Lecturer’s Guide
Corporate Financial
Management
Sixth edition
Glen Arnold
Deborah Lewis
For further instructor material,please
visit:
www.pearsoned.co.uk/arnold
ISBN: 978-1-292-14045-2
Pearson Education Limited 2019
Lecturers adopting the main text are permitted to download and photocopy the manual as required.
,PEARSON EDUCATION LIMITED
KAO Two
KAO Park
Harlow CM17 9SR
United Kingdom
Tel: +44 (0)1279 623623
Web: www.pearson.com/uk
First published under the Financial Times
Pitman Publishing imprint in 1998
Second Edition published 2002
Third Edition published 2005
Fourth Edition published 2008
Fifth edition published 2013
Sixth edition published 2019
© Financial Times Professional Limited 1998
© Pearson Education Limited 2002, 2005, 2008, 2013, 2019
The rights of Glen Arnold and Deborah Lewis to be identified as authors of this work have been
asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
Pearson Education is not responsible for the content of third-party internet sites.
ISBN 978-1-292-14045-2
All rights reserved. Permission is hereby given for the material in this publication to be
reproduced for OHP transparencies and student handouts, without express permission of the
Publishers, for educational purposes only. In all other cases, no part of this publication may be
reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise without either the prior written permission
of the Publishers or a licence permitting restricted copying in the United Kingdom issued by the
Copyright Licensing Agency Ltd., Barnard’s Inn, 86 Fetter Lane, London EC4A 1EN. This
book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of
binding or cover other than that in which it is published, without the prior consent of the
Publishers.
The Financial Times. With a worldwide network of highly respected journalists, The Financial
Times provides global business news, insightful opinion and expert analysis of business, finance
and politics. With over 500 journalists reporting from 50 countries worldwide, our in-depth
coverage of international news is objectively reported and analysed from an independent, global
perspective. To find out more, visit www.ft.com/pearsonoffer.
, Contents
Chapters Pages
Preface 5
Location of answers to questions and problems 6
SUPPLEMENTARY MATERIAL FOR CHAPTERS
Chapter 1 The financial world 8
Chapter 2 Project appraisal: net present value and internal rate of return 12
Chapter 3 Project appraisal: cash flow and applications 17
Chapter 4 The decision-making process for investment appraisal 26
Chapter 5 Project appraisal: capital rationing, taxation and inflation 31
Chapter 6 Risk and project appraisal 38
Chapter 7 Portfolio theory 44
Chapter 8 The capital asset pricing model and multi-factor models 51
Chapter 9 Stock markets 54
Chapter 10 Raising equity capital 58
Chapter 11 Long-term debt finance 64
Chapter 12 Short-term and medium-term finance 69
Chapter 13 Stock market efficiency 78
Chapter 14 Value-based management 80
Chapter 15 Value-creation metrics 87
Chapter 16 The cost of capital 95
Chapter 17 Valuing shares 98
Chapter 18 Capital structure 104
Chapter 19 Dividend policy 108
Chapter 20 Mergers 110
Chapter 21 Derivatives 118
Chapter 22 Managing exchange-rate risk 126
3
© Pearson Education Limited 2025
, Arnold & Lewis, Corporate Financial Management, 6e, Instructor’s Manual
Corporate Financial Management Online
Register to create your own personal account using the access code supplied with your copy of the book,*
and access the following teaching and learning resources:
Resources for students
A dynamic eText of the book that you can search, bookmark, annotate and highlight as you please
Self-assessment questions that identify your strengths before recommending a personalised study
plan that points you to the resources which can help you achieve a better grade
FT articles keeping you up to date with key business concepts discussed in the book
Flashcards to test your understanding of key terms
Resources for instructors
Complete, downloadable Instructor’s Manual
PowerPoint slides that can be downloaded and used for presentations
For more information, please contact your local Pearson Education sales representative or visit
www.pearson.com/mylab/finance
*Visit www.pearson.com/mylab/finance to purchase access.
4
© Pearson Education Limited 2025
,Preface
This Guide is designed to assist lecturers and tutors using Corporate Financial Management
sixth edition.
Supplementary material for chapters
For each chapter:
The learning outcomes are outlined.
Key points and concepts are listed.
Solutions to selected numerical problems (those marked with an asterisk in the main
book) are provided. Note that there is often more than one possible correct solution to a
problem.
Different answers, which nevertheless follow the logic of the argument presented in the text,
may be acceptable.
Overhead projector transparency masters
Also available on the website in PowerPoint ® for downloading are over 800 selected figures,
tables and key points reproduced in a form suitable for creating overhead projector
transparency masters. These are arranged in the order in which they appear in Corporate
Financial Management. The learning objectives and summary points from the chapters are
also included.
