SOLUTION MANUAL: FOR CORPORATE
FINANCE, 13TH EDITION BY STEPHEN
ROSS, RANDOLPH WESTERFIELD,
VERIFIED CHAPTERS 1-31, COMPLETE
NEWEST VERSION 2025/2026
, TABLE OF CONTENTS
Part one: overview
1. Introduction to corporate finance
2. Financial statements and cash flow
3. Financial statements analysis and financial models
part two: valuation and capital budgeting
4. Discounted cash flow valuation
5. Net present value and other investment rules
6. Making capital investment decisions
7. Risk analysis, real options, and capital budgeting
8. Interest rates and bond valuation
9. Stock valuation
part three: risk
10. Lessons from market history
11. Return, risk, and the capital asset pricing model
12. An alternative view of risk and return
13. Risk, cost of capital, and valuation
part four: capital structure and dividend policy
14. Efficient capital markets and behavioral challenges
15. Long-term financing
16. Capital structure: basic concepts
17. Capital structure: limits to the use of debt
18. Valuation and capital budgeting for the levered firm
19. Dividends and other payouts
part five: long-term finance
20. Raising capital
21. Leasing
part six: options, futures, and corporate finance
22. Options and corporate finance
23. Options and corporate finance: extensions and applications
24. Warrants and convertibles
25. Derivatives and hedging risk
part seven: short-term finance
26. Short-term finance and planning
27. Cash management
28. Credit and inventory management
part eight: special topics
29. Mergers, acquisitions, and divestitures
30. Financial distress
31. International corporate finance
,CHAPTER 1
INTRODUCTION TO CORPORATE FINANCE
ANSWERS TO CONCEPTS REVIEW AND CRITICAL THINKING QUESTIONS
1. Capital Budgeting (Deciding Whether To Expand A Manufacturing Plant), Capital Structure (Deciding
Whether To Issue New Equity And Use The Proceeds To Retire Outstanding Debt), And Working Capital
Management (Modifying The Firm„S Credit Collection Policy With Its Customers).
2. Disadvantages: Unlimited Liability, Limited Life, Difficulty In Transferring Ownership, Difficulty In Raising
Capital Funds. Some Advantages: Simpler, Less Regulation, The Owners Are Also The Managers,
Sometimes Personal Tax Rates Are Better Than Corporate Tax Rates.
3. The Primary Disadvantage Of The Corporate Form Is The Double Taxation To Shareholders Of Distributed
Earnings And Dividends. Some Advantages Include: Limited Liability, Ease Of Transferability, Ability To
Raise Capital, And Unlimited Life.
4. In Response To Sarbanes-Oxley, Small Firms Have Elected To Go Dark Because Of The Costs Of
Compliance. The Costs To Comply With Sarbox Can Be Several Million Dollars, Which Can Be A Large
Percentage Of A Small Firm„S Profits. A Major Cost Of Going Dark Is Less Access To Capital. Since The
Firm Is No Longer Publicly Traded, It Can No Longer Raise Money In The Public Market. Although The
Company Will Still Have Access To Bank Loans And The Private Equity Market, The Costs Associated
With Raising Funds In These Markets Are Usually Higher Than The Costs Of Raising Funds In The Public
Market.
5. The Treasurer„S Office And The Controller„S Office Are The Two Primary Organizational Groups That
Report Directly To The Chief Financial Officer. The Controller„S Office Handles Cost And Financial
Accounting, Tax Management, And Management Information Systems, While The Treasurer„S Office Is
Responsible For Cash And Credit Management, Capital Budgeting, And Financial Planning. Therefore,
The Study Of Corporate Finance Is Concentrated Within The Treasury Group„S Functions.
6. To Maximize The Current Market Value (Share Price) Of The Equity Of The Firm (Whether It„S Publicly
Traded Or Not).
7. In The Corporate Form Of Ownership, The Shareholders Are The Owners Of The Firm. The Shareholders
Elect The Directors Of The Corporation, Who In Turn Appoint The Firm„S Management. This Separation Of
Ownership From Control In The Corporate Form Of Organization Is What Causes Agency Problems To
Exist. Management May Act In Its Own Or Someone Else„S Best Interests, Rather Than Those Of The
Shareholders. If Such Events Occur, They May Contradict The Goal Of Maximizing The Share Price Of The
Equity Of The Firm.
