Fundamentals of Corporate Finance, 13th Edition TEST BANK by Ross, Westerfield, Verified Chapters 1 - 27, Complete Newest Version

Solutions Manual Fundamentals of Corporate

Finance 13th Edition Ross, Westerfield, and Jordan




Chapte

rs 1 -

27

,CHAPTER 1: Introduction to Corporate Finance
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CHAPTER 2: Financial Statements, Taxes, And Cash Flow
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CHAPTER 3: Working with Financial Statements
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CHAPTER 4: Long-Term Financial Planning and Growth
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CHAPTER 5: Introduction to Valuation: The Time Value of Money
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CHAPTER 6: Discounted Cash Flow Valuation
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CHAPTER 7: Interest Rates and Bond Valuation
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CHAPTER 8: Stock Valuation
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CHAPTER 9: Net Present Value and Other Investment Criteria
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CHAPTER 10: Making Capital Investment Decisions
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CHAPTER 11: Project Analysis and Evaluation
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CHAPTER 12: Some Lessons from Capital Market History
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CHAPTER 13: Return, Risk, And the Security Market Line
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CHAPTER 14: Cost of Capital
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CHAPTER 15: Raising Capital
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CHAPTER 16: Financial Leverage and Capital Structure Policy
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CHAPTER 17: Dividends and Payout Policy
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CHAPTER 18: Short-Term Finance and Planning
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,CHAPTER 19: Cash and Liquidity Management
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CHAPTER 20: Credit and Inventory Management
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CHAPTER 21: International Corporate Finance
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CHAPTER 22: Behavioral Finance: Implications for Financial Manage
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CHAPTER 23: Enterprise Risk Management
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CHAPTER 24:Options and Corporate Finance
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CHAPTER 25: Option Valuation
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CHAPTER 26: Mergers and Acquisitions
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CHAPTER 27: Leasing
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CHAPTER 1 TG




INTRODUCTION TO CORPORATEFIN TG TG G
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ANCE
Answers to Concepts Review and Critical Thinking Questions
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1. Capital budgeting (deciding whether to expand a manufacturing plant), capital structure (deci
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ding whether to issue new equity and use the proceeds to retire outstanding debt), and workin
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g capital management (modifying the firm’s credit collection policy with its customers).
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2. Disadvantages: unlimited liability, limited life, difficulty in transferring ownership, hard to raise
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capital funds. Some advantages: simpler, less regulation, the owners are also the managers, so
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metimes personal tax rates are better than corporate tax rates.
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3. The primary disadvantage of the corporate form is the double taxation to shareholders of distr
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, ibuted earnings and dividends. Some advantages include: limited liability, ease of transferabilit
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y, ability to raise capital, unlimited life, and so forth.
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4. In response to Sarbanes-
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Oxley, small firms have elected to go dark because of the costs of compliance. The costs to co
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mply with Sarbox can be several million dollars, which can be a large percentage of a small fir
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ms profits. A major cost of going dark is less access to capital. Since thefirm is no longer
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publicly traded, it can no longer raise money in the public market. Although the company will s
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till have access to bank loans and the private equity market, the costs associated with raising fu
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nds in these markets are usually higher than the costs of raising funds in the public market.
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5. The treasurer’s office and the controller’s office are the two primary organizational g
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roups thatreport directly to the chief financial officer. The controller’s office handles cost and f
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inancialaccounting, tax management, and management information systems, while the treasur
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er’s office is responsible for cash and credit management, capital budgeting, and financial
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T G planning. Therefore,the study of corporate finance is concentrated within the treasury group’
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s functions.
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6. To maximize the current market value (share price) of the equity of the firm (whether it’s public
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ly- traded or not).
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7. In the corporate form of ownership, the shareholders are the owners of the firm. The sharehol
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ders elect the directors of the corporation, who in turn appoint the firm’s management. This se
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paration of ownership from control in the corporate form of organization is what causes agenc
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y problems to exist. Management may act in its own or someone else’s best interests, rather th
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an those of the shareholders. If such events occur, they may contradict the goal of maximizing
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the share price of the equity of the firm.
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8. A primary market transaction.
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