Glen Arnold
5
© Pearson Education Limited 2025
, Location of answers to questions and problems
(No answers given to those in final column)
Answered in Essay answer
Answered in website
Chapter No required
available to students Lecturer’s Guide (see text)
1 All (see note in
Appendix VII)
2 1, 2, 4, 5, 6 3, 7
3 1, 2, 3, 6, 9, 11, 13, 15 4, 5, 7, 8, 10, 12, 14
4 1, 2, 4, 5 3 6, 7, 8, 9
5 1, 2, 3, 5, 6, 9, 10 4, 7, 8
6 1, 4, 5, 6, 7, 8, 9, 10, 11 2, 3, 12
7 1, 2, 3, 7, 8, 9, 10, 11, 12, 13, 15 4, 5, 6, 14a, b, c 14d
8 1, 3, 4, 5, 7, 8, 9, 10 2, 6, 11
9 1–11
10 12 8 1–7, 9–11, 13–18
11 1, 2, 3, 4, 5, 6, 10, 11, 13, 16 7 8, 9, 12, 14, 15,
17–20
12 1, 2, 4, 9, 10, 11a, 13, 17, 19 5, 12, 15, 16, 18, 3, 6, 7, 8, 9, 11b, 14,
30, 31 20–29
13 2 1, 3–17
14 8, 9 7,10 1, 6, 11–14
15 1, 5, 6, 7a, 7b, 9a, 9b, 9c, 10a, 2, 3, 4a 4b, 7c, 7d, 8, 9d,
10b, 10d 10c, 10e
16 2, 3a, 4, 5 1 3b, 3c
17 3, 4, 5, 6a–d, 7a, 7d, 7f, 7g, 7h, 9 8, 10 1, 2, 6e, 6f, 7b, 7c, 7e
18 2, 3, 6a, 9 1 4,5, 6b, 7, 8
19 4, 5, 7a, 7b 1, 2, 3, 4, 6, 7c
20 6a, 6b 1, 3, 4, 5 2, 7, 8, 9, 6c
21 1, 2, 3, 4, 5, 7a, 7b, 10a-c 6, 8, 9 11, 12, 13, 7c, 10d
22 1, 2a–c, 7, 8a, 10, 11 4, 9 3, 4b, 5, 6, 8b, 2d
6
© Pearson Education Limited 2025
Corporate Financial
Management
Sixth edition
Glen Arnold
Deborah Lewis
For further instructor material,please
visit:
www.pearsoned.co.uk/arnold
ISBN: 978-1-292-14045-2
Pearson Education Limited 2019
Lecturers adopting the main text are permitted to download and photocopy the manual as required.
,PEARSON EDUCATION LIMITED
KAO Two
KAO Park
Harlow CM17 9SR
United Kingdom
Tel: +44 (0)1279 623623
Web: www.pearson.com/uk
First published under the Financial Times
Pitman Publishing imprint in 1998
Second Edition published 2002
Third Edition published 2005
Fourth Edition published 2008
Fifth edition published 2013
Sixth edition published 2019
© Financial Times Professional Limited 1998
© Pearson Education Limited 2002, 2005, 2008, 2013, 2019
The rights of Glen Arnold and Deborah Lewis to be identified as authors of this work have been
asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
Pearson Education is not responsible for the content of third-party internet sites.
ISBN 978-1-292-14045-2
All rights reserved. Permission is hereby given for the material in this publication to be
reproduced for OHP transparencies and student handouts, without express permission of the
Publishers, for educational purposes only. In all other cases, no part of this publication may be
reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise without either the prior written permission
of the Publishers or a licence permitting restricted copying in the United Kingdom issued by the
Copyright Licensing Agency Ltd., Barnard’s Inn, 86 Fetter Lane, London EC4A 1EN. This
book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of
binding or cover other than that in which it is published, without the prior consent of the
Publishers.
The Financial Times. With a worldwide network of highly respected journalists, The Financial
Times provides global business news, insightful opinion and expert analysis of business, finance
and politics. With over 500 journalists reporting from 50 countries worldwide, our in-depth
coverage of international news is objectively reported and analysed from an independent, global
perspective. To find out more, visit www.ft.com/pearsonoffer.
