· The Law of One Price: A Unifying Principle of Valuation. The Law of One Price is used as a framework, reflecting the modern idea that the absence of arbitrage is the unifying concept in valuation. This theme is explicitly introduced in Chapter 3, Arbitrage and Financial Decision Making, revisited in each Part Opener, and integrated throughout the text--motivating all major concepts. This methodology directly connects theory to practice, and unifies what might appear to students as disparate topics that comprise the course syllabus (corporate finance, investments, valuation).
· Teaching Students to Think Finance. In each chapter, an innovative set of learning aids teaches every student how to 'think finance.' Problem-solving study aids include:
§ Common Mistakes boxes point to frequently made errors stemming from misunderstood core concepts and calculations, as well as mistakes made in practice.
§ Worked Examples accompany every important concept using a procedure that illustrates both the Problem and the step-by-step Solution.
§ With a simplified presentation of mathematics, this text breaks the sink-or-swim trend found in most texts by systematically using Notation Boxes as well as Numbered and Labeled Equations.
§ Timelines are introduced in Chapter 4, The Time Value of Money,and consistently used throughout the book when appropriate. Stressing the importance of creating timelines for every problem that involves cash flows, each worked example involving a cash flow includes a timeline as the critical first step.
· Modern Research. Berk and DeMarzo introduce recent advances in finance research throughout the book. For example, Chapter 16, Financial Distress, Managerial Incentives, and Information, is a full-chapter treatment of the effects of financial distress, agency issues, and asymmetric information on the firm's choice of capital structure.
· Modern Practice. Throughout Corporate Finance the authors connect finance concepts to practice. Chapter 18, Capital Budgeting with Leverage, shows the relationship between the WACC, APV, and Flow-to-Equity methodologies, and stresses the role of the firms leverage policy. Then, a unique capstone to capital budgeting, Chapter 19, Valuation and Financial Modeling: A Case Study, illustrates the application and real-world implementation of valuation techniques.
· Applications that Reflect Real Practice.Corporate Finance highlights practices of actual companies and real people in the field with:
o Practitioner interviews
o Real-company chapter-opening examples
o Boxes that show concepts at work in business
· Options for Teaching Risk and Return. Chapter 3 briefly introduces the concept of risk and return. Using the no-arbitrage concept, the reasoning behind evaluating risk relative to a benchmark is explained conceptually and allows for use of the concept of risk and return in early chapters. Later, the structure of Part IV is flexible and allows instructors to opt for brief or comprehensive coverage of the topic.
· Emphasis of Capital Budgeting and Valuation. Capital budgeting and valuation is presented in two distinct stages. The first, which appears in Chapter 7, Fundamentals of Capital Budgeting, focuses on cash flows, while the second stage focuses on capital budgeting and valuation in the real world in Chapter 18, Capital Budgeting with Leverage and the capstone chapter 19, Valuation and Financial Modeling: A Case Study.
· MyFinanceLab: Hands-on Practice. Hands-off Grading. Because practice with homework problems is crucial to learning finance, each copy of Corporate Finance comes with MyFinanceLab, a fully integrated homework and tutorial system. MyFinanceLab revolutionizes homework and practice with a unique hint and partial credit system developed by Jonathon Berk and Peter DeMarzo. Find out more at www.myfinancelab.com