Solutions for Analysis for Financial Management, 13th
#bv #bv #bv #bv #bv #bv
Edition by Robert C. Higgins, Jennifer Koski, Todd Mitton
# b v #bv #bv #bv #bv #bv #bv #bv #bv
TEST BANK!!! #bv
SCHOLARVAULT
,Analysis for Financial Management, 13e
SUGGESTED ANSWERS TO EVEN-NUMBERED PROBLEMS
Chapter 1
2. Management is either foolish or thinks its board is. Earning $100 million on a $5 billion
equity investment is a return of 2 percent, which is below any reasonable cost of equity.
As a board member, I would vote to cut management’s compensation, not raise it. I
would also criticize them for apparently attempting to deceive the board.
4. a. Cash rises $500,000; plant and equipment falls $300,000; equity rises $200,000.
b. Net plant and equipment rises $80 million; Cash falls $32 million; Bank debt rises
$48 million.
c. Net plant and equipment rises $60 million; cash falls $60 million.
d. Cash falls $40,000; Accounts payable falls $40,000.
e. Cash falls $240,000; Owners’ equity falls by $240,000 (via an increase in Treasury
stock).
f. Cash rises $80,000; Inventory falls; Accrued taxes, Owners’ equity, and possibly
other cost categories rise such that the algebraic sum equals $80,000.
g. Accounts receivable rise $120,000. Other categories change as described in part f.
h. Cash falls $50,000. Owners’ equity falls by $50,000 (via Retained earnings).
6. a. R&E Supplies, Inc. Sources and Uses Statement 2018–2021 ($ thousands)
Sources of cash:
Decrease in cash and securities $259
Increase in accounts payable 2,205
Increase in current portion long-term debt 40
Increase in accrued wages 13
Increase in retained earnings 537
Total $3,054
Uses of cash:
Increase in accounts receivable $1,543
Increase in inventories 1,148
Increase in prepaid expenses 4
Increase in net fixed assets 159
Decrease in long-term debt 200
Total $3,054
SCHOLARVAULT
,b. Insights:
i. R&E #bvis #bvmaking #bvextensive #bvuse #bvof #bvtrade #bvcredit #bvto #bvfinance #bva #bvbuildup #bvin
#bvcurrent #bvassets. #bvThe #bvincrease #bvin #bvaccounts #bvpayable #bvequals #bvalmost #bvthree
#bvfourths #bvof #bvtotal #bvsources #bvof #bvcash. #bvIncreasing #bvaccounts #bvreceivable #bvand
#bvinventories #bvaccount #bvfor #bvalmost #bv90 #bvpercent #bvof #bvthe #bvuses #bvof #bvcash.
ii. External #bvlong-term #bvdebt #bvfinancing #bvis #bva #bvuse #bvof #bvcash #bvfor #bvR&E, #bvmeaning #bvthat
#bvit #bvis #bvrepaying #bvits #bvloans. #bvA #bvrestructuring #bvinvolving #bvless #bvreliance #bvon
#bvaccounts #bvpayable #bvand #bvmore #bvbank #bvdebt #bvappears #bvappropriate.
8. #bvAccounting #bvincome #bvwill #bvbe #bvthe #bvvalue #bvof #bvthe #bvparcels #bvsold, #bvless #bvtheir
#bvoriginal #bvpurchase #bvprice. #bvSo #bvif #bvall #bvparcels #bvare #bvsold, #bvthe #bvincome #bvis #bv5 #bv×
#bv$16 #bvmillion #bv+ #bv5 #bv× #bv$8 #bvmillion #bv– #bv$100 #bvmillion #bv= #bv$20 #bvmillion.
#bvEconomic #bvincome #bvwill #bvbe #bvthe #bvincrease #bvin #bvthe #bvmarket #bvvalue #bvof #bvthe #bvland,
#bvwhether #bvsold #bv or #bvnot, #bvover #bvthe #bvperiod. #bvAt #bvthe #bvend #bvof #bvthe #bvfirst #bvyear,
#bvthis #bvwill #bvbe #bv$20 #bvmillion. #bvAnswers #bvto #bveach #bvpart #bvof #bvthe #bvquestion #bvappear
#bvbelow.
