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Book Review: Applied Corporate Finance by Aswath Damodaran

Applied Corporate Finance extensively is a comprehensive text for all students and practitioners.

The contents include the foundations of corporate finance, the objective of decision making, the basics of risk, risk measurement and hurdle rates in practice, measuring return of investments, project interactions, side costs and side benefits, capital structure (overview of the financial decision, the optimal financial mix, the financing details) and dividend policy.

Ashwath Damodaran’s Applied Corporate Finance opens with:

“Every decision made in a business has a financial implication, and any decision that involves the use of money is a corporate financial decision. Defined broadly, everything that a business does fits under the rubric of corporate finance. It is in fact unfortunate that we even call the subject corporate finance, because it suggests to many observers a focus on how large corporations makes financial decisions and seems to exclude small and private businesses from its purview. All businesses have to invest their resources wisely, find the right kind and mix of financing to fund these investments and return cash to the owners if they are not good enough investments.”

Applied Corporate Finance extensively is a comprehensive text for all students and practitioners.

The contents include the foundations of corporate finance, the objective of decision making, the basics of risk, risk measurement and hurdle rates in practice, measuring return of investments, project interactions, side costs and side benefits, capital structure (overview of the financial decision, the optimal financial mix, the financing details) and dividend policy.

A valuable insight is that the author details principles and concepts. He then goes on to explain how it is in practice and why it is the way it is. Live case studies and pertinent questions are included for a fuller understanding of corporate finance.

Aswath Damodaran is the Kerschner Family Chair Professor of Finance at the Stern School of Business at New York University. He teaches the corporate finance and equity valuation courses in the MBA program. He received his MBA and Ph.D. from the University of California at Los Angeles. His research interests lie in valuation, portfolio management and applied corporate finance.

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