ISBN: 0-646-22845-5

OVERVIEW
The need to understand basic principles of Finance for first year Finance undergraduates with the driving force behind the original version of this book which was produced over a number of years without the use of Excel as a learning tool. The book has been totally revised but still includes lots of exercises and re-enforcement tests covering each of the topics at various stages, with Excel 2007 used extensively.
The workbook is divided into two sections, with the first one providing some Excel 2007 skills as well as some Finance principles which are used throughout. The second part covers the basic Finance topics found in most undergraduate courses. Some chapters provide limited opportunity to use Excel's massive calculation power, but do enable us to use its equally powerful graphical facilities.

(460 pages).

CONTENT

PART A - Some Tools

Chapter 1 - Excel 2007 - Basic Features
For people not too familiar with Excel, this is a walk around chapter illustrating the main features of the software including its graphing and calculation features, operational rules and printing features. It is not meant to replace a thorough Excel text but merely to focus on sections of the software which are particularly useful to us in this text. Of course I have included a section on the ever increasing menu options for spreadsheet formatting, calculation and control.

Chapter 2 - More Advanced Features of Excel
This chapter is really for those who are not frequent users of Excel but who want to be more competent at functions and formulae. The chapter examines a number of Excel functions which are of particular interest to us in Finance, though I have left the Finance functions themselves to another chapter. Here I cover logical functions, mathematical and simple statistical functions, using functions within functions, numeric and text functions. Finally I have included a short section on importing data into Excel for analysis through the Import Wizard feature.

Chapter 3 - Axioms of Finance
Finance has a few basic axioms which are worth consideration. Perhaps the most important is that related to individual behaviour. Coming from Economics as it did, Finance brought across the ideas of utility and the individual as both a consumer and an investor. This chapter also includes a look at the most important concept of the time value of money.

Chapter 4 - Excel's Finance Functions
Excel has some 50 financial functions from depreciation, through time value (both single sum and series functions) and DCF functions to bond valuation. The chapter includes many basic examples to illustrate both the concepts and the Excel functions which use them. Duration functions associated with MacCauley duration calculations are also covered.

Chapter 5 - Probability Concepts
Much of Finance is about the future, and the prediction of asset values and cash flows, and their associated risk. This chapter considers risk, uncertainty and probability as concepts, before looking at the Excel functions which allow simple application in Finance environments. Many of the distributions in common use are illustrated as well as the major descriptors of uncertainty.

PART B

Chapter 6 - Financial Futures and Indices
The chapter explains futures contracts and terminology before illustrating simple contract results using Excel. Futures market strategies including hedging are covered before considering ASX futures instruments which leads to the evaluation of indices and their construction. Valuation exercises in Excel include bank bill and share price index futures.

Chapter 7 - Capital Budgeting and Investment Appraisal
In this chapter two distinct corporate issues are covered. The first is concerned with calculating the weighted average cost of capital (WACC) and showing its importance for inter-company comparisons, and as a target value for deciding on optimum capital structures. The second section of the chapter examines long term investment applications where cash flow is king. Various methods to evaluate wealth creating opportunities are developed, either as new capital ventures, or as capital extensions. The chapter concludes by examining leasing and the primary question of whether to lease or buy.

Chapter 8 - Equity and Efficient Portfolios
Models to value equity are developed using the commonly used formal valuation models for publically listed company securities. Both individual shares in isolation as well as those within a portfolio are considered. The concept of correlation is used to build a Markowitz efficient portfolio. The idea of correlation between shares and share beta values are very important issues for both large fund managers and individual investors alike, and Excel provides tools to calculate both easily. Concepts of diversification and the risk-return trade-off are explored.

Chapter 9 - Options and Contingent Claims
This chapter begins by examining the basic pricing theory of options to value financial instruments such as warrants which have some option characteristics, including both Binomial and Black-Scholes approaches. The chapter then considers portfolio insurance strategies centred around the use of Call and Put options as part of portfolio management. The emphasis is on understanding the fundamental concept of option pricing, and the use of Excel to generate flexible solutions utilising common techniques.

Chapter 10 - Break-Even and Leverage
This chapter examines the simplest and the sophisticated approaches to break-even using the power of Excel, extending the concept of break-even to target values and to leverage. It begins by looking at both accounting and cash-flow break-even situations. Non-cash effect models are developed together with both operating and financial leverage consequences. The chapter includes non-linear cost and revenue calculations (using Excel graphing power and regression tools).

Chapter 11 - Dividend Policy and Valuation
The amount and the way in which a firm distributes dividend has been an important issue in Finance for many years. The chapter examines the central issues such as how the amount of dividend affects company share values (including Miller and Modigliani), the information value from patterns of dividend payment and the investor preferences for dividends, and the alternative consideration od dividends as residuals. The chapter also includes a Linter dividend model.

Chapter 12 - Mergers and Takeovers
The expression mergers and acquisitions refers to corporate growth through the acquisitions of third party organisations rather than internal organic expansion. Whether the process is friendly or hostile, it makes an important difference to shareholders and the size of their slice of the cake created by the acquisition, merger or takeover. The chapter introduces synergy, and the common methods of calculation before considering the forces which lead to its distribution.

Also examined are the alternative acquisition strategies such as cash, script and combinations.

Chapter 13 - Liquid Asset Management
After an overall review of liquidity management and an explanation of motives to hold liquid assets the chapter looks at short term cash budgets under certain and uncertain conditions. The chapter also includes a section on credit policy and its consequences for Accounts Receivable, Inventory and overall liquidity.

Chapter 14 - International Finance
Common calculations and concepts are covered in the chapter including spot and forward transactions and the rate calculations. Purchasing power parity is considered as well as hedging strategies. The idea of currency swaps is covered with Excel examples as well the overall management of exchange rate risk and hedging.

Chapter 15 - Personal Finance
This chapter is concerned mainly with personal asset management. The first topic looks at personal budgeting principles before examining the role of gearing in personal wealth creation. This is followed by tax calculation using the ATO formula for personal tax. The second part of the chapter looks at superannuation value forecasting, and share portfolio management using Excel, and finally the various insurance instruments available for risk cover and wealth creation.