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Parrino et al. Fundamentals of Corporate Finance, 5th edition Solutions Manual
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TESTBANK FOR Solution Manual for
Fundamentals of Corporate Finance, 5th Edition by Robert
Parrino, David Kidwell, Bates & Gillan. ISBN
9781119795438
Chapter 1-21
Copyright © 2022 John Wiley & Sons, Inc. SM 4-
,https://www.stuvia.com/user/lectkeshi
Parrino et al. Fundamentals of Corporate Finance, 5th edition Solutions Manual
Copyright © 2022 John Wiley & Sons, Inc. SM 4-
,https://www.stuvia.com/user/lectkeshi
Parrino et al. Fundamentals of Corporate Finance, 5th edition Solutions Manual
Chapt
er 1 The Financial Manager and the Firm
Before You Go On Questions and Answers
Section 1.1
1. What are the three basic types of financial decisions managers
must make?
The three basic decisions each business must make are the
capital budgeting decision, the financing decision, and the
working capital management decision. These decisions
determine which productive assets to buy, how to pay for or
finance these purchases, and how to manage the day-to-day
financial matters so the company can pay its bills.
2. Explain why you would make an investment if the value
of the expected cash flows exceeds the cost of the project.
You would accept an investment project whose cash flows
exceed the cost of the project because such projects will
increase the value of the firm, making the owners wealthier.
Most people start a business to increase their wealth.
Remember that the cost of capital (time value of money) will
Copyright © 2022 John Wiley & Sons, Inc. SM 4-
, https://www.stuvia.com/user/lectkeshi
Parrino et al. Fundamentals of Corporate Finance, 5th edition Solutions Manual
affect the decision about whether to invest.
3. Why are capital budgeting decisions among the most
important decisions in the life of a firm?
The capital budgeting decisions are considered the most
important in the life of the firm because these decisions
determine which productive assets the firm purchases, and
which assets generate most of the firm’s cash flows.
Furthermore, capital budgeting decisions are
Copyright © 2022 John Wiley & Sons, Inc. SM 4-
Parrino et al. Fundamentals of Corporate Finance, 5th edition Solutions Manual
https://www.stuvia.com/user/lectkeshi
TESTBANK FOR Solution Manual for
Fundamentals of Corporate Finance, 5th Edition by Robert
Parrino, David Kidwell, Bates & Gillan. ISBN
9781119795438
Chapter 1-21
Copyright © 2022 John Wiley & Sons, Inc. SM 4-
,https://www.stuvia.com/user/lectkeshi
Parrino et al. Fundamentals of Corporate Finance, 5th edition Solutions Manual
Copyright © 2022 John Wiley & Sons, Inc. SM 4-
,https://www.stuvia.com/user/lectkeshi
Parrino et al. Fundamentals of Corporate Finance, 5th edition Solutions Manual
Chapt
er 1 The Financial Manager and the Firm
Before You Go On Questions and Answers
Section 1.1
1. What are the three basic types of financial decisions managers
must make?
The three basic decisions each business must make are the
capital budgeting decision, the financing decision, and the
working capital management decision. These decisions
determine which productive assets to buy, how to pay for or
finance these purchases, and how to manage the day-to-day
financial matters so the company can pay its bills.
2. Explain why you would make an investment if the value
of the expected cash flows exceeds the cost of the project.
You would accept an investment project whose cash flows
exceed the cost of the project because such projects will
increase the value of the firm, making the owners wealthier.
Most people start a business to increase their wealth.
Remember that the cost of capital (time value of money) will
Copyright © 2022 John Wiley & Sons, Inc. SM 4-
, https://www.stuvia.com/user/lectkeshi
Parrino et al. Fundamentals of Corporate Finance, 5th edition Solutions Manual
affect the decision about whether to invest.
3. Why are capital budgeting decisions among the most
important decisions in the life of a firm?
The capital budgeting decisions are considered the most
important in the life of the firm because these decisions
determine which productive assets the firm purchases, and
which assets generate most of the firm’s cash flows.
Furthermore, capital budgeting decisions are
Copyright © 2022 John Wiley & Sons, Inc. SM 4-
