Full Table of Contents

Part I: Overview of Corporate Finance
	Chapter 1: Introduction to Corporate Finance
		1.1	Corporate Finance and the Financial Manager
			What Is Corporate Finance?
			The Financial Manager
			Financial Management Decisions
		1.2	Forms of Business Organization
			Sole Proprietorship
			Partnership
			Corporation
		1.3	The Goal of Financial Management
			Possible Goals
			The Goal of Financial Management
			A More General Goal
		1.4	The Agency Problem and Control of the Corporation
			Agency Relationships
			Management Goals
			Do Managers Act in the Shareholders' Interests?
		1.5	Financial Markets and the Corporation
			Cash Flows to and from the Firm
			Money versus Capital Markets
			Primary versus Secondary Markets
		1.6	Financial Institutions
		1.7	Trends in Financial Markets and Financial Management
		1.8	Outline of the Text
		1.9	Summary and Conclusions
	Chapter 2: Financial Statements, Taxes, and Cash Flow
		2.1	The Balance Sheet
			Assets: The Left-Hand Side
			Liabilities and Owners' Equity: The Right-Hand Side
			Net Working Capital
			Liquidity
			Debt versus Equity
			Market Value versus Book Value
		2.2	The Income Statement
			GAAP and the Income Statement
			Non-Cash Items
			Time and Costs
		2.3	Cash Flow
			Cash Flow from Assets
			Cash Flow to Creditors and Shareholders
			Net Capital Spending
			Change in NWC and Cash Flow from Assets
		2.4	Taxes
			Individual Tax Rates
			Average versus Marginal Tax Rates
			Taxes on Investment Income
			Corporate Taxes
			Taxable Income
			Capital Gains and Carry-forward and Carry-back
		2.5	Capital Cost Allowance
			Asset Purchases and Sales
		2.6	Summary and Conclusions
Part II: Financial Statements and Long-Term Financial Planning
	Chapter 3: Working with Financial Statements
		3.1	Cash Flow and Financial Statements: A Closer Look
			Sources and Uses of Cash
			The Statement of Changes in Financial Position
		3.2	Standardized Financial Statements
			Common-Size Statements
			Common-Base-Year Financial Statements: Trend Analysis
		3.3	Ratio Analysis
			Short-Term Solvency or Liquidity Measures
			Other Liquidity Ratios
			Long-Term Solvency Measures
			Asset Management, or Turnover, Measures
			Profitability Measures
			Market Value Measures
		3.4	The Du Pont Identity
		3.5	Using Financial Statement Information
			Why Evaluate Financial Statements?
			Choosing a Benchmark
			Problems with Financial Statement Analysis
		3.6	Summary and Conclusions
	Chapter 4: Long-Term Financial Planning and Corporate Growth
		4.1	What Is Financial Planning?
			Growth as a Financial Management Goal
			Dimensions of Financial Planning
			What Can Planning Accomplish?
		4.2	Financial Planning Models: A First Look
			A Financial Planning Model: The Ingredients
			A Simple Financial Planning Model
		4.3	The Percentage of Sales Approach
			An Illustration of the Percentage of Sales Approach
		4.4	External Financing and Growth
			EFN and Growth
			Internal Growth Rate
			Financial Policy and Growth
			Determinants of Growth
		4.5	Some Caveats on Financial Planning Models
		4.6	Summary and Conclusions
		App 4A	A Financial Planning Model for the Hoffman Company
		App 4B	Derivation of the Sustainable Growth Formula
Part III: Valuation of Future Cash Flows
	Chapter 5: Introduction to Valuation: The Time Value of Money
		5.1	Future Value and Compounding
			Investing for a Single Period
			Investing for More than One Period
			A Note on Compound Growth
		5.2	Present Value and Discounting
			The Single Period Case
			Present Values for Multiple Periods
		5.3	More on Present and Future Values
			Present versus Future Value
			Determining the Discount Rate
			Finding the Number of Periods
		5.4	Summary and Conclusions
	Chapter 6: Discounted Cash Flow Valuation
		6.1	Future and Present Values of Multiple Cash Flows
			Future Value with Multiple Cash Flows
			Present Value with Multiple Cash Flows
			A Note on Cash Flow Timing
		6.2	Valuing Level Cash Flows: Annuities and Perpetuities
			Present Value for Annuity Cash Flows
			Future Value for Annuities
			A Note on Annuities Due
			Perpetuities
			Growing Perpetuities
			Growing Annuity
		6.3	Comparing Rates: The Effect of Compounding
			Effective Annual Rates and Compounding
			Calculating and Comparing Effective Annual Rates
			Mortgages
			EARs and APRs
			Taking It to the Limit: A Note on Continuous Compounding
		6.4	Loan Types and Loan Amortization
			Pure Discount Loans
			Interest-Only Loans
			Amortized Loans
		6.5	Summary and Conclusions
		App 6A	Proof of Annuity Present Value Formula
	Chapter 7: Interest Rates and Bond Valuation
		7.1	Bonds and Bond Valuation
			Bond Features and Prices
			Bond Values and Yields
			Interest Rate Risk
			Finding the Yield to Maturity
		7.2	More on Bond Features
			Is it Debt or Equity?
