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Fundamentals of Corporate Finance, 5th edition

Published by Pearson (March 11, 2020) © 2021

  • Jonathan Berk Stanford University
  • Peter DeMarzo Stanford University
  • Jarrad Harford University of Washington

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For corporate finance or financial management courses.

Practice and connect to real-world financial decisions

Fundamentals of Corporate Finance offers a practical introduction to modern-day core principles. The text arms students with a problem-solving methodology, real-life financial management practices, and an overarching valuation framework that they can apply in their future careers.

Updated with new data, examples and exercises, the 5th Edition gives students the opportunity to practice and apply course concepts. It also connects them to the latest financial issues and policy in today's world of business.

Hallmark features of this title

Real-world coverage

  • Practitioner Interviews share insights from leaders in the field.
  • Financial Crisis boxes tie the material to aspects of the 2007 to 2009 financial crisis, helping students to understand what impact it had on financial systems.
  • General Interest boxes highlight timely content from financial publications that shed light on business problems and real company practices.

Practical applications

  • Integrated support for Microsoft® Excel® and a financial calculator show students how to use these technologies to solve problems.
  • Concept Check Questions test students' understanding and target areas in which they need further review.
  • Author-written, end-of-chapter problems allow instructors to assign material to students for homework and practice.

New and updated features of this title

Bridge theory and practice

  • EXPANDED: The Valuation Principle is presented as the foundation of all financial decision-making. It posits that a firm should take projects or make investments on the firm's value by comparing the costs and benefits in equivalent terms.
  • REVISED: Personal Finance GPS examples showcase the use of financial analysis in everyday life by setting problems in scenarios such as purchasing a new house or car, and saving for retirement.
  • REVISED: Common Mistake boxes alert students to frequently made mistakes stemming from misunderstanding core concepts and calculations.

Current and relevant

  • UPDATED: Coverage of the latest tax codes helps instructors keep their course current with up-to-date rulings and regulations.

Practical applications

  • UPDATED: Cases let students apply the material with realistic data-analyzing exercises and problems.
  • REVISED: Guided Problem Solutions accompany important concepts and use a consistent problem-solving methodology (Plan, Execute and Evaluate) to guide students to the correct answer.

Highlights of the DIGITAL UPDATE for MyLab Finance (available for Spring 2021 classes)

Instructors, contact your sales rep to ensure you have the most recent version of the course.

  • NEW: Corporate Finance Simulations have students apply key finance concepts based on real-world scenarios as well as receive instant feedback.

Features of MyLab Finance for the 5th Edition; published 2020

  • Pearson eText is an easy-to-use digital textbook, available with MyLab, which lets students read, highlight and take notes all in one place, even when offline.

PART 1: INTRODUCTION

  1. Corporate Finance and the Financial Manager
  2. Introduction to Financial Statement Analysis

PART 2: INTEREST RATES AND VALUING CASH FLOWS

  1. Time Value of Money: An Introduction
  2. Time Value of Money: Valuing Cash Flow Streams
  3. Interest Rates
  4. Bonds
  5. Stock Valuation

PART 3: VALUATION AND THE FIRM

  1. Investment Decision Rules
  2. Fundamentals of Capital Budgeting
  3. Stock Valuation: A Second Look

PART 4: RISK AND RETURN

  1. Risk and Return in Capital Markets
  2. Systematic Risk and the Equity Risk Premium
  3. The Cost of Capital

PART 5: LONG-TERM FINANCING

  1. Raising Equity Capital
  2. Debt Financing

PART 6: CAPITAL STRUCTURE AND PAYOUT POLICY

  1. Capital Structure
  2. Payout Policy

PART 7: FINANCIAL PLANNING AND FORECASTING

  1. Financial Modeling and Pro Forma Analysis
  2. Working Capital Management
  3. Short-Term Financial Planning

PART 8: SPECIAL TOPICS

  1. Option Applications and Corporate Finance
  2. Mergers and Acquisitions
  3. International Corporate Finance

CHAPTERS ON THE WEB

  1. Leasing
  2. Insurance and Risk Management
  3. Corporate Governance

About our authors

Jonathan Berk, Stanford University, is the A.P. Giannini Professor of Finance at the Graduate School of Business, Stanford University and is a Research Associate at the National Bureau of Economic Research. Prior to earning his PhD, he worked as an Associate at Goldman Sachs (where his education in finance really began). Professor Berk's research interests in finance include corporate valuation, capital structure, mutual funds, asset pricing, experimental economics and labor economics.

Peter DeMarzo, Stanford University, is the Mizuho Financial Group Professor of Finance and former Senior Associate Dean for Academic Affairs at the Stanford Graduate School of Business. He is also a Research Associate at the National Bureau of Economic Research. He currently teaches MBA and PhD courses in corporate finance and financial modeling. In addition to his experience at the Stanford Graduate School of Business, Professor DeMarzo has taught at the Haas School of Business and the Kellogg Graduate School of Management, and he was a National Fellow at the Hoover Institution.

Jarrad Harford, University of Washington, is the Marion B. Ingersoll Professor of Finance at the University of Washington. Prior to Washington, Professor Harford taught at the Lundquist College of Business at the University of Oregon. He received his PhD in Finance with a minor in Organizations and Markets from the University of Rochester. Harford has taught the core undergraduate finance course, Business Finance, for over 16 years, as well as an elective in mergers and acquisitions, and “Finance for Non-financial Executives” in the executive education program.

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