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FUNDAMENTALS OF CORPORATE FINANCE 13 EDITION ROSS, WESTERFIELD, AND JORDAN CHAPTERS 1-27
TABLE OF CONTENTS
Chapter 1: Introduction to Corporate Finance
Chapter 2: Financial Statements, Taxes, And Cash
Flow
Chapter 3: Working with Financial Statements
Chapter 4: Long-Term Financial Planning and
Growth
Chapter 5: Introduction to Valuation: The Time Value of Money
Chapter 6: Discounted Cash Flow Valuation
Chapter 7: Interest Rates and Bond Valuation
Chapter 8: Stock Valuation
Chapter 9: Net Present Value and Other Investment
Criteria
Chapter 10: Making Capital Investment Decisions
Chapter 11: Project Analysis and Evaluation
Chapter 12: Some Lessons from Capital Market History
Chapter 13: Return, Risk, And the Security Market
Line
Chapter 14: Cost of Capital
Chapter 15: Raising Capital
,Chapter 16: Financial Leverage and Capital Structure
Policy
Chapter 17: Dividends and Payout Policy
Chapter 18: Short-Term Finance and Planning
Chapter 19: Cash and Liquidity Management
Chapter20: Credit and Inventory Management
Chapter 21: International Corporate Finance
Chapter 22: Behavioral Finance: Implications for Financial Manage
Chapter 23: Enterprise Risk Management
Chapter 24:Options and Corporate Finance
Chapter 25: Option Valuation
Chapter 26: Mergers and Acquisitions
Chapter 27: Leasing
, CHAPTER 1:
INTRODUCTION TO CORPORATE FINANCE
Answers to Concepts Review and Critical Thinking Questions
1. Capital budgeting (deciding whether to expand a manufacturing plant), capital structure
(deciding whether to issue new equity and use the proceeds to retire outstanding debt), and
working capital management (modifying the firm’s credit collection policy with its customers).
2. Disadvantages: unlimited liability, limited life, difficulty in transferring ownership, hard to raise
capital funds. Some advantages: simpler, less regulation, the owners are also the managers,
sometimes personal tax rates are better than corporate tax rates.
3. The primary disadvantage of the corporate form is the double taxation to shareholders of
distributed earnings and dividends. Some advantages include: limited liability, ease of
transferability, ability to raise capital, unlimited life, and so forth.
4. In response to Sarbanes-Oxley, small firms have elected to go dark because of the costs of
compliance. The costs to comply with Sarbox can be several million dollars, which can be a
large percentage of a small firms profits. A major cost of going dark is less access to capital.
Since the firm is no longer publicly traded, it can no longer raise money in the public market.
Although the company will still have access to bank loans and the private equity market, the
costs associated with raising funds in these markets are usually higher than the costs of raising
funds in the public market.
5. The treasurer’s office and the controller’s office are the two primary organizational groups that
report directly to the chief financial officer. The controller’s office handles cost and
financialaccounting, tax management, and management information systems, while the
treasurer’s office is responsible for cash and credit management, capital budgeting, and
financial planning. Therefore, the study of corporate finance is concentrated within the
treasury group’s functions.
FUNDAMENTALS OF CORPORATE FINANCE 13 EDITION ROSS, WESTERFIELD, AND JORDAN CHAPTERS 1-27
TABLE OF CONTENTS
Chapter 1: Introduction to Corporate Finance
Chapter 2: Financial Statements, Taxes, And Cash
Flow
Chapter 3: Working with Financial Statements
Chapter 4: Long-Term Financial Planning and
Growth
Chapter 5: Introduction to Valuation: The Time Value of Money
Chapter 6: Discounted Cash Flow Valuation
Chapter 7: Interest Rates and Bond Valuation
Chapter 8: Stock Valuation
Chapter 9: Net Present Value and Other Investment
Criteria
Chapter 10: Making Capital Investment Decisions
Chapter 11: Project Analysis and Evaluation
Chapter 12: Some Lessons from Capital Market History
Chapter 13: Return, Risk, And the Security Market
Line
Chapter 14: Cost of Capital
Chapter 15: Raising Capital
,Chapter 16: Financial Leverage and Capital Structure
Policy
Chapter 17: Dividends and Payout Policy
Chapter 18: Short-Term Finance and Planning
Chapter 19: Cash and Liquidity Management
Chapter20: Credit and Inventory Management
Chapter 21: International Corporate Finance
Chapter 22: Behavioral Finance: Implications for Financial Manage
Chapter 23: Enterprise Risk Management
Chapter 24:Options and Corporate Finance
Chapter 25: Option Valuation
Chapter 26: Mergers and Acquisitions
Chapter 27: Leasing
, CHAPTER 1:
INTRODUCTION TO CORPORATE FINANCE
Answers to Concepts Review and Critical Thinking Questions
1. Capital budgeting (deciding whether to expand a manufacturing plant), capital structure
(deciding whether to issue new equity and use the proceeds to retire outstanding debt), and
working capital management (modifying the firm’s credit collection policy with its customers).
2. Disadvantages: unlimited liability, limited life, difficulty in transferring ownership, hard to raise
capital funds. Some advantages: simpler, less regulation, the owners are also the managers,
sometimes personal tax rates are better than corporate tax rates.
3. The primary disadvantage of the corporate form is the double taxation to shareholders of
distributed earnings and dividends. Some advantages include: limited liability, ease of
transferability, ability to raise capital, unlimited life, and so forth.
4. In response to Sarbanes-Oxley, small firms have elected to go dark because of the costs of
compliance. The costs to comply with Sarbox can be several million dollars, which can be a
large percentage of a small firms profits. A major cost of going dark is less access to capital.
Since the firm is no longer publicly traded, it can no longer raise money in the public market.
Although the company will still have access to bank loans and the private equity market, the
costs associated with raising funds in these markets are usually higher than the costs of raising
funds in the public market.
5. The treasurer’s office and the controller’s office are the two primary organizational groups that
report directly to the chief financial officer. The controller’s office handles cost and
financialaccounting, tax management, and management information systems, while the
treasurer’s office is responsible for cash and credit management, capital budgeting, and
financial planning. Therefore, the study of corporate finance is concentrated within the
treasury group’s functions.
