Excel Modeling in Corporate Finance, 5th Edition PDF by Craig W. Holden

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Excel Modeling in Corporate Finance, Fifth Edition

By Craig W. Holden

Excel Modeling in Corporate Finance 5th Edition

Contents:

Preface ……………………………………………………………………………. 8

Fifth Edition Changes ……………………………………………………………………………. 8

Ready-To-Build Spreadsheets ………………………………………………………………… 8

What is Unique about This Book ………………………………………………………….. 11

Conventions Used in This Book …………………………………………………………….. 12

Craig’s Challenge ………………………………………………………………………………… 14

ExcelTM Modeling Books ………………………………………………………………………. 14

Suggestions for Faculty Members …………………………………………………………. 14

Acknowledgments ………………………………………………………………………………… 15

About The Author …………………………………………………………. 17

PART 1 TIME VALUE OF MONEY …. 18

Chapter 1 Single Cash Flow …………………………………………… 18

1.1 Present Value …………………………………………………………………………………. 18

1.2 Future Value ………………………………………………………………………………….. 19

Problems ……………………………………………………………………………………………… 20

Chapter 2 Annuity ………………………………………………………… 21

2.1 Present Value …………………………………………………………………………………. 21

2.2 Future Value ………………………………………………………………………………….. 22

2.3 System of Four Annuity Variables …………………………………………………… 23

Problems ……………………………………………………………………………………………… 24

Chapter 3 NPV Using Constant Discounting ………………….. 25

3.1 Nominal Rate …………………………………………………………………………………. 25

3.2 Real Rate ……………………………………………………………………………………….. 26

Problems ……………………………………………………………………………………………… 27

Chapter 4 NPV Using General Discounting ……………………. 28

4.1 Nominal Rate …………………………………………………………………………………. 28

4.2 Real Rate ……………………………………………………………………………………….. 30

Problems ……………………………………………………………………………………………… 32

Chapter 5 Loan Amortization ……………………………………….. 33

5.1 Basics …………………………………………………………………………………………….. 33

5.2 Sensitivity Analysis …………………………………………………………………………. 34

Problems ……………………………………………………………………………………………… 36

Chapter 6 Lease Vs. Buy ……………………………………………….. 37

6.1 Car ………………………………………………………………………………………………… 37

6.2 Corporate ………………………………………………………………………………………. 37

Problems ……………………………………………………………………………………………… 39

PART 2 VALUATION ………………………. 40

Chapter 7 Bond Valuation …………………………………………….. 40

7.1 Annual Payments ……………………………………………………………………………. 40

7.2 EAR, APR, and Foreign Currencies ………………………………………………… 41

7.3 Duration and Convexity ………………………………………………………………….. 46

7.4 Price Sensitivity ……………………………………………………………………………… 48

7.5 System of Five Bond Variables ………………………………………………………… 50

Problems ……………………………………………………………………………………………… 51

Chapter 8 Estimating the Cost of Capital ………………………. 54

8.1 Static CAPM Using Fama-MacBeth Method ……………………………………. 54

8.2 APT or Intertemporal CAPM Using Fama-McBeth Method …………….. 58

Problems ……………………………………………………………………………………………… 63

Chapter 9 Stock Valuation …………………………………………….. 64

9.1 Dividend Discount Model ………………………………………………………………… 64

Problems ……………………………………………………………………………………………… 65

Chapter 10 Firm and Project Valuation …………………………. 66

10.1 Cash Flows for Five Equivalent Methods ……………………………………….. 66

10.2 Adjusted Present Value …………………………………………………………………. 69

10.3 Free Cash Flow To Equity …………………………………………………………….. 70

10.4 Free Cash Flow to the Firm …………………………………………………………… 71

10.5 Dividend Discount Model ………………………………………………………………. 72

