The late Simon Benninga was Professor of Finance and Director of the Sofaer International MBA program at the Faculty of Management at Tel-Aviv University. For many years he was a Visiting Professor at the Wharton School of the University of Pennsylvania. Tal Mofkadi is an Assistant Professor in the School of Finance in the Faculty of Management at Tel Aviv University, University of Amsterdam, and Nagoya University of Business and Commerce, and the managing partner of Numerics, an economic and financial consultancy firm.
Preface and Acknowledgments xix
Before All Else 1
I Corporate Finance 13
1 Basic Financial Analysis 15
2 Corporate Valuation Overview 53
3 Calculating the Weighted Average Cost of Capital (WACC) 73
4 Pro Forma Analysis and Valuation Based on the Discounted Cash Flow
Approach 111
5 Building a Pro Forma Model: The Case of Merck 145
6 Financial Analysis of Leasing 161
II Bonds 177
7 Bond's Duration 179
8 Modeling the Term Structure 207
9 Calculating Default-Adjusted Expected Bond Returns 231
III Portfolio Theory 253
10 Portfolio Models--Introduction 255
11 Efficient Portfolios and the Efficient Frontier 287
12 Calculating the Variance-Covariance Matrix 337
13 Estimating Betas and the Security Market Line 357
14 Event Studies 377
15 The Black-Litterman Approach to Portfolio Optimization 405
IV Options 435
16 Introduction to Options 437
17 The Binomial Option Pricing Model 459
18 The Black-Scholes Model 499
19 Option Greeks 537
20 Real Options 569
V Monte Carlo Methods 591
21 Generating and Using Random Numbers 593
22 An Introduction to Monte Carlo Methods 639
23 Simulating Stock Prices 661
24 Monte Carlo Simulations for Investments 689
25 Value at Risk (VaR) 715
26 Replicating Options and Option Strategies 733
27 Using Monte Carlo Methods for Option Pricing 765
VI Technical 829
28 Data Tables 831
29 Matrices 849
30 Excel Functions 859
31 Array Functions 905
32 Some Excel Hints 919
33 Essentials of R Programming 951
Selected References 963
Index 975