			Long-Term Debt: The Basics
			The Indenture
		7.3	Bond Ratings
		7.4	Some Different Types of Bonds
			Financial Engineering
			Stripped Bonds
			Floating-Rate Bonds
			Other Types of Bonds
		7.5	Bond Markets
			How Bonds are Bought and Sold
			Bond Price Reporting
		7.6	Inflation and Interest Rates
			Real versus Nominal Rates
			The Fisher Effect
		7.7	Determinants of Bond Yields
			The Term Structure of Interest Rates
			Bond Yields and the Yield Curve: Putting It All Together
			Conclusion
		7.8	Summary and Conclusions
		App 7A	On Duration
		App 7B	Financial Calculators and Bond Analysis
		App 7C	Callable Bonds and Bond Refunding
	Chapter 8: Stock Valuation
		8.1	Common Stock Valuation
			Common Stock Cash Flows
			Common Stock Valuation: Some Special Cases
			Changing the Growth Rate
			Components of the Required Return
		8.2	Common Stock Features
			Shareholders' Rights
			Dividends
			Classes of Stock
		8.3	Preferred Stock Features
			Stated Value
			Cumulative and Non-Cumulative Dividends
			Is Preferred Stock Really Debt?
			Preferred Stock and Taxes
			Beyond Taxes
		8.4	Stock Market Reporting
			Growth Opportunities
			Application: The Price Earnings Ratio
		8.5	Summary and Conclusions
		App 8A	Corporate Voting
Part IV: Capital Budgeting
	Chapter 9: Net Present Value and Other Investment Criteria
		9.1	Net Present Value
			The Basic Idea
			Estimating Net Present Value
		9.2	The Payback Rule
			Defining the Rule
			Analyzing the Payback Period Rule
			Redeeming Qualities
			Summary of the Rule
			The Discounted Payback Rule
		9.3	The Average Accounting Return
			Analyzing the Average Accounting Return Method
		9.4	The Internal Rate of Return
			Problems with the IRR
			Redeeming Qualities of the IRR
		9.5	The Profitability Index
		9.6	The Practice of Capital Budgeting
		9.7	Summary and Conclusions
	Chapter 10: Making Capital Investment Decisions
		10.1	Project Cash Flows: A First Look
			Relevant Cash Flows
			The Stand-Alone Principle
		10.2	Incremental Cash Flows
			Sunk Costs
			Opportunity Costs
			Side Effects
			Net Working Capital
			Financing Costs
			Inflation
			Government Intervention
			Other Issues
		10.3	Pro Forma Financial Statements and Project Cash Flows
			Getting Started: Pro Forma Financial Statements
			Project Cash Flows
			Project Total Cash Flow and Value
		10.4	More on Project Cash Flow
			A Closer Look at Net Working Capital
			Depreciation and Capital Cost Allowance
			An Example: The Majestic Mulch and Compost Company (MMCC)
		10.5	Alternative Definitions of Operating Cash Flow
			The Bottom-Up Approach
			The Top-Down Approach
			The Tax Shield Approach
			Conclusion
		10.6	Applying the Tax Shield Approach to the Majestic Mulch and Compost Company Project
			Present Value of the Tax Shield on CCA
			Salvage Value versus UCC
		10.7	Some Special Cases of Discounted Cash Flow Analysis
			Evaluating Cost-Cutting Proposals
			Replacing an Asset
			Evaluating Equipment with Different Lives
			Setting the Bid Price
		10.8	Summary and Conclusions
		App 10A	More on Inflation and Capital Budgeting
		App 10B	Capital Budgeting with Spreadsheets
	Chapter 11: Project Analysis and Evaluation
		11.1	Evaluating NPV Estimates
			The Basic Problem
			Projected versus Actual Cash Flows
			Forecasting Risk
			Sources of Value
		11.2	Scenario and Other What-If Analyses
			Getting Started
			Scenario Analysis
			Sensitivity Analysis
			Simulation Analysis
		11.3	Break-Even Analysis
			Fixed and Variable Costs
			Accounting Break-Even
			Accounting Break-Even: A Closer Look
			Uses for the Accounting Break-Even
		11.4	Operating Cash Flow, Sales Volume, and Break-Even
			Accounting Break-Even and Cash Flow
			Sales Volume and Operating Cash Flow
			Cash Flow and Financial Break-Even Points
		11.5	Operating Leverage
			The Basic Idea
			Implications of Operating Leverage
			Measuring Operating Leverage
			Operating Leverage and Break-Even
