FINANCE 158 Chapter 20 Binomial Option Pricing Estimating Volatility Single Period Multi-Period Risk Neutral Average of N and N-l Convergence to Normal American With Discrete Dividends Full-Scale 178 Problems 183 Chapter 21 Real Options NPV Correctly vs. NPV Ignoring Option 185 Problems 188 Chapter 22 Black-Scholes Option Pricing Basics Continuous Dividend Implied Volatility 194 Problems 196

5 vi Contents Chapter 23 Debt And Equity Valuation Two Methods Impact of Risk 200 Problems.201 PART 8 EXCEL SKILLS 202 Chapter 24 Useful Excel Tricks Quickly Delete The Instructions and Arrows Freeze Panes Spin Buttons and the Developer Tab Option Buttons and Group Boxes Scroll Bar Install Solver or the Analysis ToolPak Format Painter Conditional Formatting Fill Handle D Scatter Chart D Surface Chart 211 CONTENTS ON CD H Excel Modeling in Corporate Finance Fourth Edition.pdf H Ready-To-Build spreadsheets: H3 Ch 01 Single Cash Flow - Ready-To-Build.xlsx ID Ch 02 Annuity - Ready-To-Build.xlsx HI Ch 03 NPV Using Constant Discounting - Ready-To-Build.xlsx H Ch 04 NPV Using General Discounting - Ready-To-Build.xlsx 11 Ch 05 Loan Amortization - Ready-To-Build.xlsx Hi Ch 06 Bond Valuation - Ready-To-Build.xlsx H Ch 07 Estimating the Cost of Capital - Ready-To-Build.xlsx H Ch 08 Stock Valuation - Ready-To-Build.xlsx e) Ch 09 Firm and Project Valuation - Ready-To-Build.xlsx Ch 10 The Yield Curve - Ready-To-Build.xlsx Hi Ch 11 US Yield Curve Dynamics - Ready-To-Build.xlsx H Ch 12 Capital Structure - Ready-To-Build.xlsx Ch 13 Project NPV - Ready-To-Build.xlsx ll Ch 14 Cost-Reducing Project - Ready-To-Build.xlsx lh Ch 15 Break-Even Analysis - Ready-To-Build.xlsx TD Ch 16 Corporate Financial Planning - Ready-To-Build.xlsx 11 Ch 17 Du Pont System of Ratio Analysis - Ready-To-Build.xlsx la Ch 18 Life-Cycle Financial Planning - Ready-To-Build.xlsx Ch 19 International Parity - Ready-To-Build.xlsx, H Ch 20 Binomial Option Pricing - Ready-To-Build.xlsx HI Ch 21 Real Options - Ready-To-Build.xlsx H Ch 22 Black-Scholes Option Pricing - Ready-To-Build.xlsx H Ch 23 Debt and Equity Valuation - Ready-To-Build.xlsx Ql Files in Excel (xls) Format