, Contents
Chapters Pages
Preface 5
Location of answers to questions and problems 6
SUPPLEMENTARY MATERIAL FOR CHAPTERS
Chapter 1 The financial world 8
Chapter 2 Project appraisal: net present value and internal rate of return 12
Chapter 3 Project appraisal: cash flow and applications 17
Chapter 4 The decision-making process for investment appraisal 26
Chapter 5 Project appraisal: capital rationing, taxation and inflation 31
Chapter 6 Risk and project appraisal 38
Chapter 7 Portfolio theory 44
Chapter 8 The capital asset pricing model and multi-factor models 51
Chapter 9 Stock markets 54
Chapter 10 Raising equity capital 58
Chapter 11 Long-term debt finance 64
Chapter 12 Short-term and medium-term finance 69
Chapter 13 Stock market efficiency 78
Chapter 14 Value-based management 80
Chapter 15 Value-creation metrics 87
Chapter 16 The cost of capital 95
Chapter 17 Valuing shares 98
Chapter 18 Capital structure 104
Chapter 19 Dividend policy 108
Chapter 20 Mergers 110
Chapter 21 Derivatives 118
Chapter 22 Managing exchange-rate risk 126
3
© Pearson Education Limited 2025
, Arnold & Lewis, Corporate Financial Management, 6e, Instructor’s Manual
Corporate Financial Management Online
Register to create your own personal account using the access code supplied with your copy of the book,*
and access the following teaching and learning resources:
Resources for students
A dynamic eText of the book that you can search, bookmark, annotate and highlight as you please
Self-assessment questions that identify your strengths before recommending a personalised study
plan that points you to the resources which can help you achieve a better grade
FT articles keeping you up to date with key business concepts discussed in the book
Flashcards to test your understanding of key terms
Resources for instructors
Complete, downloadable Instructor’s Manual
PowerPoint slides that can be downloaded and used for presentations
For more information, please contact your local Pearson Education sales representative or visit
www.pearson.com/mylab/finance
*Visit www.pearson.com/mylab/finance to purchase access.
4
© Pearson Education Limited 2025
,Preface
This Guide is designed to assist lecturers and tutors using Corporate Financial Management
sixth edition.
Supplementary material for chapters
For each chapter:
The learning outcomes are outlined.
Key points and concepts are listed.
Solutions to selected numerical problems (those marked with an asterisk in the main
book) are provided. Note that there is often more than one possible correct solution to a
problem.
Different answers, which nevertheless follow the logic of the argument presented in the text,
may be acceptable.
Overhead projector transparency masters
Also available on the website in PowerPoint ® for downloading are over 800 selected figures,
tables and key points reproduced in a form suitable for creating overhead projector
transparency masters. These are arranged in the order in which they appear in Corporate
Financial Management. The learning objectives and summary points from the chapters are
also included.
Glen Arnold
5
© Pearson Education Limited 2025
, Location of answers to questions and problems
(No answers given to those in final column)
Answered in Essay answer
Answered in website
Chapter No required
available to students Lecturer’s Guide (see text)
1 All (see note in
Appendix VII)
2 1, 2, 4, 5, 6 3, 7
3 1, 2, 3, 6, 9, 11, 13, 15 4, 5, 7, 8, 10, 12, 14
4 1, 2, 4, 5 3 6, 7, 8, 9
5 1, 2, 3, 5, 6, 9, 10 4, 7, 8
6 1, 4, 5, 6, 7, 8, 9, 10, 11 2, 3, 12
7 1, 2, 3, 7, 8, 9, 10, 11, 12, 13, 15 4, 5, 6, 14a, b, c 14d
8 1, 3, 4, 5, 7, 8, 9, 10 2, 6, 11
9 1–11
10 12 8 1–7, 9–11, 13–18
11 1, 2, 3, 4, 5, 6, 10, 11, 13, 16 7 8, 9, 12, 14, 15,
17–20
12 1, 2, 4, 9, 10, 11a, 13, 17, 19 5, 12, 15, 16, 18, 3, 6, 7, 8, 9, 11b, 14,
30, 31 20–29
13 2 1, 3–17
14 8, 9 7,10 1, 6, 11–14
15 1, 5, 6, 7a, 7b, 9a, 9b, 9c, 10a, 2, 3, 4a 4b, 7c, 7d, 8, 9d,
10b, 10d 10c, 10e
16 2, 3a, 4, 5 1 3b, 3c
17 3, 4, 5, 6a–d, 7a, 7d, 7f, 7g, 7h, 9 8, 10 1, 2, 6e, 6f, 7b, 7c, 7e
18 2, 3, 6a, 9 1 4,5, 6b, 7, 8
19 4, 5, 7a, 7b 1, 2, 3, 4, 6, 7c
20 6a, 6b 1, 3, 4, 5 2, 7, 8, 9, 6c
21 1, 2, 3, 4, 5, 7a, 7b, 10a-c 6, 8, 9 11, 12, 13, 7c, 10d
22 1, 2a–c, 7, 8a, 10, 11 4, 9 3, 4b, 5, 6, 8b, 2d
6
© Pearson Education Limited 2025
