SOLUTIONS MANUAL Fundamentals Of Corporate Finance 13th Edition Ross, Westerfield, And Jordan Chapters 1 to 27 Complete GRADED A+

SOLUTIONS MANUAL
Fundamentals Of Corporate Finance
13th Edition Ross, Westerfield, And Jordan
Chapters 1 - 27

,CHAPTERg1:gIntroductiongtogCorporategFinance

CHAPTERg2:gFinancialgStatements,gTaxes,gAndgCashgFlow

CHAPTERg3:gWorkinggwithgFinancialgStatements

CHAPTERg4:gLong-TermgFinancialgPlanninggandgGrowth

CHAPTERg5:gIntroductiongtogValuation:gThegTimegValuegofgMoney

CHAPTERg6:gDiscountedgCashgFlowgValuation

CHAPTERg7:gInterestgRatesgandgBondgValuation

CHAPTERg8:gStockgValuation

CHAPTERg9:gNetgPresentgValuegandgOthergInvestmentgCriteria

CHAPTERg10:gMakinggCapitalgInvestmentgDecisions

CHAPTERg11:gProjectgAnalysisgandgEvaluation

CHAPTERg12:gSomegLessonsgfromgCapitalgMarketgHistory

CHAPTERg13:gReturn,gRisk,gAndgthegSecuritygMarketgLine

CHAPTERg14:gCostgofgCapital

CHAPTERg15:gRaisinggCapital

CHAPTERg16:gFinancialgLeveragegandgCapitalgStructuregPolicy

CHAPTERg17:gDividendsgandgPayoutgPolicy

CHAPTERg18:gShort-TermgFinancegandgPlanning

CHAPTERg19:gCashgandgLiquiditygManagement

CHAPTERg20:gCreditgandgInventorygManagement

CHAPTERg21:gInternationalgCorporategFinance

CHAPTERg22:gBehavioralgFinance:gImplicationsgforgFinancialgManage

CHAPTERg23:gEnterprisegRiskgManagement

CHAPTERg24:OptionsgandgCorporategFinance

CHAPTERg25:gOptiongValuation

CHAPTERg26:gMergersgandgAcquisitions

CHAPTERg27:gLeasing

,CHAPTER 1 g




INTRODUCTION TO CORPORATEFI g g g




NANCE
AnswersgtogConceptsgReviewgandgCriticalgThinkinggQuestions

1. Capitalgbudgetingg(decidinggwhethergtogexpandgagmanufacturinggplant),gcapitalgstructureg(decid
inggwhethergtogissuegnewgequitygandgusegthegproceedsgtogretiregoutstandinggdebt),gandgworkingg
capitalgmanagementg(modifyinggthegfirm’sgcreditgcollectiongpolicygwithgitsgcustomers).

2. Disadvantages:gunlimitedgliability,glimitedglife,gdifficultygingtransferringgownership,ghardgtograise
gcapitalgfunds.gSomegadvantages:gsimpler,glessgregulation,gthegownersgaregalsogthegmanagers,gso

metimesgpersonalgtaxgratesgaregbettergthangcorporategtaxgrates.

3. Thegprimarygdisadvantagegofgthegcorporategformgisgthegdoublegtaxationgtogshareholdersgofgdistri
butedgearningsgandgdividends.gSomegadvantagesginclude:glimitedgliability,geasegofgtransferability
,gabilitygtograisegcapital,gunlimitedglife,gandgsogforth.

4. IngresponsegtogSarbanes-
Oxley,gsmallgfirmsghavegelectedgtoggogdarkgbecausegofgthegcostsgofgcompliance.gThegcostsgtogco
mplygwithgSarboxgcangbegseveralgmilliongdollars,gwhichgcangbegaglargegpercentageg ofg ag smallg fir
msg profits.g Ag majorg costg ofg goingg darkg isg lessg accessg tog capital.g Sinceg thegfirmgisgnoglongergpubl
iclygtraded,gitgcangnoglongergraisegmoneygingthegpublicgmarket.gAlthoughgthegcompanygwillgstillgh
avegaccessgtogbankgloansgandgthegprivategequitygmarket,gthegcostsgassociatedgwithgraisinggfundsgi
ngthesegmarketsgaregusuallyghighergthangthegcostsgofgraisinggfundsgingthegpublicgmarket.

5. Theg treasurer’sg officeg andg theg controller’sg officeg areg theg twog primaryg organizationalg group
sg thatgreportgdirectlygtogthegchiefgfinancialgofficer.gThegcontroller’sgofficeghandlesgcostgandgfinanc
ialgaccounting,gtaxgmanagement,gandgmanagementginformationgsystems,gwhilegthegtreasurer’sgo
fficegisgresponsibleg forg cashg andg creditg management,g capitalg budgeting,g andg financialg plannin
g.g Therefore,gthegstudygofgcorporategfinancegisgconcentratedgwithingthegtreasuryggroup’sgfunctio
ns.

6. Togmaximizegthegcurrentgmarketgvalueg(sharegprice)gofgthegequitygofgthegfirmg(whethergit’sgpubli
cly-gtradedgorgnot).

7. Ingthegcorporategformgofgownership,gthegshareholdersgaregthegownersgofgthegfirm.gThegsharehol
dersgelectgthegdirectorsgofgthegcorporation,gwhogingturngappointgthegfirm’sgmanagement.gThisgse
parationgofgownershipgfromgcontrolgingthegcorporategformgofgorganizationgisgwhatgcausesgagenc
ygproblemsgtogexist.gManagementgmaygactgingitsgowngorgsomeonegelse’sgbestginterests,grathergtha
ngthosegofgthegshareholders.gIfgsuchgeventsgoccur,gtheygmaygcontradictgtheggoalgofgmaximizinggth
egsharegpricegofgthegequitygofgthegfirm.