		11.6	Additional Considerations in Captial Budgeting
			Managerial Options
			Capital Rationing
		11.7	Summary and Conclusions
Part V: Risk and Return
	Chapter 12: Some Lessons from Capital Market History
		12.1	Returns
			Dollar Returns
			Percentage Returns
		12.2	The Historical Record
			A First Look
			A Closer Look
		12.3	Average Returns: The First Lesson
			Calculating Average Returns
			Average Returns: The Historical Record
			Risk Premiums
			The First Lesson
		12.4	The Variability of Returns: The Second Lesson
			Frequency Distributions and Variability
			The Historical Variance and Standard Deviation
			The Historical Record
			Normal Distribution
			The Second Lesson
			Using Capital Market History
		12.5	Capital Market Efficiency
			Price Behaviour in an Efficient Market
			The Efficient Markets Hypothesis
			Market Efficiency—Forms and Evidence
		12.6	Summary and Conclusions
	Chapter 13: Return, Risk, and the Security Market Line
		13.1	Expected Returns and Variances
			Expected Return
			Calculating the Variance
		13.2	Portfolios
			Portfolio Weights
			Portfolio Expected Returns
			Portfolio Variance
			Portfolio Standard Deviation and Diversification
			Diversification and the Efficient Set
		13.3	Announcements, Surprises, and Expected Returns
			Expected and Unexpected Returns
			Announcements and News
		13.4	Risk: Systematic and Unsystematic
			Systematic and Unsystematic Risk
			Systematic and Unsystematic Components of Return
		13.5	Diversification and Portfolio Risk
			The Effect of Diversification: Another Lesson from Market History
			The Principle of Diversification
			Diversification and Unsystematic Risk
			Diversification and Systematic Risk
			Risk and the Sensible Investor
		13.6	Systematic Risk and Beta
			The Systematic Risk Principle
			Measuring Systematic Risk
			Portfolio Betas
		13.7	The Security Market Line
			Beta and the Risk Premium
			Calculating Beta
			The Security Market Line
		13.8	The SML and the Cost of Capital: A Preview
			The Basic Idea
			The Cost of Capital
		13.9	Arbitrage Pricing Theory
		13.10	Summary and Conclusions
		App 13A	Derivation of the Capital Asset Pricing Model
Part VI: Cost of Capital and Long-Term Financial Policy
	Chapter 14: Cost of Capital
		14.1	The Cost of Capital: Some Preliminaries
			Required Return versus Cost of Capital
			Financial Policy and Cost of Capital
		14.2	The Cost of Equity
			The Dividend Growth Model Approach
			The SML Approach
			The Cost of Equity in Rate Hearings
		14.3	The Costs of Debt and Preferred Stock
			The Cost of Debt
			The Cost of Preferred Stock
		14.4	The Weighted Average Cost of Capital
			The Capital Structure Weights
			Taxes and the Weighted Average Cost of Capital
			Solving the Warehouse Problem and Similar Capital Budgeting Problems
			Performance Evaluation: Another Use of the WACC
		14.5	Divisional and Project Costs of Capital
			The SML and the WACC
			Divisional Cost of Capital
			The Pure Play Approach
			The Subjective Approach
		14.6	Flotation Costs and the Weighted Average Cost of Capital
			The Basic Approach
			Flotation Costs and NPV
		14.7	Calculating WACC for Bombardier
			Estimating Financing Proportions
			Market Value Weights for Bombardier
			Cost of Debt
			Cost of Preferred Stock
			Cost of Common Stock
			Dividend Valuation Model Growth Rate
			CAPM
			Bombardier's WACC
		14.8	Summary and Conclusions
		App 14A	Adjusted Present Value
	Chapter 15: Raising Capital
		15.1	The Financing Life Cycle of a Firm: Early-Stage Financing and Venture Capital
			Venture Capital
			Some Venture Capital Realities
			Choosing a Venture Capitalist
		15.2	The Public Issue
		15.3	The Basic Procedure for a New Issue
			Securities Registration
		15.4	The Cash Offer
			Types of Underwriting
			Bought Deal
			The Selling Period
			The Overallotment Option
			The Investment Dealers
			The Offering Price and Underpricing
			The Decision to Go Public
			Pricing IPOs
			Why Does Underpricing Exist?
