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Spreadsheet Modeling And Decision Analysis Solutions 7th Edition – 1 MODELING SPREADSHEET IN CORPORATE FINANCE To accompany Corporate Finance by Ross, Westerfield, and Jaffe CRAIG W. HOLDEN Richard G. Brinkman Faculty Fellowship and Kelley Professor Indiana University School of Business Prentice Hall, Upper Saddle River, New Jersey 07458
3 TABLE OF CONTENTS Introduction PART 1 TIME VALUE OF MONEY Chapter 1 Chapter 2 Single Cash Flow 1.1 Present Value 1.2 Annuity Future Value Problem 2.1 Present Value 2.2 Future Value 2.3 Four Annuity Variable System Problem Chapter 3 Net Present Value 3.1 Constant Discount Rate 3.2 Constant Discount Rate General Problem Chapter 4 Real and Inflation 4.1 Constant Discount Rate 4.2 General Discount Rate Problem Chapter 5 Loan Depreciation 5.1 Fundamentals 5.2 Sensitivity Analysis Problems PART 2 Valuation Chapter 6 Valuation Bond 6.1 Fundamentals 6.2 Yield to Standard 6.3 System Index 4 6 Valuation Stock Problem 7.1 Two Levels 7.2 The Dynamic Graph Problem Chapter 8 The Yield Curve 8.1 Getting from the Bond List 8.2 Use to Price Coupon Bonds 8.3 Use to the problem of determining the rate of progress Chapter 9 Dynamics of the US Yield Curve 9.1 The Dynamic Problem Graph Dynamic
Spreadsheet Modeling And Decision Analysis Solutions 7th Edition
4 PART 3 CAPITAL ALLOCATION Chapter 10 Project NPV 10.1 Basics 10.2 Cash Flow Forecast 10.3 Working Capital 10.4 Sensitivity Analysis Problems Chapter 11 Cost Reduction Project 11.1 Concepts 11.2 Sensitivity Analysis Problems 11.2 Sensitivity Analysis 1.2 Details -study of profitability based on profitability Chapter 13 Three Valuation Methods 13.1 Present Value 13.2 Flow to Equity 13.3 Average Contributing Cost of Capital Matters PART 4 FINANCIAL PLANNING Chapter 14 Corporate Financial Planning 14.1 Real 14.2 Cash Flow 14.3 Cash Flow 14.4.4 Cash Flow 14.4.4 Cash Flow 14.4.4 Cash Flow 14.4.4 Fact . 3.4…………………………………………… ………………………………………… ………………….ny.. Pont System Ratio Analysis 15.1 Fundamental Problems Chapter 16 Life Cycle Financial Planning 16.1 Fundamental Problems
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5 PART 5 OPTIONS AND CORPORATE FINANCE Chapter 17 Binomial Option Pricing 17.1 Single Period 17.2 Multiperiod 17.3 Risk Neutral 17.4 Full Scale Real Data Problems Chapter 18 Black Skill Option Pricing 18.1 Basics 18.2 Chapter 18.2 Fundamentals 18.2 Chapter 18.2 Basic Level 18.2 Chapter 2. and Equity Valuation 19.1 Two Methods 19.2 The Impact of Risk Factors Chapter 20 Real Options 20.1 Using Black-Scholes 20.2 Using the Binomial Model 20.3 Awareness of the Standard Deviation Problem
6 Introduction For nearly 20 years, since the advent of the PC, Lotus 1-2-3, and Microsoft Excel in the 1980s, the spreadsheet model has been the mainstay of financial professionals in the business world. apply financial knowledge. Today, however, most Corporate Finance textbooks rely on calculators as their main tool and have little (if any) coverage of how to model spreadsheets. . This book fills that gap. It teaches students how to create financial models in Excel. Provide step-by-step instructions so that students can build their own models (active learning), rather than being given a canned template (passive learning). It progresses from simple examples to practical real-world applications. This includes almost all quantitative models in corporate finance. Why I wrote this book My sole aim is to change financial education from calculator to spreadsheet based. These changes will better prepare students for the business world of the 21st century. These changes will increase student satisfaction in the classroom by allowing for more practical, real-world applications and by enabling a more hands-on, hands-on approach to learning. There are many features that differentiate this book from others on the market: Teach by Example. I believe that the best way to learn spreadsheet modeling is by working through examples and solving many problems. This book develops a comprehensive, active learning approach. Active learning is an established way to improve student learning and student satisfaction with the course/instructor. When students build their own financial models, they really get it. As I say to my students, If you build, you will learn. A supplement to all popular Corporate Finance textbooks. This book is a supplement to be combined with the main textbook. This means you can use any book you like. You don’t have to convert. This also means you can use an additional approach to incorporating spreadsheet modeling. You can start modestly and build up from there. Alternative notation versions are available that match the notation of all popular corporate finance textbooks. Vanilla excel free. Other books on the market emphasize teaching