Finance for Strategic Decision Making demystifies and clarifies for non-financial executives the basics of financial analysis. It shows how they can make important financial decisions that can critically enhance their institutions ability to respond to competitive challenges, undertake new projects, overcome financial setbacks, and most importantly, create shareholder value. Written by M. P. Narayanan and Vikram K. Nandatwo of the countrys leading authorities on financial strategythis book offers a practical guide for using financial analysis to enhance strategicdecision making. The book includes a coherent framework that outlines practical and intellectually sound guidance for executives who must make strategic decisions.Finance for Strategic Decision MakingExplains the role of finance in corporate strategyOffers guidance on resource allocation decisionsExplores how to determine the right balance of debt and equity capital to maximize firm valueDemonstrates how to use payout policy as a strategic toolClarifies if a merger, acquisition, or divestiture is in the best interest of an organizationShows how to manage risk

Reveals how to measure value created and the effectiveness of upper level management

M. P. Narayanan is professor of finance and chair of the finance department at the University of Michigan Business School. He is the faculty director of the Finance for Non-Financial Managers program and the Finance for Strategic Decision-Making program.
Vikram K. Nanda is associate professor of finance at the University of Michigan Business School.

Series Foreword xi

Preface xiii

1 Finance and Corporate Strategy 1

2 The Resource Allocation Decision 13

3 Cost of Capital 55

4 Capital Structure and Financing 75

5 Payout Policy 113

6 Mergers and Acquisitions 137

7 Divestitures 179

8 Risk Management 211

9 Performance Evaluation 247

Notes 285

The Authors 291

Index 293