Test Bank for Fundamentals of Financial Management, 16th Edition by Eugene F. Brigham.pdf

Instructor’s Manual k




Fundamentals of Finan k k




cial Management k




twelfth edition k




James C. Van Horne Joh k k k k




n M. Wachowicz JR.
k k k




ISBNk0k273k68514k7

©k Pearsonk Educationk Limited k 2005
Lecturers kadopting k thek maink text k arek permitted k to k photocopy k thek book k as k required.




©k Pearson k Education k Limited k 2005

,PearsonkEducationkLimited
EdinburghkGate
k Harlow

Essex kCM20k2JE k Englan
d

and k Associated k Companies k throughout k thek world

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www.pearsoned.co.uk


Previous keditions kpublished kunderkthekPrentice-Hallkimprint
TwelfthkeditionkpublishedkunderkthekFinancial kTimeskPrenticekHall kimprintk2005

© k 2001, k 1998k by k Prentice-Hall, k Inc.
© k Pearsonk Educationk Limited k 2005

Thek rights k of k James k C.k Vank Hornek and k Johnk M.k Wachowiczk JR. k tokbek identified
k as k authors k of kthis kwork khavek beenk asserted kby kthem k inkaccordancek withk thek Co

pyright, k Designs k and k Patent k Act k 1988.

ISBN: k 0k 273k 68514k 7

Allk rights k reserved. k Permissionk is khereby k givenkfork thek materialk ink this k publicati
onk to k bek reproduced kfork OHPk transparencies k and k student k handouts,k without kex
press k permissionk of k thek Publishers, k f ork educationalk purposes k only.
Ink allk otherk cases, k no k part k of k this k publicationk may k bek reproduced, k stored
ink ak retrievalk system, k ork transmitted k inkany k formk ork by kany k means, k electronic, k m
echanical, k photocopying, k recording, k ork otherwisek without k thek prior
writtenk permissionk of kthek Publishers k orkaklicencek permitting krestricted kcopying k i
nk thek United k Kingdomk issued k by k thek Copyright k Licensing k Agency k Ltd,
90k Tottenhamk Court k Road, k Londonk W1Tk 4LP. k This k book kmay knotk bek lent, k resol
d,k hired k out k ork otherwisek disposed k of k by k way k of k tradek ink any k f orm
of k binding korkcoverk otherk thank that k inkwhichk it kis kpublished, kwithout kthek pri
ork consent k of k thek Publishers.




Van k Horne kand kWachowicz:kFundamentalskofkFinancialk Management,k 12e ii

, ©k Pearson k Education kLimited k2005




Introduction



Many k approaches k might kbek usedk ink teaching k thekbasickf inancialk management k course. k Fun

damentals k of k Financialk Management k sequences k things k inkorderk to kcoverk certaink foundationk materia

lkf irst, k including: kthek rolekof kf inancialk management; k thek business,k tax,k and kfinancialk setting;k thek math

ematics k ofkfinance; k basick valuationk concepts;k thek ideakofk ak tradekoff kbetweenk risk k and k return; k and k f i

nancialk analysis, kplanning, k and k control.k Givenk ak coveragek ofkthesek topics,k wek thenk havek f oundk itk ea

sierk to k build k uponk this k basek ink thek subsequent k teaching k of k f inancialk management.


Morek specifically,k thekbookk goes konktok investigatek current k asset k and k liabilitykdecisionsk andk t

henk moves k onk tok considerk longer-

termk assets k andkf inancing. k Ak goodk dealkofk emphasis k is kplacedk onk working-

capitalk management. k This k is k becausek wek havekf oundk that kpeoplek tend ktokf acekproblems k herek whenk

goingk into k entry-

levelk business kpositions ktok akgreaterk extent k thank they k dok to kotherk asset k andkf inancing k areak problem

s.
Van k Horne kand kWachowicz:kFundamentalskofkFinancialk Management,k 12e 1

, Introduction ©k Pearson k Education kLimited k2005




Nonetheless, k capitalk budgeting, kcapitalkstructurek decisions, k andk long-

termk f inancing k arek very k important, kparticularly k considering k thek theoreticalk advances k inkf inancek ink re

cent k years. k Thesek areas k havek not k beenk slighted.k Many k ofk thek newerk f rontiers kofkf inancek arek explore

d k ink thek book.k Inkf act,k onekofk thek book's kdistinguishing kf eatures k isk itsk ability ktok exposek thek student k re

aderk tok many k newk conceptsk ink modernkf inance. k Byk design, kthis k exposurek is k mainly kverbalk withk onlyk

limited k usek ofk mathematics. k Thek last k sectionkofk thekbookk dealsk withk thek morek specialized k topics kof: k

convertibles,k exchangeables, k and k warrants; k mergers k and k otherkf ormskof kcorporatek restructuring; k a

nd k internationalk f inancialk management.


Whilek thek book k mayk bek used k withoutk any kformalk prerequisites, kof tenk thek student k willk havek h

ad k ank introductoryk coursek ink accountingk and k economicsk (and kperhaps k ak coursek ink statistics).k Comp

letionk of kthesek courses k allows k thek instructork to kproceedk morek rapidly koverkfinancialk analysis, k capital

k budgeting,k and kcertaink otherk topics. k Thek bookk has k aktotalk ofktwelvek appendices,k whichk dealk withk m

orek advanced k issues k and/ork topicsk ofkspecialk interest.k Thek book'sk continuity k isk notk adversely k aff ect

ed k ifk thesek appendices k arek omitted.k Whilek wek f eelk that k allk of kthek appendicesk arek relevant kf ork ak thoro

ughk understanding k of kf inancialk management, k thek instructork cank choosek thosek most k appropriatek tok

his k ork herk course.


If kthek bookk isk usedk ink its k entirety,k thek appropriatek timekf ramek isk aksemesterk or,kperhaps, k two

k quarters. k Forkthek one-

quarterk basic kf inancek course, k wek havekfound k itk necessary k tok omitk coveragek of kcertaink chapters. k Ho

wever, k itk is kstillk possiblek tok maintaink thek book'sk thrust kof kproviding k akf undamentalk understanding k ofkf

inancialk management. k Fork thekone-

quarterk course, k thek f ollowing k sequencing k has k provenk manageable:


Van k Horne kand kWachowicz:kFundamentalskofkFinancialk Management,k 12e 2