Corporate Finance

SEVENTH CANADIAN EDITION C O R P O R AT E F I N A N C E Stephen A. Ross Sloan School of Management, Massachusetts Institute of Technology Randolph W. Westerf  ield Marshall School of Business, University of Southern California Jeffrey F. Jaffe Wharton School of Business, University of Pennsylvania Gordon S. Roberts Schulich School of Business, York University Corporate Finance Seventh Canadian edition Copyright © 2015, 2011, 2008, 2005, 2003, 1999, 1995 by McGraw-Hill Ryerson Limited. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, or stored in a database or retrieval system, without the prior written permission of McGraw-Hill Ryerson Limited, or in the case of photocopying or other reprographic copying, a licence from The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright licence, visit www.accesscopyright.ca or call toll free to 1-800-893-5777. The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Ryerson, and McGraw-Hill Ryerson does not guarantee the accuracy of information presented at these sites. ISBN-13: 978-0-07-133957-5 ISBN-10: 0-07-133957-4 234567890M198765 Printed and bound in Canada. Care has been taken to trace ownership of copyright material contained in this text; however, the publisher will welcome any information that enables it to rectify any reference or credit for subsequent editions. Director of Product Management: Rhondda McNabb Senior Product Manager: Kimberley Veevers Senior Marketing Manager: Joy Armitage Taylor Product Developer: Erin Catto Photo/Permissions Research: Alison Lloyd Baker Senior Product Team Associate: Marina Seguin Supervising Editor: Joanne Limebeer Copy Editor: Julia Cochrane Production Coordinator: Scott Morrison Manufacturing Production Coordinator: Emily Hickey Cover Design: Peter Papayanakis Cover Image: Ivan Mikhaylov/Alamy Interior Design: Peter Papayanakis Page Layout: First Folio Resource Group, Inc. Printer: Marquis Library and Archives Canada Cataloguing in Publication Ross, Stephen A., author Corporate finance/Stephen A. Ross (Sloan School of Management, Massachusetts Institute of Technology), Randolph W. Westerfield (Marshall School of Business, University of Southern California), JeffreY F. Jaffe (Wharton School of Business, University of Pennsylvania), Gordon S. Roberts (Schulich School of Business, York University). — Seventh Canadian edition. Revision of: Corporate finance/Stephen A. Ross … [et al.]. — 6th Canadian ed. — Toronto: McGraw-Hill Ryerson, (c)2011. Includes bibliographical references and index. ISBN 978-0-07-133957-5 (bound) 1. Corporations—Finance—Textbooks. 2. Corporations—Canada— Finance—Textbooks. I. Westerfield, Randolph, author II. Jaffe, Jeffrey F., 1946-, author III. Roberts, Gordon S. (Gordon Sam), 1945-, author IV. Title. HG4026.R64 2014 658.15 C2014-905417-3 ABOUT THE AUTHORS STEPHEN A. ROSS  Sloan School of Management, Massachusetts Institute of Technology Stephen Ross is the Franco Modigliani Professor of Financial Economics at the Sloan School of Management, Massachusetts Institute of Technology. One of the most widely published authors in finance and economics, Professor Ross is recognized for his work in developing the arbitrage pricing theory, as well as for having made substantial contributions to the discipline through his research in signalling, agency theory, option pricing, and the theory of the term structure of interest rates, among other topics. A past president of the American Finance Association, he currently serves as an associate editor of several academic and practitioner journals. He is a trustee of CalTech and a director of the College R