Question Accounting # b v Income Economic # b v Income
a. $20 #bvmillion $20 #bvmillion
b. $0 $20 #bvmillion
c. –$10 #bvmillion $20 #bvmillion
d. $30 #bvmillion $20 #bvmillion
e. # b v Too #bvmany #bvcompanies #bvhave #bvtried #bvthis. #bvIf #bvthe #bvmarket #bvvalue #bvof #bva #bvpiece
#bvof #bvland #bvfalls, #bvthe #bvowner #bvloses #bvwhether #bvhe #bvsells #bvor #bvnot. #bvThe #bvmarket
#bvprice #bvof #bvthe #bvland #bvfell #bvbecause #bvpeople #bvthought #bvthe #bvfuture #bvincome #bvstream
#bvto #bvthe #bvowners #bvwas #bvworth #bvless. #bvContinuing #bvto #bvhold #bvthe #bvproperty #bvforces
#bvthe #bvowner #bvto #bvaccept #bvthe #bvlower #bvincome. #bvWhether #bvthe #bvloss #bvis
#bvrecognized #bvor #bvnot #bvmight #bvaffect #bvaccounting #bvearnings, #bvbut #bvhas #bvnothing
#bvto #bvdo #bvwith #bvreality.
10. The #bvaccounting #bvprofits #bvfrom #bvDesmond’s #bvbrewery #bvare #bvexpected #bvto #bvbe
#bv$60,000. #bvThese #bvaccounting #bvprofits #bvdo #bvnot #bvinclude #bvthe #bvimplicit #bvcost #bvof
#bvthe #bventrepreneur’s #bvtime. #bvDesmond’s #bvtime #bvis #bvworth #bvat #bvleast #bv$70,000, #bvthe
#bvcurrent #bvincome #bvhe #bvwill #bvhave #bvto #bvforego #bvto #bvmanage #bvthe #bvbrewery. #bvWhen
#bvthese #bvimplicit #bvopportunity #bvcosts #bvare #bvincluded #bvincome #bvfalls #bvto:
$250,000 #bv– #bv$190,000 #bv– #bv$70,000 #bv= #bv–$10,000
This #bvnew #bvventure #bvwill #bvclearly #bvreduce #bvDesmond’s #bvincome, #bvnot #bvincrease #bvit.
SCHOLARVAULT
, 12. a.
Company A B C
End-of-year
cash #bvbalance $150 #bvmillion $30 #bvmillion $120 #bvmillion
b. It #bvappears #bvthat #bvcompany #bvC #bvretired #bvmore #bvdebt #bvthan #bvit #bvissued, #bvrepurchased
#bvmore #bvstock #bvthan #bvit #bvissued, #bvor #bvsome #bvcombination #bvof #bvthe #bvtwo.
c. I’d #bvprefer #bvto #bvown #bvcompany #bvA. #bvA #bvappears #bvto #bvbe #bva #bvgrowing #bvcompany #bvas
#bvevidenced #bvby #bvthe #bvsizable #bvnet #bvcash #bvused #bvin #bvinvesting #bvactivities, #bvand #bvits
#bvnegative #bvnet #bvcash #bvflow #bvfrom #bvoperations #bvmay #bvwell #bvbe #bvdue #bvto
#bvincreasing #bvaccounts #bvreceivable #bvand #bvinventories #bvthat #bvnaturally
#bvaccompany #bvsales #bvgrowth. #bvCompany #bvB #bvappears #bvnot #bvto #bvbe #bvgrowing,
#bvso #bvits #bvnegative #bvnet #bvcash #bvflows #bvfrom #bvoperations #bvare #bvprobably #bvdue #bvto
#bvlosses #bvor #bvto #bvincreasing #bvreceivables #bvand #bvinventories #bvrelative #bvto #bvsales, #bva
#bvtrend #bvdenoting #bvpoor #bvmanagement #bvof #bvcurrent #bvassets.
d. I #bvdon’t #bvthink #bvthere #bvis #bvnecessarily #bvany #bvcause #bvfor #bvconcern. #bvIt #bvappears
#bvcompany #bvC #bvis #bva #bvmature, #bvslow-growth #bvcompany #bvthat #bvis #bvreturning #bvits
#bvunneeded #bvoperating #bvcash #bvflows #bvto #bvinvestors #bvin #bvthe #bvform #bvof #bvdebt
#bvrepayment, #bvshare #bvrepurchase, #bvdividends, #bvor #bvsome #bvcombination #bvof
#bvthese. #bvThis #bvis #bva #bvperfectly #bvviable #bvstrategy #bvin #bvthe #bvabsence #bvof #bvattractive
#bvinvestment #bvopportunities.