students programming using Visual Basic for Applications (VBA) or using macros. In contrast, this book does everything in plain vanilla Excel. Although a minority of students like the program, most do not like it very much. Plain vanilla Excel has the advantage of being a very intuitive and easy-to-use environment that is accessible to everyone. It is fully capable of handling a wide range of applications, including very advanced ones. Plus, your students already know the basics of Excel and nothing else is considered. Students are expected to be able to enter formulas in cells and copy formulas from one cell to another. All other features of Excel (graphs, built-in functions, Solver, etc.) are explained in practice. Build from simple examples to practical, real-world applications. A common approach is to start with simple examples and build up to practical real-world applications. In many chapters, the previous spreadsheet model transitioned to the next more complex model. For example, about binomial option pricing gives advanced spreadsheet models as follows: (a.) one-period model with reconstructed portfolio, (b.) eight-period model with repeated portfolio, (c .) eight-period model with risk. – neutral probability, (d.) a full-size, fifty-period model with variance estimated from actual return data. Where possible, this book makes full-scale practical applications
7 using real data. Students enjoy learning practical applications that they can use in their future jobs. Employers like to hire students with spreadsheet modeling skills, who can be more productive faster. Changes in content as well. Spreadsheet modeling is not only a new medium, but an opportunity to cover some specific content items that require computer support to do so. For example, a real-time data spreadsheet model in Corporate Financial Planning uses three years of 10K historical data on Nike, Inc. (including each line of the income statement, balance sheet, and cash flow statement), create a complete financial statement. system (including linked financial ratios), and project financial statements three years later. The spreadsheet model in Lifecycle Financial Planning includes detailed treatment of federal and state tax returns, Social Security taxes and benefits, etc., which allows for rational analysis, retirement, and investment savings options throughout life. The spreadsheet model in US Yield Curve Dynamics shows you 30 years of US monthly yield curve history in minutes. The spreadsheet model in Three Valuation Techniques shows the modified Present Value equation, Flow to Equity, and Average Cost of Capital method, not only in perpetuity which is covered in many textbooks , but for two-phase projects in general. with an agreed cash flow over a clear foreseeable horizon, then an infinite horizon continuum. As a practical matter, all of these advanced applications require spreadsheet modeling. Idioms To Use In This Book There are a number of idioms in this book. Time passes over columns and variables down rows. When something happens over time, I let each column represent time. For example in capital budgeting, year 0 is in column B, year 1 is in column C, year 2 is in column D, and so on. Each row represents a different variable, which is usually identified in column A. This method organizes the spreadsheet. so common because of the way financial statements are organized. Color coding. A custom color scheme is used to describe the structure of the spreadsheet model. The printed book uses: (1) light gray shading for input values, (2) no shading (ie white) for output formulas, and (3) dark gray shading for final results (underline ). The electronic version of the book (PDF file) uses: (1) yellow shading for input values, (2) no shading (ie white) for throughput formulas, and (3) green shading for final results ( “below the line.”). Some spreadsheets include optional variables. The optional variant uses medium gray shading in the printed book and blue shading in the electronic version. Timeline technology. The most natural way to reduce cash flow in a spreadsheet model is the timeline method, where each column corresponds to a period (for example see the picture below).
8 Timeline methods handle the general case of time-varying discount rates as easily as the special case of constant discount rates. Usually, there is some information about the time pattern of the risk-free rate from the term structure of interest rates. Even just increasing the risk premium is constant, generating a time pattern of discount rates. There is no reason to throw this information away, when it is just as easy to include it in a
Spreadsheet Modeling And Decision Analysis A Practical Introduction To Business Analytics 8th Editio By Logitech
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