10.6 Residual Income ……………………………………………………………………………. 73

10.7 Five Equivalent Methods ………………………………………………………………. 74

Problems ……………………………………………………………………………………………… 83

Appendix: Reconciling the Residual Income Method with Other

Approaches to Valuing Firms or Projects ……………………………………………… 84

Chapter 11 The Yield Curve ………………………………………….. 90

11.1 Obtaining It From Treasury Bills and Strips ………………………………….. 90

11.2 Using It To Price A Coupon Bond………………………………………………….. 91

11.3 Using It To Determine Forward Rates …………………………………………… 92

Problems ……………………………………………………………………………………………… 93

Chapter 12 US Yield Curve Dynamics …………………………… 94

12.1 Dynamic Chart……………………………………………………………………………… 94

Problems ……………………………………………………………………………………………… 99

PART 3 CAPITAL STRUCTURE ……. 101

Chapter 13 Capital Structure ……………………………………….101

13.1 Modigliani-Miller With No Taxes ………………………………………………… 101

13.2 Modigliani-Miller With Corporate Taxes …………………………………….. 103

13.3 Trade-off Model: Tax Shield vs. Distress Cost ………………………………. 105

Problems ……………………………………………………………………………………………. 107

PART 4 CAPITAL BUDGETING ……. 108

Chapter 14 Project NPV ……………………………………………….108

14.1 Basics …………………………………………………………………………………………. 108

14.2 Forecasting Cash Flows ……………………………………………………………….. 111

14.3 Working Capital …………………………………………………………………………. 112

14.4 Sensitivity Analysis ……………………………………………………………………… 114

Problems ……………………………………………………………………………………………. 117

Chapter 15 Cost-Reducing Project ……………………………….118

15.1 Basics …………………………………………………………………………………………. 118

15.2 Sensitivity Analysis ……………………………………………………………………… 121

Problems ……………………………………………………………………………………………. 122

Chapter 16 Break-Even Analysis ………………………………….123

16.1 Based On Accounting Profit ………………………………………………………… 123

16.2 Based On NPV ……………………………………………………………………………. 126

Problems ……………………………………………………………………………………………. 130

PART 5 FINANCIAL PLANNING ….. 131

Chapter 17 Corporate Financial Planning …………………….131

17.1 Actual …………………………………………………………………………………………. 131

17.2 Forecast ……………………………………………………………………………………… 134

17.3 Cash Flow …………………………………………………………………………………… 138

17.4 Ratios …………………………………………………………………………………………. 140

17.5 Sensitivity …………………………………………………………………………………… 142

17.6 Full-Scale Estimation ………………………………………………………………….. 143

Problems ……………………………………………………………………………………………. 149

Chapter 18 Du Pont System Of Ratio Analysis ………………152

18.1 Basics …………………………………………………………………………………………. 152

Problems ……………………………………………………………………………………………. 153

Chapter 19 Life-Cycle Financial Planning …………………….154

19.1 Taxable Vs. Traditional Vs. Roth Savings …………………………………….. 154

19.2 Basic Life-Cycle Planning ……………………………………………………………. 156

19.3 Full-Scale Life-Cycle Planning …………………………………………………….. 158

Problems ……………………………………………………………………………………………. 165

PART 6 INTERNATIONAL CORPORATE FINANCE ……………….. 166

Chapter 20 International Parity ……………………………………166

20.1 System of Four Parity Conditions ………………………………………………… 166

20.2 Estimating Future Exchange Rates ………………………………………………. 168

Problems ……………………………………………………………………………………………. 169

PART 7 OPTIONS AND CORPORATE

FINANCE ……………………………………….. 170

Chapter 21 Binomial Option Pricing …………………………….170

21.1 Estimating Volatility …………………………………………………………………… 170

21.2 Single Period ………………………………………………………………………………. 171

21.3 Multi-Period ……………………………………………………………………………….. 174

