Solution manual for entrepreneurial finance 7th edition j chris leach

SOLUTIONMANUALForEntrepreneurial Finance,7thEdition
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b byJ.ChrisLeach,RonaldW.Melicher,Chapters1-16,
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CompleteWithCAPSTONE CASES
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,TABLE OF CONTENTS b b b




Part 1: THE ENTREPRENEURIAL ENVIRONMENT.
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1. Introduction to
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Finance for Entrepreneurs. b b




2. Developing the Business Idea.
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Part 2: ORGANIZING AND OPERATING THE VENTURE.
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3. Organizing and Financing a New Venture.
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4. Preparing and Using Financial Statements.
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5. Evaluating Operating and Financial Performance.
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Part 3: PLANNING FOR THE FUTURE.
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6. Managing Cash Flow.
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7. Types and Costs of Financial Capital.
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8. Securities Law Considerations When Obtaining Venture Financing.
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Part 4: CREATING AND RECOGNIZING VENTURE VALUE.
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9. Projecting Financial Statements.
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10. Valuing Early-Stage Ventures.
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11. Venture Capital Valuation Methods.
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Part 5: STRUCTURING FINANCING FOR THE GROWING VENTURE.
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12. Professional Venture Capital.
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13. Other Financing Alternatives.
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14. Security Structures and Determining Enterprise Values.
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Part 6: EXIT AND TURNAROUND STRATEGIES.
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15. Harvesting the Business Venture Investment.
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16. Financially Troubled Ventures: Turnaround Opportunities?
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Part 7: CAPSTONE CASES.
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Case 1. Eco-Products, Inc.
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Case 2. Spatial Technology,
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,Chapter 1 b




INTRODUCTION TO FINANCE FOR ENTREPRENEURS b b b b




FOCUS

The purpose of this first chapter is to present an overview of what entrepreneurial finance is about. In doing so we
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hope to convey to you the importance of understanding and applying entrepreneurial finance methods and tools to
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help ensure an entrepreneurial venture is successful.We present a life cycle approach to the teaching of
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entrepreneurial finance where we cover venture operating and financial decisions faced by the entrepreneur as a
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venture progresses from an idea through to harvesting the venture.
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LEARNING OBJECTIVES b




LO 1.1: Characterize the entrepreneurial process.
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LO 1.2: Describe entrepreneurship and some characteristics of entrepreneurs.
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LO 1.3: Indicate several megatrends providing waves of entrepreneurial opportunities.LO 1.4: List
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and describe the seven principles of entrepreneurial finance.
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LO 1.5: Discuss entrepreneurial finance and the role of the financial manager.LO 1.6:
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Describe the various stages of a successful venture‘s life cycle.
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LO 1.7: Identify, by life cycle stage, the relevant types of financing and investors.LO 1.8:
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Understand the life cycle approach used in this book.
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CHAPTER OUTLINE b




1.1 THE ENTREPRENEURIAL PROCESS b b




1.2 ENTREPRENEURSHIPFUNDAMENTALS b




A. Who is an Entrepreneur? b b b




B. Basic Definitions b




C. Entrepreneurial Traits or Characteristics b b b




D. Opportunities Exist ButNot Without Risks b b b b b




1.3 SOURCES OFENTREPRENEURIALOPPORTUNITIES b b b




A. Societal Changes b




B. Demographic Changes b




C. Technological Changes b




D. EmergingEconomies and Global Changes b b b b




E. Crises and ―Bubbles‖ b b




F. Disruptive Innovation b




1

, 1.4 PRINCIPLES OFENTREPRENEURIALFINANCE b b b




A. Real, Human, and Financial Capital must be Rented from Owners (Principle #1)b b b b b b b b b b b




B. Risk and Expected Reward go Hand in Hand (Principle #2) b b b b b b b b b




C. While Accountingis the Language of Business, Cash is the Currency (Principle #3)b b b b b b b b b b b b




D. New Venture Financing Involves Search, Negotiation, and Privacy(Principle #4)
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E. A Venture‘s Financial Objective is to Increase Value (Principle #5)
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F. It is Dangerous to Assume that People Act Against Their Own Self-Interests(Principle #6)
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G. VentureCharacter and Reputation can be Assets or Liabilities (Principle #7) b b b b b b b b b b




1.5 ROLE OF ENTREPRENEURIALFINANCE b b b




1.6 THE SUCCESSFULVENTURE LIFE CYCLE
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A. Development Stage b




B. Startup Stage b




C. Survival Stage b




D. Rapid-Growth Stage b




E. Early-MaturityStage b




F. Life Cycle Stages and the Entrepreneurial Process b b b b b b




1.7 FINANCINGTHROUGH THE VENTURE LIFE CYCLE b b b b b




A. Seed Financing b




B. Startup Financing b




C. First-Round Financing b




D. Second-Round Financing b




E. Mezzanine Financing b




F. Liquidity-StageFinancing b




G. Seasoned Financing b




1.8 LIFE CYCLE APPROACH FOR TEACHING ENTREPRENEURIALFINANCESUMMARY
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DISCUSSION QUESTIONS AND ANSWERS b b b




1. What is the entrepreneurial process?
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Theentrepreneurial process comprises: developingopportunities, gatheringresources, andmanaging and
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building operations with the goal of creatingvalue.
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2. What is entrepreneurship? What are somebasiccharacteristics of entrepreneurs?
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Entrepreneurship is the process of changingideas into commercial opportunities and creatingvalue. While b b b b b b b b b b b b b




there is no prototypical entrepreneur, many are good at recognizing commercial opportunities, tend to be
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optimistic, and envision a plan for the future.
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3. Why do businesses close or cease operating? What are the primaryreasons why businessesfail?
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