8. A Primary Market Transaction.
,
FINANCE, 13TH EDITION BY STEPHEN
ROSS, RANDOLPH WESTERFIELD,
VERIFIED CHAPTERS 1-31, COMPLETE
NEWEST VERSION 2025/2026
, TABLE OF CONTENTS
Part one: overview
1. Introduction to corporate finance
2. Financial statements and cash flow
3. Financial statements analysis and financial models
part two: valuation and capital budgeting
4. Discounted cash flow valuation
5. Net present value and other investment rules
6. Making capital investment decisions
7. Risk analysis, real options, and capital budgeting
8. Interest rates and bond valuation
9. Stock valuation
part three: risk
10. Lessons from market history
11. Return, risk, and the capital asset pricing model
12. An alternative view of risk and return
13. Risk, cost of capital, and valuation
part four: capital structure and dividend policy
14. Efficient capital markets and behavioral challenges
15. Long-term financing
16. Capital structure: basic concepts
17. Capital structure: limits to the use of debt
18. Valuation and capital budgeting for the levered firm
19. Dividends and other payouts
part five: long-term finance
20. Raising capital
21. Leasing
part six: options, futures, and corporate finance
22. Options and corporate finance
23. Options and corporate finance: extensions and applications
24. Warrants and convertibles
25. Derivatives and hedging risk
part seven: short-term finance
26. Short-term finance and planning
27. Cash management
28. Credit and inventory management
part eight: special topics
29. Mergers, acquisitions, and divestitures
30. Financial distress
31. International corporate finance
,CHAPTER 1
INTRODUCTION TO CORPORATE FINANCE
ANSWERS TO CONCEPTS REVIEW AND CRITICAL THINKING QUESTIONS
1. Capital Budgeting (Deciding Whether To Expand A Manufacturing Plant), Capital Structure (Deciding
Whether To Issue New Equity And Use The Proceeds To Retire Outstanding Debt), And Working Capital
Management (Modifying The Firm„S Credit Collection Policy With Its Customers).
2. Disadvantages: Unlimited Liability, Limited Life, Difficulty In Transferring Ownership, Difficulty In Raising
Capital Funds. Some Advantages: Simpler, Less Regulation, The Owners Are Also The Managers,
Sometimes Personal Tax Rates Are Better Than Corporate Tax Rates.
3. The Primary Disadvantage Of The Corporate Form Is The Double Taxation To Shareholders Of Distributed
Earnings And Dividends. Some Advantages Include: Limited Liability, Ease Of Transferability, Ability To
Raise Capital, And Unlimited Life.
4. In Response To Sarbanes-Oxley, Small Firms Have Elected To Go Dark Because Of The Costs Of
Compliance. The Costs To Comply With Sarbox Can Be Several Million Dollars, Which Can Be A Large
Percentage Of A Small Firm„S Profits. A Major Cost Of Going Dark Is Less Access To Capital. Since The
Firm Is No Longer Publicly Traded, It Can No Longer Raise Money In The Public Market. Although The
Company Will Still Have Access To Bank Loans And The Private Equity Market, The Costs Associated
With Raising Funds In These Markets Are Usually Higher Than The Costs Of Raising Funds In The Public
Market.
5. The Treasurer„S Office And The Controller„S Office Are The Two Primary Organizational Groups That
Report Directly To The Chief Financial Officer. The Controller„S Office Handles Cost And Financial
Accounting, Tax Management, And Management Information Systems, While The Treasurer„S Office Is
Responsible For Cash And Credit Management, Capital Budgeting, And Financial Planning. Therefore,
The Study Of Corporate Finance Is Concentrated Within The Treasury Group„S Functions.
6. To Maximize The Current Market Value (Share Price) Of The Equity Of The Firm (Whether It„S Publicly
Traded Or Not).
7. In The Corporate Form Of Ownership, The Shareholders Are The Owners Of The Firm. The Shareholders
Elect The Directors Of The Corporation, Who In Turn Appoint The Firm„S Management. This Separation Of
Ownership From Control In The Corporate Form Of Organization Is What Causes Agency Problems To
Exist. Management May Act In Its Own Or Someone Else„S Best Interests, Rather Than Those Of The
Shareholders. If Such Events Occur, They May Contradict The Goal Of Maximizing The Share Price Of The
Equity Of The Firm.
8. A Primary Market Transaction.
,