21.4 Risk Neutral ……………………………………………………………………………….. 178

21.5 Average of N and N-1 ………………………………………………………………….. 181

21.6 Convergence to Normal ……………………………………………………………….. 183

21.7 American With Discrete Dividends ………………………………………………. 185

21.8 Full-Scale ……………………………………………………………………………………. 189

Problems ……………………………………………………………………………………………. 194

Chapter 22 Real Options ………………………………………………196

22.1 Option To Abandon …………………………………………………………………….. 196

22.2 Option to Expand ……………………………………………………………………….. 197

22.3 Option to Contract ……………………………………………………………………… 198

22.4 Option To Choose ……………………………………………………………………….. 199

22.5 Compound Option ………………………………………………………………………. 201

Problems ……………………………………………………………………………………………. 204

Chapter 23 Black-Scholes Option Pricing ……………………..206

23.1 Basics …………………………………………………………………………………………. 206

23.2 Continuous Dividend …………………………………………………………………… 207

23.3 Implied Volatility ………………………………………………………………………… 211

Problems ……………………………………………………………………………………………. 213

Chapter 24 Debt And Equity Valuation ………………………..215

24.1 Two Methods ………………………………………………………………………………. 215

24.2 Impact of Risk …………………………………………………………………………….. 217

Problems ……………………………………………………………………………………………. 218

PART 8 EXCEL SKILLS ………………… 219

Chapter 25 Useful Excel Tricks …………………………………….219

25.1 Quickly Delete The Instructions and Arrows ………………………………… 219

25.2 Freeze Panes ……………………………………………………………………………….. 219

25.3 Spin Buttons and the Developer Tab ……………………………………………. 220

25.4 Option Buttons and Group Boxes ………………………………………………… 221

25.5 Scroll Bar ……………………………………………………………………………………. 223

25.6 Install Solver or the Analysis ToolPak ………………………………………….. 224

25.7 Format Painter……………………………………………………………………………. 224

25.8 Conditional Formatting ………………………………………………………………. 225

25.9 Fill Handle ………………………………………………………………………………….. 226

25.10 2-D Scatter Chart ……………………………………………………………………… 226

25.11 3-D Surface Chart ……………………………………………………………………… 228

DOWNLOADABLE CONTENTS

Excel Modeling in Corporate Finance Fifth Edition.pdf

Ready-To-Build spreadsheets available in both XLSX

and XLS file formats:

Ch 01 Single Cash Flow – Ready-To-Build.xlsx

Ch 02 Annuity – Ready-To-Build.xlsx

Ch 03 NPV Using Constant Discounting – Ready-To-Build.xlsx

Ch 04 NPV Using General Discounting – Ready-To-Build.xlsx

Ch 05 Loan Amortization – Ready-To-Build.xlsx

Ch 06 Lease Vs Buy – Ready-To-Build.xlsx

Ch 07 Bond Valuation – Ready-To-Build.xlsx

Ch 08 Estimating the Cost of Capital – Ready-To-Build.xlsx

Ch 09 Stock Valuation – Ready-To-Build.xlsx

Ch 10 Firm and Project Valuation – Ready-To-Build.xlsx

Ch 11 The Yield Curve – Ready-To-Build.xlsx

Ch 12 US Yield Curve Dynamics – Ready-To-Build.xlsx

Ch 13 Capital Structure – Ready-To-Build.xlsx

Ch 14 Project NPV – Ready-To-Build.xlsx

Ch 15 Cost-Reducing Project – Ready-To-Build.xlsx

Ch 16 Break-Even Analysis – Ready-To-Build.xlsx

Ch 17 Corporate Financial Planning – Ready-To-Build.xlsx

Ch 18 Du Pont System of Ratio Analysis – Ready-To-Build.xlsx

Ch 19 Life-Cycle Financial Planning – Ready-To-Build.xlsx

Ch 20 International Parity – Ready-To-Build.xlsx

Ch 21 Binomial Option Pricing – Ready-To-Build.xlsx

Ch 22 Real Options – Ready-To-Build.xlsx

Ch 23 Black-Scholes Option Pricing – Ready-To-Build.xlsx

Ch 24 Debt and Equity Valuation – Ready-To-Build.xlsx

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