14. #bvSee # b v suggested # b v solutions # b v to # b v Excel # b v problems # b v at # b v McGraw-Hill’s
# b v Connect # b v or # b v at #bvwww.mhhe.com/Higgins13e.
SCHOLARVAULT
#bv #bv #bv #bv #bv #bv
Edition by Robert C. Higgins, Jennifer Koski, Todd Mitton
# b v #bv #bv #bv #bv #bv #bv #bv #bv
TEST BANK!!! #bv
SCHOLARVAULT
,Analysis for Financial Management, 13e
SUGGESTED ANSWERS TO EVEN-NUMBERED PROBLEMS
Chapter 1
2. Management is either foolish or thinks its board is. Earning $100 million on a $5 billion
equity investment is a return of 2 percent, which is below any reasonable cost of equity.
As a board member, I would vote to cut management’s compensation, not raise it. I
would also criticize them for apparently attempting to deceive the board.
4. a. Cash rises $500,000; plant and equipment falls $300,000; equity rises $200,000.
b. Net plant and equipment rises $80 million; Cash falls $32 million; Bank debt rises
$48 million.
c. Net plant and equipment rises $60 million; cash falls $60 million.
d. Cash falls $40,000; Accounts payable falls $40,000.
e. Cash falls $240,000; Owners’ equity falls by $240,000 (via an increase in Treasury
stock).
f. Cash rises $80,000; Inventory falls; Accrued taxes, Owners’ equity, and possibly
other cost categories rise such that the algebraic sum equals $80,000.
g. Accounts receivable rise $120,000. Other categories change as described in part f.
h. Cash falls $50,000. Owners’ equity falls by $50,000 (via Retained earnings).
6. a. R&E Supplies, Inc. Sources and Uses Statement 2018–2021 ($ thousands)
Sources of cash:
Decrease in cash and securities $259
Increase in accounts payable 2,205
Increase in current portion long-term debt 40
Increase in accrued wages 13
Increase in retained earnings 537
Total $3,054
Uses of cash:
Increase in accounts receivable $1,543
Increase in inventories 1,148
Increase in prepaid expenses 4
Increase in net fixed assets 159
Decrease in long-term debt 200
Total $3,054
SCHOLARVAULT
,b. Insights:
i. R&E #bvis #bvmaking #bvextensive #bvuse #bvof #bvtrade #bvcredit #bvto #bvfinance #bva #bvbuildup #bvin
#bvcurrent #bvassets. #bvThe #bvincrease #bvin #bvaccounts #bvpayable #bvequals #bvalmost #bvthree
#bvfourths #bvof #bvtotal #bvsources #bvof #bvcash. #bvIncreasing #bvaccounts #bvreceivable #bvand
#bvinventories #bvaccount #bvfor #bvalmost #bv90 #bvpercent #bvof #bvthe #bvuses #bvof #bvcash.
ii. External #bvlong-term #bvdebt #bvfinancing #bvis #bva #bvuse #bvof #bvcash #bvfor #bvR&E, #bvmeaning #bvthat
#bvit #bvis #bvrepaying #bvits #bvloans. #bvA #bvrestructuring #bvinvolving #bvless #bvreliance #bvon
#bvaccounts #bvpayable #bvand #bvmore #bvbank #bvdebt #bvappears #bvappropriate.
8. #bvAccounting #bvincome #bvwill #bvbe #bvthe #bvvalue #bvof #bvthe #bvparcels #bvsold, #bvless #bvtheir
#bvoriginal #bvpurchase #bvprice. #bvSo #bvif #bvall #bvparcels #bvare #bvsold, #bvthe #bvincome #bvis #bv5 #bv×
#bv$16 #bvmillion #bv+ #bv5 #bv× #bv$8 #bvmillion #bv– #bv$100 #bvmillion #bv= #bv$20 #bvmillion.
#bvEconomic #bvincome #bvwill #bvbe #bvthe #bvincrease #bvin #bvthe #bvmarket #bvvalue #bvof #bvthe #bvland,
#bvwhether #bvsold #bv or #bvnot, #bvover #bvthe #bvperiod. #bvAt #bvthe #bvend #bvof #bvthe #bvfirst #bvyear,
#bvthis #bvwill #bvbe #bv$20 #bvmillion. #bvAnswers #bvto #bveach #bvpart #bvof #bvthe #bvquestion #bvappear
#bvbelow.