		15.5	New Equity Sales and the Value of the Firm
		15.6	The Costs of Issuing Securities
			IPOs in Practice: The Case of Air Canada
		15.7	Rights
			The Mechanics of a Rights Offering
			Number of Rights Needed to Purchase a Share
			The Value of a Right
			Theoretical Value of a Right
			Ex Rights
			Value of Rights After Ex-Rights Date
			The Underwriting Arrangements
			Effects on Shareholders
			Cost of Rights Offerings
		15.8	Dilution
			Dilution of Proportionate Ownership
			Dilution of Value: Book versus Market Values
		15.9	Issuing Long-Term Debt
		15.10	Summary and Conclusions
	Chapter 16: Financial Leverage and Capital Structure Policy
		16.1	The Capital Structure Question
			Firm Value and Stock Value: An Example
			Capital Structure and the Cost of Capital
		16.2	The Effect of Financial Leverage
			The Basics of Financial Leverage
			Corporate Borrowing and Homemade Leverage
		16.3	Capital Structure and the Cost of Equity Capital
			M&M Proposition I: The Pie Model
			The Cost of Equity and Financial Leverage: M&M Proposition II
			Business and Financial Risk
		16.4	M&M Propositions I and II with Corporate Taxes
			The Interest Tax Shield
			Taxes and M&M Proposition I
			Taxes, the WACC, and Proposition II
		16.5	Bankruptcy Costs
			Direct Bankruptcy Costs
			Indirect Bankruptcy Costs
			Agency Costs of Equity
		16.6	Optimal Capital Structure
			The Static Theory of Capital Structure
			Optimal Capital Structure and the Cost of Capital
			Optimal Capital Structure: A Recap
			Capital Structure: Some Managerial Recommendations
		16.7	The Pie Again
			The Extended Pie Model
			Marketed Claims versus Non-Marketed Claims
		16.8	Observed Capital Structures
		16.9	Long-Term Financing under Financial Distress and Bankruptcy
			Liquidation and Reorganization
			Agreements to Avoid Bankruptcy
		16.10	Summary and Conclusions
		App 16A	Capital Structure and Personal Taxes
	Chapter 17: Dividends and Dividend Policy
		17.1	Cash Dividends and Dividend Payment
			Cash Dividends
			Standard Method of Cash Dividend Payment
			Dividend Payment: A Chronology
			More on the Ex-Dividend Date
		17.2	Does Dividend Policy Matter?
			An Illustration of the Irrelevance of Dividend Policy
		17.3	Real-World Factors Favouring a Low Payout
			Taxes
			Some Evidence on Dividends and Taxes in Canada
			Flotation Costs
			Dividend Restrictions
		17.4	Real-World Factors Favouring a High Payout
			Desire for Current Income
			Uncertainty Resolution
			Tax and Legal Benefits from High Dividends
			Conclusion
		17.5	A Resolution of Real-World Factors?
			Information Content of Dividends
			Dividend Signalling in Practice
			The Clientele Effect
		17.6	Establishing a Dividend Policy
			Residual Dividend Approach
			Dividend Stability
			A Compromise Dividend Policy
		17.7	Stock Repurchase: An Alternative to Cash Dividends
			Cash Dividends versus Repurchase
			Real-World Considerations in a Repurchase
			Share Repurchase and EPS
		17.8	Stock Dividends and Stock Splits
			Some Details on Stock Splits and Stock Dividends
			Value of Stock Splits and Stock Dividends
			Reverse Splits
		17.9	Summary and Conclusions
Part VII: Short-Term Financial Planning and Management
	Chapter 18: Short-Term Finance and Planning
		18.1	Tracing Cash and Net Working Capital
		18.2	The Operating Cycle and the Cash Cycle
			Defining the Operating and Cash Cycles
			Calculating the Operating and Cash Cycles
			Interpreting the Cash Cycle
		18.3	Some Aspects of Short-Term Financial Policy
			The Size of the Firm's Investment in Current Assets
			Alternative Financing Policies for Current Assets
			Financial Policy
			Which Is Best?
