Solution manual for entrepreneurial finance 7th edition J. Chris Leach, Ronald W. Melicher

SOLUTIONMANUAL r




EntrepreneurialFinance,7thEdition r r r




J.ChrisLeach,RonaldW.Melicher
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Chapters1-16WithCAPSTONECASES
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,TABLE OF CONTENTS r r r




Part1:THEENTREPRENEURIALENVIRONMENT.
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1. IntroductiontoFinanceforEntrepreneurs. r r r r




2. DevelopingtheBusinessIdea. r r r




Part2:ORGANIZINGANDOPERATINGTHEVENTURE.
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3. OrganizingandFinancinga NewVenture. r r r r r




4. PreparingandUsingFinancialStatements. r r r r




5. EvaluatingOperatingandFinancialPerformance. Part 3: r r r r r r




PLANNING FOR THEFUTURE.
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6. ManagingCashFlow. r r




7. TypesandCosts ofFinancialCapital.
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8. SecuritiesLawConsiderationsWhenObtainingVentureFinancing. Part4:
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CREATINGANDRECOGNIZINGVENTUREVALUE.
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9. ProjectingFinancialStatements. r r




10. ValuingEarly-StageVentures. r r




11. VentureCapitalValuationMethods. r r r




Part5:STRUCTURINGFINANCINGFORTHEGROWINGVENTURE.
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12. ProfessionalVentureCapital. r r




13. OtherFinancingAlternatives. r r




14. SecurityStructuresandDeterminingEnterpriseValues. Part6:
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EXITANDTURNAROUNDSTRATEGIES.
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15. HarvestingtheBusinessVentureInvestment. r r r r




16. FinanciallyTroubledVentures:TurnaroundOpportunities? Part7: r r r r r r




CAPSTONECASES.
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Case1.Eco-Products,Inc. Case2.
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SpatialTechnology,
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,Chapter 1 r




INTRODUCTIONTOFINANCEFORENTREPRENEURS FOCUS r r r r r




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




LO 1.1: Characterize the entrepreneurial process.
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LO 1.2: Describeentrepreneurship and some characteristics of entrepreneurs. LO
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1.3: Indicate several megatrends providing waves of entrepreneurial
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ropportunities.LO 1.4: List and describe the sevenprinciples ofentrepreneurial r r r r r r r r r




rfinance.
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 asuccessful venture‘s life cycle.
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LO 1.7: Identify, by life cycle stage, the relevant types of financing and investors.LO
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1.8: Understand the life cycle approach used in this book.
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CHAPTEROUTLINE r




1.1 THE ENTREPRENEURIALPROCESS r r




1.2 ENTREPRENEURSHIPFUNDAMENTALS r




A. Who is an Entrepreneur? r r r




B. Basic Definitions r




C. Entrepreneurial Traits or Characteristics r r r




D. Opportunities Exist But Not Without Risks r r r r r




1.3 SOURCESOFENTREPRENEURIALOPPORTUNITIES r r r




A. Societal Changes r




B. DemographicChanges r




C. Technological Changes r




D. EmergingEconomies and Global Changes r r r r




E. Crises and ―Bubbles‖ r r




F. DisruptiveInnovation r




1

, 1.4 PRINCIPLES OFENTREPRENEURIALFINANCE r r r




A. Real, Human, and Financial Capital must be Rented fromOwners (Principle #1)
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B. Risk and Expected Reward go Hand in Hand (Principle #2)
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C. While Accounting is the Language ofBusiness, Cash is the Currency (Principle #3)
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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-
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Interests(Principle#6)
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G. VentureCharacter and Reputation can be Assets or Liabilities (Principle #7) r r r r r r r r r r




1.5 ROLE OFENTREPRENEURIAL FINANCE
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1.6 THESUCCESSFULVENTURE LIFE CYCLE
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A. DevelopmentStage r




B. Startup Stage r




C. SurvivalStage r




D. Rapid-GrowthStage r




E. Early-MaturityStage r




F. LifeCycle Stages and theEntrepreneurial Process
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1.7 FINANCINGTHROUGHTHE VENTURE LIFE CYCLE r r r r r




A. Seed Financing r




B. Startup Financing r




C. First-RoundFinancing r




D. Second-RoundFinancing r




E. MezzanineFinancing r




F. Liquidity-StageFinancing r




G. SeasonedFinancing r




1.8 LIFE CYCLE APPROACH FOR TEACHING ENTREPRENEURIAL FINANCE
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SUMMARY
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DISCUSSIONQUESTIONSANDANSWERS r r r




1. What is the entrepreneurial process?
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Theentrepreneurial process comprises: developingopportunities, gatheringresources,
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randmanaging and building operations with the goal of creating value. r r r r r r r r r




2. What is entrepreneurship? What are some basic characteristics of entrepreneurs?
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Entrepreneurship is the process of changing ideasinto commercial opportunities and creatingvalue. r r r r r r r r r r r r




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