8. Agprimarygmarketgtransaction.

, B-2g SOLUTIONS


9. IngauctiongmarketsglikegthegNYSE,gbrokersgandgagentsgmeetgatgagphysicalglocationg(thegexchange)
gtogmatchgbuyersgandgsellersgofgassets.gDealergmarketsglikegNASDAQgconsistgofgdealersgoperating

gatgdispersedglocalesgwhogbuygandgsellgassetsgthemselves,gcommunicatinggwithgothergdealersgeith

ergelectronicallygorgliterallygover-the-counter.

10. Suchgorganizationsgfrequentlygpursuegsocialgorgpoliticalgmissions,gsogmanygdifferentggoalsgaregco
nceivable.gOneggoalgthatgisgoftengcitedgisgrevenuegminimization;gi.e.,gprovidegwhateverggoodsga
ndgservicesgaregofferedgatgtheglowestgpossiblegcostgtogsociety.gAgbettergapproachgmightgbegtogobs
ervegthatgevengagnot-for-
profitgbusinessghasgequity.gThus,goneganswergisgthatgthegappropriateggoalgisg togmaximizegthegval
uegofgthegequity.

11. Presumably,gthegcurrentgstockgvaluegreflectsgthegrisk,gtiming,gandgmagnitudegofgallgfuturegcashgfl
ows,gbothgshort-termgandglong-term.gIfgthisgisgcorrect,gthengthegstatementgisgfalse.

12. Angargumentgcangbegmadegeithergway.gAtgthegonegextreme,gwegcouldgarguegthatgingagmarketgeco
nomy,gallgofgthesegthingsgaregpriced.gTheregisgthusgangoptimalglevelgof,gforgexample,gethicalgand/
orgillegalgbehavior,gandgthegframeworkgofgstockgvaluationgexplicitlygincludesgthese.gAtgthegother
gextreme,gwegcouldgarguegthatgthesegaregnon-

economicgphenomenagandgaregbestghandledgthroughgthegpoliticalgprocess.gAgclassicg(andghighlyg
relevant)gthoughtgquestiongthatgillustratesgthisgdebateggoesgsomethingglikegthis:g“Agfirmghasgesti
matedgthatgthegcostgofgimprovinggthegsafetygofgonegofgitsgproductsgisg$30gmillion.gHowever,gtheg
firmgbelievesgthatgimprovinggthegsafetygofgthegproductgwillgonlygsaveg$20gmilliongingproductglia
bilitygclaims.gWhatgshouldgthegfirmgdo?”

13. Theggoalgwillgbegthegsame,gbutgthegbestgcoursegofgactiongtowardgthatggoalgmaygbegdifferentgbeca
usegofgdifferinggsocial,gpolitical,gandgeconomicginstitutions.

14. Theggoalgofgmanagementgshouldgbegtogmaximizegthegsharegpricegforgthegcurrentgshareholders.gIfg
managementgbelievesgthatgitgcangimprovegthegprofitabilitygofgthegfirmgsogthatgthegsharegpricegwil
lgexceedg$35,gthengtheygshouldgfightgthegoffergfromgthegoutsidegcompany.gIfgmanagementgbeliev
esgthatgthisgbiddergorgothergunidentifiedgbiddersgwillgactuallygpaygmoregthang$35gpergsharegtogac
quiregthegcompany,gthengtheygshouldgstillgfightgthegoffer.gHowever,gifgthegcurrentgmanagementg
cannotgincreasegthegvaluegofgthegfirmgbeyondgthegbidgprice,gandgnogotherghighergbidsgcomegin,gt
hengmanagementgisgnotgactinggingtheginterestsgofgthegshareholdersgbygfightinggthegoffer.gSincegcur
rentgmanagersgoftenglosegtheirgjobsgwhengthegcorporationgisgacquired,gpoorlygmonitoredgmana
gersghavegangincentivegtogfightgcorporategtakeoversgingsituationsgsuchgasgthis.

15. Wegwouldgexpectgagencygproblemsgtogbeglessgseveregingothergcountries,gprimarilygduegtogthegrel
ativelygsmallgpercentagegofgindividualgownership.gFewergindividualgownersgshouldgreducegthegn
umbergofgdiversegopinionsgconcerninggcorporateggoals.gTheghighgpercentagegofginstitutionalgow
nershipgmightgleadgtogaghighergdegreegofgagreementgbetweengownersgandgmanagersgongdecision
sgconcerninggriskygprojects.gIngaddition,ginstitutionsgmaygbegbettergablegtogimplementgeffectiveg
monitoringgmechanismsgongmanagersgthangcangindividualgowners,gbasedgongtheginstitutions’gde
epergresourcesgandgexperiencesgwithgtheirgowngmanagement.gThegincreaseginginstitutionalgown
ershipgofgstockgingthegUnitedgStatesgandgtheggrowinggactivismgofgtheseglargegshareholderggroupsg
maygleadgtogagreductiongingagencygproblemsgforgU.S.gcorporationsgandgagmoregefficientgmarketgf
orgcorporategcontrol.