CORPORATE FINANCE
An Introduction
, The Prentice Hall Series in Finance
Alexander/Sharpe/Bailey Fabozzi/Modigliani/Jones/Ferri Hull Ogden/Jen/O’Connor
Fundamentals of Investments Foundations of Financial Markets Fundamentals of Futures and Advanced Corporate Finance
and Institutions Options Markets
Bear/Moldonado-Bear Pennacchi
Free Markets, Finance, Ethics, and Finkler Hull Theory of Asset Pricing
Law Financial Management for Options, Futures, and Other
Public, Health, and Not-for-Profit Derivatives Rejda
Berk/DeMarzo Organizations Principles of Risk Management
Corporate Finance * Hull and Insurance
Francis/Ibbotson Risk Management and Financial
Berk/DeMarzo Investments: A Global Perspective Institutions Schoenebeck
Corporate Finance: The Core * Interpreting and Analyzing
Fraser/Ormiston Keown/Martin/Petty/Scott Financial Statements
Berk/DeMarzo/Harford Understanding Financial Financial Management: Principles
Statements and Applications Scott/Martin/Petty/Keown/
Fundamentals of Corporate
Thatcher
Finance * Geisst Keown/Martin/Petty/Scott Cases in Finance
Investment Banking in the Foundations of Finance: The
Bierman/Smidt
Financial System Logic and Practice of Financial Seiler
The Capital Budgeting Decision:
Management Performing Financial Studies: A
Economic Analysis of Investment Gitman Methodological Cookbook
Projects Principles of Managerial Finance * Keown
Personal Finance: Turning Money Shapiro
Bodie/Merton/Cleeton Gitman
into Wealth Capital Budgeting and Investment
Financial Economics Principles of Managerial
Analysis
Finance—Brief Edition *
Kim/Nofsinger
Click/Coval Sharpe/Alexander/Bailey
Gitman/Joehnk Corporate Governance
The Theory and Practice Investments
of International Financial Fundamentals of Investing *
Levy/Post
Management Investments Solnik/McLeavey
Gitman/Madura
Global Investments
Introduction to Finance
Copeland/Weston/Shastri May/May/Andrew
Financial Theory and Corporate Guthrie/Lemon Effective Writing: A Handbook for Stretcher/Michael
Policy Mathematics of Interest Rates and Finance People Cases in Financial Management
Finance Titman/Martin
Cox/Rubinstein Madura
Options Markets Haugen Personal Finance Valuation: The Art and Science of
The Inefficient Stock Market: Corporate Investment Decisions
Dorfman What Pays Off and Why Marthinsen
Risk Takers: Uses and Abuses of Trivoli
Introduction to Risk Management
Haugen Financial Derivatives Personal Portfolio Management:
and Insurance
Modern Investment Theory Fundamentals and Strategies
Dietrich McDonald
Haugen Derivatives Markets Van Horne
Financial Services and Financial
The New Finance: Overreaction, Financial Management and Policy
Institutions: Value Creation in
Complexity, and Uniqueness McDonald
Theory and Practice Van Horne
Fundamentals of Derivatives
Holden Markets Financial Market Rates and Flows
Dufey/Giddy
Excel Modeling and Estimation
Cases in International Finance Megginson Van Horne/Wachowicz
in the Fundamentals of Corporate
Corporate Finance Theory Fundamentals of Financial
Eakins Finance
Management
Finance in .learn Holden Melvin
Excel Modeling and Estimation in International Money and Finance Vaughn
Eiteman/Stonehill/Moffett Financial Planning for the
the Fundamentals of Investments
Multinational Business Finance Mishkin/Eakins Entrepreneur
Holden Financial Markets and Institutions
Emery/Finnerty/Stowe Excel Modeling and Estimation in Welch
Corporate Financial Management Investments Moffett Corporate Finance:
Cases in International Finance An Introduction *
Fabozzi Holden
Bond Markets: Analysis and Excel Modeling and Estimation in Moffett/Stonehill/Eiteman Weston/Mitchel/Mulherin
Strategies Corporate Finance Fundamentals of Multinational Takeovers, Restructuring, and
Finance Corporate Governance
Fabozzi/Modigliani Hughes/MacDonald
Capital Markets: Institutions and International Banking: Text and Nofsinger Winger/Frasca
Instruments Cases Psychology of Investing Personal Finance
* denotes titles Log onto www.myfinancelab.com to learn more
, CORPORATE FINANCE
An Introduction
Ivo Welch
BROWN UNIVERSITY
PRENTICE HALL
New York Boston San Francisco
