Robert Parrino - Fundamentals of Corporate Finance

Fourth Edition

ROBERT PARRINO

Department Chair and Lamar Savings
Centennial Professor of Finance
University of Texas at Austin

The CFA Institute Materials used in this book are reproduced and republished from the CFA Program Materials with permission from the CFA Institute. The authors and publisher are grateful for permission to use this material.

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ISBN: 978-1-119-37140-3

Printed in the United States of America

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ROBERT PARRINO

To my parents, whose life-long support and commitment to education inspired me to become an educator, and to my wife, Emily, for her unending support.

THOMAS BATES

To my wife, Emi, and our daughters, Abigail and Lillian. Your support, patience, fun, and friendship make me a better educator, scholar, and person.

STUART GILLAN

To the memory of my father, and to my family for their never-ending support and encouragement.

DAVID KIDWELL

To my parents, Dr. William and Margaret Kidwell, for their endless support of my endeavors; to my son, David Jr., of whom I am very proud; and to my wife, Jillinda, who is the joy of my life.

ROBERT PARRINO

Department Chair and Lamar Savings Centennial Professor of Finance Director, Hicks, Muse, Tate & Furst Center for Private Equity Finance McCombs School of Business, University of Texas at Austin

A member of the faculty at University of Texas since 1992, Dr. Parrino teaches courses in regular degree and executive education programs at the University of Texas, as well as in customized executive education courses for industrial, financial, and professional firms. He has also taught at the University of Chicago, University of Rochester, and IMADEC University in Vienna. Dr. Parrino has received numerous awards for teaching excellence at the University of Texas from students, faculty, and the Texas Exes (alumni association).

Dr. Parrino has been involved in advancing financial education outside of the classroom in a variety of ways. As a Chartered Financial Analyst (CFA) charterholder, he has been very active with the CFA Institute, having been a member of the candidate curriculum committee, served as a regular speaker at the annual Financial Analysts Seminar, spoken at over 20 Financial Analyst Society meetings, and served as a member of the planning committee for the CFA Institute's Annual Meeting. In addition, Dr. Parrino is the founding director of the Hicks, Muse, Tate & Furst Center for Private Equity Finance at the University of Texas. The center sponsors conferences and other educational activities in areas related to private equity finance. Dr. Parrino was Vice President for Financial Education of the Financial Management Association (FMA) from 2008 to 2010 and an academic director of the FMA from 2011 to 2013. In 2017 he was elected to be VP-Program for the 2019 FMA annual meeting.

Dr. Parrino also co-founded the Financial Research Association and is Associate Editor of the Journal of Corporate Finance. Dr. Parrino's research focus includes corporate governance, financial policies, restructuring, mergers and acquisitions, and private equity markets. He has published his research in a number of journals, including the Journal of Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Journal of Law and Economics, Journal of Portfolio Management, and Financial Management. Dr. Parrino has won a number of awards for his research, including the 2013-2014 Career Award for Outstanding Research Contributions at the McCombs School of Business.

Dr. Parrino has experience in the application of corporate finance concepts in a variety of business situations. Since entering the academic profession, he has been retained as an advisor on valuation issues concerning businesses with enterprise values ranging to more than $1 billion and has consulted in areas such as corporate financing, compensation, and corporate governance. Dr. Parrino was previously President of Sprigg Lane Financial, Inc., a financial consulting firm with offices in Charlottesville, Virginia, and New York City. While at Sprigg Lane, he was on the executive, banking, and portfolio committees of the holding company that owns Sprigg Lane. Before joining Sprigg Lane, Dr. Parrino was on the Corporate Business Planning and Development staff at Marriott Corporation. At Marriott, he conducted fundamental business analyses and preliminary financial valuations of new business development opportunities and potential acquisitions. Dr. Parrino holds a B.S. in chemical engineering from Lehigh University, an MBA degree from The College of William and Mary, and M.S. and Ph.D. degrees in applied economics and finance, respectively, from University of Rochester.