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978-0133546408 Chapter 1 Solution Manual
Part 1 Introduction to Managerial Finance Chapters in This Part Chapter 1 The Role of Managerial Finance Chapter 2 The Financial Market Environment Chapter 1 The Role of Managerial Finance Instructor’s Resources Overview This chapter introduces the students to the […]
978-0133546408 chapter 10 Solution Manual Part 1
Part 5 Long-Term Investment Decisions Chapters in This Part Chapter 10 Capital Budgeting Techniques Chapter 11 Capital Budgeting Cash Flows and Risk Renements Chapter 10 Capital Budgeting Techniques Instructor’s Resources Overview This chapter is the first of three that deal […]
978-0133546408 chapter 10 Solution Manual Part 2
P10-9. NPV and maximum return LG 3; Challenge a. N 4, I 10%, PMT $44,400 Solve for PV $140,742.03 At a cost of capital of 10%, the NPV is −$9,258, which means that the project is […]
978-0133546408 chapter 10 Solution Manual Part 3
P10-24. All techniques—decision among mutually exclusive investments LG 2, 3, 4, 5, 6; Challenge Project A B C Cash inflows (years 15) $20,00 0 $ 31,500 $ 32,500 a. Payback*3 years 3.2 years 3.4 years b. NPV* $10,34 5 $ […]
978-0133546408 Chapter 11 Solution Manual Part 1
Chapter 11 Capital Budgeting Cash Flows and Risk Refinements Instructor’s Resources Overview This chapter expands upon the capital budgeting techniques presented in the previous chapter (Chapter 10). Shareholder wealth maximization relies upon selection of projects that have positive net present […]
978-0133546408 Chapter 11 Solution Manual Part 2
P11-10. Calculating initial investment LG 3, 4; Challenge a.Book value ($60,000 0.31) $18,600 b. Sales price of old equipment $35,000 Taxes on recapture of depreciation $16,400 0.40 $6,560 Sale price of old roaster $35,000 […]
978-0133546408 Chapter 11 Solution Manual Part 3
216 Gitman/Zutter Principles of Managerial Finance, Brief, Seventh Edition P11-22 Personal Finance: Impact of inflation on investments LG 2; Easy a. c. Year Investment Cash Flows Current NPV (a) Higher Inflation NPV (b) Lower Inflation NPV (c) 0 1 […]
978-0133546408 Chapter 12 Solution Manual Part 1
Part 6 Long-Term Financial Decisions Chapters in this Part Chapter 12 Leverage and Capital Structure Chapter 13 Payout Policy Chapter 12 Leverage and Capital Structure Instructor’s Resources Overview This chapter introduces the student to the concepts of operating and financial […]
978-0133546408 Chapter 12 Solution Manual Part 2
P12-9. DOL LG 2; Intermediate a. $380,000 8,000 units ( ) $63.50 $16.00 FC QP VC = = = – – 9,000 Units 10,000 Units 11,000 Units b. c. Change in unit sales 1,000 0 1,000 % change in sales […]
978-0133546408 Chapter 12 Solution Manual Part 3
P12-22. EBIT-EPS and capital structure LG 5; Intermediate a. Using $50,000 and $60,000 EBIT: Structure A Structure B EBIT $50,000 $60,000 $50,000 $60,000 Less: Interest 16,000 16,000 34,000 34,000 Financial breakeven points: Structure A Structure B $16,000 $34,000 b. c. […]
978-0133546408 Chapter 12 Solution Manual Part 4
P12-27. Integrative—optimal capital structure LG 3, 4, 5, 6; Challenge a. Probability 0.30 0.40 0.30 Sales $600,000 $900,000 $1,200,000 b. Debt Ratio Amount of Debt Amount of Equity Number of Shares of Common Stock* 0% $ 0 $1,000,000 40,000 15% […]
978-0133546408 Chapter 13 Solution Manual Part 1
Chapter 13 Payout Policy Instructor’s Resources Overview Chapter 13 concentrates on the payout decision from the viewpoint of both the firm and the investors. The types of payout policies, forms of dividends, and their possible effects on the value of […]
978-0133546408 Chapter 13 Solution Manual Part 2
22 Gitman/Zutter Principles of Managerial Finance, Brief, Seventh Edition P13-9. Stock dividend—firm LG 5; Intermediate (a) 5% Stock Dividend (b) (1) 10% Stock Dividend (b) (2) 20% Stock Dividend Preferred stock $100,000 $100,000 $100,000 Common stock (at $2.00 par) 21,000122,000224,0003 […]