			Current Assets and Liabilities in Practice
		18.4	The Cash Budget
			Sales and Cash Collections
			Cash Outflows
			The Cash Balance
		18.5	A Short-Term Financial Plan
			Short-Term Planning and Risk
		18.6	Short-Term Borrowing
			Operating Loans
			Letters of Credit
			Secured Loans
			Factoring
			Securitized Receivables—A Financial Innovation
			Inventory Loans
			Trade Credit
			Money Market Financing
		18.7	Summary and Conclusions
	Chapter 19: Cash and Liquidity Management
		19.1	Reasons for Holding Cash
			Speculative and Precautionary Motives
			The Transaction Motive
			Costs of Holding Cash
			Cash Management versus Liquidity Management
		19.2	Determining the Target Cash Balance
			The Basic Idea
			Other Factors Influencing the Target Cash Balance
		19.3	Understanding Float
			Disbursement Float
			Collection Float and Net Float
			Float Management
			Accelerating Collections
			Over-the-Counter Collections
			Controlling Disbursements
		19.4	Investing Idle Cash
			Temporary Cash Surpluses
			Characteristics of Short-Term Securities
			Some Different Types of Money Market Securities
		19.5	Summary and Conclusions
		App 19A	Cash Management Models
	Chapter 20: Credit and Inventory Management
		20.1	Credit and Receivables
			Components of Credit Policy
			The Cash Flows from Granting Credit
			The Investment in Receivables
		20.2	Terms of the Sale
			Why Trade Credit Exists
			The Basic Form
			The Credit Period
			Cash Discounts
			Credit Instruments
		20.3	Analyzing Credit Policy
			Credit Policy Effects
			Evaluating a Proposed Credit Policy
		20.4	Optimal Credit Policy
			The Total Credit Cost Curve
			Organizing the Credit Function
		20.5	Credit Analysis
			When Should Credit Be Granted?
			Credit Information
			Credit Evaluation and Scoring
		20.6	Collection Policy
			Monitoring Receivables
			Collection Effort
			Credit Management in Practice
		20.7	Inventory Management
			The Financial Manager and Inventory Policy
			Inventory Types
			Inventory Costs
		20.8	Inventory Management Techniques
			The ABC Approach
			The Economic Order Quantity (EOQ) Model
			Extensions to the EOQ Model
			Managing Derived-Demand Inventories
			Materials Requirements Planning (MRP)
			Just-in-Time Inventory
		20.9	Summary and Conclusions
		App 20A	More on Credit Policy Analysis
Part VIII: Topics in Corporate Finance
	Chapter 21: International Corporate Finance
		21.1	Terminology
		21.2	Foreign Exchange Markets and Exchange Rates
			Exchange Rates
			Types of Transactions
		21.3	Purchasing Power Parity
			Absolute Purchasing Power Parity
			Relative Purchasing Power Parity
			Currency Appreciation and Depreciation
		21.4	Interest Rate Parity, Unbiased Forward Rates, and the International Fisher Effect
			Covered Interest Arbitrage
			Interest Rate Parity (IRP)