London Toronto Sydney Tokyo Singapore Madrid
Mexico City Munich Paris Cape Town Hong Kong Montreal
, Editor in Chief: Donna Battista
Executive Development Editor: Mary Clare McEwing
Managing Editor: Jeff Holcomb
Senior Production Supervisor: Kathryn Dinovo
Supplements Supervisor: Heather McNally
Director of Media: Susan Schoenberg
Senior Media Producer: Bethany Tidd
Associate Media Producer: Miguel Leonarte
Marketing Assistant: Ian Gold
Senior Author Support/Technology Specialist: Joe Vetere
Senior Prepress Supervisor: Caroline Fell
Rights and Permissions Advisor: Dana Weightman
Senior Manufacturing Buyer: Carol Melville
Senior Media Buyer: Ginny Michaud
Senior Designer: Barbara Atkinson
Text and Cover Designer: Leslie Haimes
Production Coordination, Composition, and Art: Windfall Software, using ZzTEX
Cover and Text Image: © La Fleur Studio/Images.com
Copyright © 2009 Pearson Education, Inc. All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written permission of the
publisher. Printed in the United States of America. For information on obtaining permission for use of
material in this work, please submit a written request to Pearson Education, Inc., Rights and Contracts
Department, 501 Boylston Street, Suite 900, Boston, MA 02116, fax your request to 617-671-3447, or
e-mail at http://www.pearsoned.com/legal/permissions.htm.
Many of the designations used by manufacturers and sellers to distinguish their products are claimed as
trademarks. Where those designations appear in this book, and the publisher was aware of a trademark
claim, the designations have been printed in initial caps or all caps.
Library of Congress Cataloging-in-Publication Data
Welch, Ivo.
Corporate finance : an introduction / Ivo Welch.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-321-27799-2 (alk. paper)
ISBN-10: 0-321-27799-6 (alk. paper)
1. Corporations–Finance. I. Title.
HG4026.W434 2009
650.15—dc22
2008024981
1 2 3 4 5 6 7 8 9 10—CRK—12 11 10 09 08
www.pearsonhighered.com ISBN-10: 0-321-27799-6
ISBN-13: 978-0-321-27799-2
An Introduction
, The Prentice Hall Series in Finance
Alexander/Sharpe/Bailey Fabozzi/Modigliani/Jones/Ferri Hull Ogden/Jen/O’Connor
Fundamentals of Investments Foundations of Financial Markets Fundamentals of Futures and Advanced Corporate Finance
and Institutions Options Markets
Bear/Moldonado-Bear Pennacchi
Free Markets, Finance, Ethics, and Finkler Hull Theory of Asset Pricing
Law Financial Management for Options, Futures, and Other
Public, Health, and Not-for-Profit Derivatives Rejda
Berk/DeMarzo Organizations Principles of Risk Management
Corporate Finance * Hull and Insurance
Francis/Ibbotson Risk Management and Financial
Berk/DeMarzo Investments: A Global Perspective Institutions Schoenebeck
Corporate Finance: The Core * Interpreting and Analyzing
Fraser/Ormiston Keown/Martin/Petty/Scott Financial Statements
Berk/DeMarzo/Harford Understanding Financial Financial Management: Principles
Statements and Applications Scott/Martin/Petty/Keown/
Fundamentals of Corporate
Thatcher
Finance * Geisst Keown/Martin/Petty/Scott Cases in Finance
Investment Banking in the Foundations of Finance: The
Bierman/Smidt
Financial System Logic and Practice of Financial Seiler
The Capital Budgeting Decision:
Management Performing Financial Studies: A
Economic Analysis of Investment Gitman Methodological Cookbook
Projects Principles of Managerial Finance * Keown
Personal Finance: Turning Money Shapiro
Bodie/Merton/Cleeton Gitman
into Wealth Capital Budgeting and Investment
Financial Economics Principles of Managerial
Analysis
Finance—Brief Edition *
Kim/Nofsinger
Click/Coval Sharpe/Alexander/Bailey
Gitman/Joehnk Corporate Governance
The Theory and Practice Investments
of International Financial Fundamentals of Investing *
Levy/Post
Management Investments Solnik/McLeavey
Gitman/Madura
Global Investments
Introduction to Finance
Copeland/Weston/Shastri May/May/Andrew
Financial Theory and Corporate Guthrie/Lemon Effective Writing: A Handbook for Stretcher/Michael
Policy Mathematics of Interest Rates and Finance People Cases in Financial Management