978-0133546408 Chapter 14 Solution Manual Part 1
Part 7 Short-Term Financial Decisions Chapters in This Part Chapter 14 Working Capital and Current Assets Management Chapter 15 Current Liabilities Management Chapter 14 Working Capital and Current Assets Management Instructor’s Resources Overview This chapter introduces the fundamentals and describes […]
978-0133546408 Chapter 14 Solution Manual Part 2
P14-5. EOQ analysis LG 3: Intermediate a. (1) EOQ (2 ) (2 1,200,000 $25) = = 10,541 $0.54 S O C ´ ´ ´ ´ (2 1,200,000 0) 0 $0.54 ´ ´ = (3) EOQ √ [(2 × […]
978-0133546408 Chapter 15 Solution Manual Part 1
Chapter 15 Current Liabilities Management Instructor’s Resources Overview This chapter introduces the fundamentals and describes the interrelationship of net working capital, profitability, and risk in managing the firm’s current liability accounts. The management of current liabilities requires choosing appropriate levels […]
978-0133546408 Chapter 15 Solution Manual Part 2
56 Gitman/Zutter Principles of Managerial Finance, Brief, Seventh Edition P15-10. Personal finance: Unsecured sources of short-term loans LG 3; Challenge a. Fixed-rate loan b. Variable-rate loan Time period First 60 days Days 61 to 90 Days 91 to 180 Prime […]
978-0133546408 Chapter 2 Solution Manual
Chapter 2: The Financial Market Environment 13 Chapter 2 The Financial Market Environment Instructor’s Resources Overview Money and capital markets and their major components are introduced in this chapter. Firms need to raise capital in order to survive. Financial institutions […]
978-0133546408 Chapter 3 Solution Manual Part 1
Part 2 Financial Tools Chapters in This Part Chapter 3 Financial Statements and Ratio Analysis Chapter 4 Cash Flow and Financial Planning Chapter 5 Time Value of Money Chapter 3 Financial Statements and Ratio Analysis Instructor’s Resources Overview This chapter […]
978-0133546408 Chapter 3 Solution Manual Part 2
P3-5. Calculation of EPS and retained earnings LG 1; Intermediate a. Earnings per share: Net profit before taxes $436,000 Less: Taxes at 40% 174,400 Net profit after tax $261,600 Less: Preferred stock dividends 64,000 Earnings available to common stockholders $197,600 […]
978-0133546408 Chapter 3 Solution Manual Part 3
P3-21. The relationship between financial leverage and profitability LG 4, 5; Challenge a. (1) total liabilities Debt ratio total assets = Pelican Timberland $1,000,000 Debt ratio 0.10 10% $10,000,000 $5,000,000 Debt ratio 0.50 50% $10,000,000 = = = = = […]
978-0133546408 Chapter 4 Solution Manual Part 2
P4-7. Cash receipts LG 4; Basic April May June July August Sales $65,000 $60,000 $70,000 $100,000 $100,000 P4-8. Cash disbursement schedule LG 4; Basic February March April May June July Sales $500,000 $500,000 $560,000 $610,000 $650,000 $650,00 0 Purchases (0.60) […]
978-0133546408 Chapter 4 Solution Manual Part 3
Chapter 4: Cash Flow and Financial Planning 49 P4-17. Pro forma balance sheet—basic LG 5; Intermediate a. Pro Forma Balance Sheet Leonard Industries December 31, 2016 Assets Current assets Pro Forma Balance Sheet Leonard Industries December 31, 2016 Liabilities and […]
978-0133546408 Chapter 5 Solution Manual Part 1
Chapter 5 Time Value of Money Instructor’s Resources Overview This chapter introduces an important financial concept: the time value of money. The present value and future of a sum, as well as the present and future values of an annuity, […]
978-0133546408 Chapter 5 Solution Manual Part 2
P5-14. Time value: Present value of a lump sum LG 2; Intermediate N 6, I 8%, FV $100 Solve for PV $63.02 P5-15. Personal finance: Time value and discount rates LG 2; Intermediate (3) N […]
978-0133546408 Chapter 5 Solution Manual Part 3
Chapter 5: Time Value of Money 73 P5-37. Compounding frequency, time value, and effective annual rates LG 5; Intermediate a. Compounding frequency: AN 10, I 3%, PV $2,500 BN 18, I 2%, PV $50,000 […]
978-0133546408 Chapter 6 Solution Manual Part 1