Question Accounting # b v Income Economic # b v Income
a. $20 #bvmillion $20 #bvmillion
b. $0 $20 #bvmillion
c. –$10 #bvmillion $20 #bvmillion
d. $30 #bvmillion $20 #bvmillion
e. # b v Too #bvmany #bvcompanies #bvhave #bvtried #bvthis. #bvIf #bvthe #bvmarket #bvvalue #bvof #bva #bvpiece
#bvof #bvland #bvfalls, #bvthe #bvowner #bvloses #bvwhether #bvhe #bvsells #bvor #bvnot. #bvThe #bvmarket
#bvprice #bvof #bvthe #bvland #bvfell #bvbecause #bvpeople #bvthought #bvthe #bvfuture #bvincome #bvstream
#bvto #bvthe #bvowners #bvwas #bvworth #bvless. #bvContinuing #bvto #bvhold #bvthe #bvproperty #bvforces
#bvthe #bvowner #bvto #bvaccept #bvthe #bvlower #bvincome. #bvWhether #bvthe #bvloss #bvis
#bvrecognized #bvor #bvnot #bvmight #bvaffect #bvaccounting #bvearnings, #bvbut #bvhas #bvnothing
#bvto #bvdo #bvwith #bvreality.
10. The #bvaccounting #bvprofits #bvfrom #bvDesmond’s #bvbrewery #bvare #bvexpected #bvto #bvbe
#bv$60,000. #bvThese #bvaccounting #bvprofits #bvdo #bvnot #bvinclude #bvthe #bvimplicit #bvcost #bvof
#bvthe #bventrepreneur’s #bvtime. #bvDesmond’s #bvtime #bvis #bvworth #bvat #bvleast #bv$70,000, #bvthe
#bvcurrent #bvincome #bvhe #bvwill #bvhave #bvto #bvforego #bvto #bvmanage #bvthe #bvbrewery. #bvWhen
#bvthese #bvimplicit #bvopportunity #bvcosts #bvare #bvincluded #bvincome #bvfalls #bvto:
$250,000 #bv– #bv$190,000 #bv– #bv$70,000 #bv= #bv–$10,000
This #bvnew #bvventure #bvwill #bvclearly #bvreduce #bvDesmond’s #bvincome, #bvnot #bvincrease #bvit.
SCHOLARVAULT
, 12. a.
Company A B C
End-of-year
cash #bvbalance $150 #bvmillion $30 #bvmillion $120 #bvmillion
b. It #bvappears #bvthat #bvcompany #bvC #bvretired #bvmore #bvdebt #bvthan #bvit #bvissued, #bvrepurchased
#bvmore #bvstock #bvthan #bvit #bvissued, #bvor #bvsome #bvcombination #bvof #bvthe #bvtwo.
c. I’d #bvprefer #bvto #bvown #bvcompany #bvA. #bvA #bvappears #bvto #bvbe #bva #bvgrowing #bvcompany #bvas
#bvevidenced #bvby #bvthe #bvsizable #bvnet #bvcash #bvused #bvin #bvinvesting #bvactivities, #bvand #bvits
#bvnegative #bvnet #bvcash #bvflow #bvfrom #bvoperations #bvmay #bvwell #bvbe #bvdue #bvto
#bvincreasing #bvaccounts #bvreceivable #bvand #bvinventories #bvthat #bvnaturally
#bvaccompany #bvsales #bvgrowth. #bvCompany #bvB #bvappears #bvnot #bvto #bvbe #bvgrowing,
#bvso #bvits #bvnegative #bvnet #bvcash #bvflows #bvfrom #bvoperations #bvare #bvprobably #bvdue #bvto
#bvlosses #bvor #bvto #bvincreasing #bvreceivables #bvand #bvinventories #bvrelative #bvto #bvsales, #bva
#bvtrend #bvdenoting #bvpoor #bvmanagement #bvof #bvcurrent #bvassets.
d. I #bvdon’t #bvthink #bvthere #bvis #bvnecessarily #bvany #bvcause #bvfor #bvconcern. #bvIt #bvappears
#bvcompany #bvC #bvis #bva #bvmature, #bvslow-growth #bvcompany #bvthat #bvis #bvreturning #bvits
#bvunneeded #bvoperating #bvcash #bvflows #bvto #bvinvestors #bvin #bvthe #bvform #bvof #bvdebt
#bvrepayment, #bvshare #bvrepurchase, #bvdividends, #bvor #bvsome #bvcombination #bvof
#bvthese. #bvThis #bvis #bva #bvperfectly #bvviable #bvstrategy #bvin #bvthe #bvabsence #bvof #bvattractive
#bvinvestment #bvopportunities.
14. #bvSee # b v suggested # b v solutions # b v to # b v Excel # b v problems # b v at # b v McGraw-Hill’s
# b v Connect # b v or # b v at #bvwww.mhhe.com/Higgins13e.
SCHOLARVAULT