			Forward Rates and Future Spot Rates
			Putting It All Together
		21.5	International Capital Budgeting
			Method 1: The Home Currency Approach
			Method 2: The Foreign Currency Approach
			Unremitted Cash Flows
		21.6	Financing International Projects
			The Cost of Capital for International Firms
			International Diversification and Investors
			Sources of Short- and Intermediate-Term Financing
		21.7	Exchange Rate Risk
			Short-Run Exposure
			Long-Run Exposure
			Translation Exposure
			Managing Exchange Rate Risk
		21.8	Political Risk
		21.9	Summary and Conclusions
	Chapter 22: Leasing
		22.1	Leases and Lease Types
			Leasing versus Buying
			Operating Leases
			Financial Leases
		22.2	Accounting and Leasing
		22.3	Taxes and Leases
		22.4	The Cash Flows from Leasing
			The Incremental Cash Flows
		22.5	Lease or Buy?
			A Preliminary Analysis
			NPV Analysis
			A Misconception
		22.6	A Leasing Paradox
			Resolving the Paradox
			Leasing and Capital Budgeting
		22.7	Reasons for Leasing
			Good Reasons for Leasing
			Bad Reasons for Leasing
			Leasing Decisions in Practice
		22.8	Summary and Conclusions
	Chapter 23: Mergers and Acquisitions
		23.1	The Legal Forms of Acquisitions
			Merger or Consolidation
			Acquisition of Stock
			Acquisition of Assets
			Acquisition Classifications
			A Note on Takeovers
		23.2	Taxes and Acquisitions
			Determinants of Tax Status
			Taxable versus Tax-Free Acquisitions
		23.3	Accounting for Acquisitions
			The Purchase Method
			Pooling of Interests
			Which Is Better: Purchase or Pooling of Interests?
		23.4	Gains from Acquisition
			Synergy
			Revenue Enhancement
			Cost Reductions
			Tax Gains
			Changing Capital Requirements
			Avoiding Mistakes
			A Note on Inefficient Management
			The Negative Side of Takeovers
		23.5	Some Financial Side Effects of Acquisitions
			EPS Growth
			Diversification
		23.6	The Cost of an Acquisition
			Case I: Cash Acquisition
			Case II: Stock Acquisition
			Cash versus Common Stock
		23.7	Defensive Tactics
			The Control Block and the Corporate Charter
			Repurchase/Standstill Agreements
			Exclusionary Offers and Non-Voting Stock
			Poison Pills and Share Rights Plans
			Going Private and Leveraged Buyouts
			LBOs to Date: The Record
			Other Defensive Devices
		23.8	Some Evidence on Acquisitions
		23.9	Summary and Conclusions
Part IX: Derivative Securities and Corporate Finance
	Chapter 24: Risk Management: An Introduction to Financial Engineering
		24.1	Hedging and Price Volatility
			Price Volatility: A Historical Perspective
			Interest Rate Volatility
			Exchange Rate Volatility
			Commodity Price Volatility
			The Impact of Financial Risk: The U.S. Savings and Loan Industry
		24.2	Managing Financial Risk
			The Risk Profile
			Reducing Risk Exposure
			Hedging Short-Run Exposure
			Cash Flow Hedging: A Cautionary Note
			Hedging Long-Term Exposure
			Conclusion
		24.3	Hedging with Forward Contracts
			Forward Contracts: The Basics
			The Payoff Profile
			Hedging with Forwards
		24.4	Hedging with Futures Contracts
			Trading in Futures
			Futures Exchanges
			Hedging with Futures
		24.5	Hedging with Swap Contracts
			Currency Swaps
			Interest Rate Swaps
			Commodity Swaps
			The Swap Dealer
			Interest Rate Swaps: An Example
		24.6	Hedging with Option Contracts
			Option Terminology
			Options versus Forwards
			Option Payoff Profiles
			Option Hedging
			Hedging Commodity Price Risk with Options
			Hedging Exchange Rate Risk with Options
			Hedging Interest Rate Risk with Options
		24.7	Summary and Conclusions
	Chapter 25: Options and Corporate Securities
		25.1	Options: The Basics
			Puts and Calls
			Stock Option Quotations
			Option Payoffs
			Put Payoffs
			Long-Term Equity Anticipation Securities (LEAPS)
		25.2	Fundamentals of Option Valuation
			Value of a Call Option at Expiration
			The Upper and Lower Bounds on a Call Option's Value
			A Simple Model: Part I
			Four Factors Determining Option Values
		25.3	Valuing a Call Option
			A Simple Model: Part II
			The Fifth Factor
			A Closer Look
		25.4	Equity as a Call Option on the Firm's Assets
			Case I: The Debt Is Risk-Free
			Case II: The Debt Is Risky
		25.5	Warrants
			The Difference between Warrants and Call Options
			Warrants and the Value of the Firm
		25.6	Convertible Bonds
			Features of a Convertible Bond
			Value of a Convertible Bond
		25.7	Reasons for Issuing Warrants and Convertibles
			The Free Lunch Story
			The Expensive Lunch Story
			A Reconciliation
		25.8	Other Options
			The Call Provision on a Bond
			Put Bonds
			The Overallotment Option
			Insurance and Loan Guarantees
			Managerial Options
		25.9	Summary and Conclusions
		App 25A	The Black–Scholes Option Pricing Model
			Glossary
			Appendix A: Mathematical Tables
			Appendix B: Answers to Selected End-of-Chapter Problems
			Equation Index
			Name Index
			Subject Index