Finance Titman/Martin
Cox/Rubinstein Madura
Options Markets Haugen Personal Finance Valuation: The Art and Science of
The Inefficient Stock Market: Corporate Investment Decisions
Dorfman What Pays Off and Why Marthinsen
Risk Takers: Uses and Abuses of Trivoli
Introduction to Risk Management
Haugen Financial Derivatives Personal Portfolio Management:
and Insurance
Modern Investment Theory Fundamentals and Strategies
Dietrich McDonald
Haugen Derivatives Markets Van Horne
Financial Services and Financial
The New Finance: Overreaction, Financial Management and Policy
Institutions: Value Creation in
Complexity, and Uniqueness McDonald
Theory and Practice Van Horne
Fundamentals of Derivatives
Holden Markets Financial Market Rates and Flows
Dufey/Giddy
Excel Modeling and Estimation
Cases in International Finance Megginson Van Horne/Wachowicz
in the Fundamentals of Corporate
Corporate Finance Theory Fundamentals of Financial
Eakins Finance
Management
Finance in .learn Holden Melvin
Excel Modeling and Estimation in International Money and Finance Vaughn
Eiteman/Stonehill/Moffett Financial Planning for the
the Fundamentals of Investments
Multinational Business Finance Mishkin/Eakins Entrepreneur
Holden Financial Markets and Institutions
Emery/Finnerty/Stowe Excel Modeling and Estimation in Welch
Corporate Financial Management Investments Moffett Corporate Finance:
Cases in International Finance An Introduction *
Fabozzi Holden
Bond Markets: Analysis and Excel Modeling and Estimation in Moffett/Stonehill/Eiteman Weston/Mitchel/Mulherin
Strategies Corporate Finance Fundamentals of Multinational Takeovers, Restructuring, and
Finance Corporate Governance
Fabozzi/Modigliani Hughes/MacDonald
Capital Markets: Institutions and International Banking: Text and Nofsinger Winger/Frasca
Instruments Cases Psychology of Investing Personal Finance
* denotes titles Log onto www.myfinancelab.com to learn more
, CORPORATE FINANCE
An Introduction
Ivo Welch
BROWN UNIVERSITY
PRENTICE HALL
New York Boston San Francisco
London Toronto Sydney Tokyo Singapore Madrid
Mexico City Munich Paris Cape Town Hong Kong Montreal
, Editor in Chief: Donna Battista
Executive Development Editor: Mary Clare McEwing
Managing Editor: Jeff Holcomb
Senior Production Supervisor: Kathryn Dinovo
Supplements Supervisor: Heather McNally
Director of Media: Susan Schoenberg
Senior Media Producer: Bethany Tidd
Associate Media Producer: Miguel Leonarte
Marketing Assistant: Ian Gold
Senior Author Support/Technology Specialist: Joe Vetere
Senior Prepress Supervisor: Caroline Fell
Rights and Permissions Advisor: Dana Weightman
Senior Manufacturing Buyer: Carol Melville
Senior Media Buyer: Ginny Michaud
Senior Designer: Barbara Atkinson
Text and Cover Designer: Leslie Haimes
Production Coordination, Composition, and Art: Windfall Software, using ZzTEX
Cover and Text Image: © La Fleur Studio/Images.com
Copyright © 2009 Pearson Education, Inc. All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written permission of the
publisher. Printed in the United States of America. For information on obtaining permission for use of
material in this work, please submit a written request to Pearson Education, Inc., Rights and Contracts
Department, 501 Boylston Street, Suite 900, Boston, MA 02116, fax your request to 617-671-3447, or
e-mail at http://www.pearsoned.com/legal/permissions.htm.
Many of the designations used by manufacturers and sellers to distinguish their products are claimed as
trademarks. Where those designations appear in this book, and the publisher was aware of a trademark
claim, the designations have been printed in initial caps or all caps.
Library of Congress Cataloging-in-Publication Data
Welch, Ivo.
Corporate finance : an introduction / Ivo Welch.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-321-27799-2 (alk. paper)
ISBN-10: 0-321-27799-6 (alk. paper)
1. Corporations–Finance. I. Title.
HG4026.W434 2009
650.15—dc22
2008024981
1 2 3 4 5 6 7 8 9 10—CRK—12 11 10 09 08
www.pearsonhighered.com ISBN-10: 0-321-27799-6
ISBN-13: 978-0-321-27799-2
