@PROFDOCDIGITALLIBRARIES
SOLUTION MANUAL
Corporate Financial Management
Authors: Deborah Lewis & Glen Arnold
6th edition
JN
U
R
SE
,@PROFDOCDIGITALLIBRARIES
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
JN
Chapter 6 Risk and project appraisal 38
Chapter 7 Portfolio theory 44
Chapter 8 The capital asset pricing model and multi-factor models 51
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Chapter 9 Stock markets 54
Chapter 10 Raising equity capital 58
R
Chapter 11 Long-term debt finance 64
SE
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
,@PROFDOCDIGITALLIBRARIES
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.
JN
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,
U
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
R
also included.
Glen Arnold
SE
, @PROFDOCDIGITALLIBRARIES
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
JN
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
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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
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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
SE
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
SOLUTION MANUAL
Corporate Financial Management
Authors: Deborah Lewis & Glen Arnold
6th edition
JN
U
R
SE
,@PROFDOCDIGITALLIBRARIES
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
JN
Chapter 6 Risk and project appraisal 38
Chapter 7 Portfolio theory 44
Chapter 8 The capital asset pricing model and multi-factor models 51
U
Chapter 9 Stock markets 54
Chapter 10 Raising equity capital 58
R
Chapter 11 Long-term debt finance 64
SE
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
,@PROFDOCDIGITALLIBRARIES
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.
JN
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,
U
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
R
also included.
Glen Arnold
SE
, @PROFDOCDIGITALLIBRARIES
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
JN
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
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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
R
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
SE
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
