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Corporate Finance
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Let me begin this preface with a confession of a few of my own biases. First, I
believe that theory and the models that flow from it should provide the tools to
understand, analyze, and solve problems. The test of a model or theory then should not be
based on its elegance but on its usefulness in problem solving. Second, there is little in
corporate financial theory that is new and revolutionary. The core principles of corporate
finance are common sense and have changed little over time. That should not be
surprising. Corporate finance is only a few decades old, and people have been running
businesses for thousands of years; it would be exceedingly presumptuous of us to believe
that they were in the dark until corporate finance theorists came along and told them what
to do. To be fair, it is true that corporate financial theory has made advances in taking
commonsense principles and providing structure, but these advances have been primarily
on the details. The story line in corporate finance has remained remarkably consistent
over time