Part 3 Valuation of Securities Chapters in This Part Chapter 6 Interest Rates and Bond Valuation Chapter 7 Stock Valuation Chapter 6 Interest Rates and Bond Valuation Instructor’s Resources Overview This chapter begins with a thorough discussion of interest rates, […]
978-0133546408 Chapter 6 Solution Manual Part 2
P6-8. Risk-free rate and risk premiums LG 1; Basic a. Risk-free rate: RF r* IP Security r*IP RF c. Nominal rate: r r* IP RP Security r*IP RP r A 3% 6% 3% 12% […]
978-0133546408 Chapter 7 Solution Manual Part 1
Chapter 7 Stock Valuation Instructor’s Resources Overview This chapter continues on the valuation process introduced in Chapter 6 for bonds. Models for valuing preferred and common stock are presented. For common stock, the zero growth, constant growth, and variable growth […]
978-0133546408 Chapter 7 Solution Manual Part 2
Chapter 7: Stock Valuation 123 P7-13. Personal finance: Common stock value—variable growth LG 4; Challenge P0 0 1 1 (1 ) (1 ) Nt t ts D g r = ´ + + å 1 2 1 (1 […]
978-0133546408 Chapter 8 Solution Manual Part 1
Part 4 Risk and the Required Rate of Return Chapters in This Part Chapter 8 Risk and Return Chapter 9 The Cost of Capital Chapter 8 Risk and Return Instructor’s Resources Overview This chapter focuses on the fundamentals of the […]
978-0133546408 Chapter 8 Solution Manual Part 2
P8-10. Assessing return and risk LG 2; Challenge a. Project 257 (1) Range: 1.00 (.10) 1.10 (2) Expected return: =1 n i ri i r r P= ´ å Rate of Return ri Probability Pr i Weighted Value […]
978-0133546408 Chapter 8 Solution Manual Part 3
P8-20. Interpreting beta LG 5; Basic Effect of change in market return on asset with beta of 1.20: P8-21. Betas LG 5; Basic a. and b. Asset Beta Increase in Market Return Expected Impact on Asset Return Decrease in Market […]
978-0133546408 Chapter 9 Solution Manual Part 1
Chapter 9 The Cost of Capital Instructor’s Resources Overview This chapter introduces the student to an important financial concept, the cost of capital. The mechanics of computing the sources of capital debt, preferred stock, common stock, and retained earnings are […]
978-0133546408 Chapter 9 Solution Manual Part 2
172 Gitman/Zutter Principles of Managerial Finance, Brief, Seventh Edition P9-11. Retained earnings versus new common stock LG 5; Intermediate 1 0 r D r g P = + 1 n n D r g N = + Firm Calculation […]
Chapter 10 1 Capital budgeting techniques are used to evaluate a firm’s
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 10 Capital Budgeting Techniques 10.1 Understand the key elements of the capital budgeting process. 1) Capital budgeting techniques are used to evaluate a firm’s fixed asset […]
Chapter 10 2 The cash flow pattern depicted is associated with a capital
Copyright © 2015 Pearson Education, Inc. Table 10.1 23) The cash flow pattern depicted is associated with a capital investment and may be characterized as ________. (See Table 10.1) A) an annuity and a conventional cash flow B) a mixed […]
Chapter 10 3 The The Discount Rate That Equates
Copyright © 2015 Pearson Education, Inc. 9) If a project’s IRR is greater than the cost of capital, the project should be rejected. Answer: FALSE Diff: 1 Topic: Internal Rate of Return (IRR) Learning Obj.: LG 4 Learning Outcome: F-07 […]
Chapter 11 1 The relevant cash flows for a proposed capital expenditure
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 11 Capital Budgeting Cash Flows and Risk Refinements 11.1 Discuss relevant cash flows and the three major cash flow components. 1) Accounting figures and cash flows […]
Chapter 11 2 The cash flow pattern for the capital investment proposal
Copyright © 2015 Pearson Education, Inc. 42) For Proposal 3, the annual incremental after-tax cash flow from operations for year 3 is ________. (See Table 11.2) A) $45,000 B) $75,150 C) $90,150 D) $93,800 Answer: D Diff: 1 Topic: Interpreting […]
Chapter 11 3 A corporation is evaluating the relevant cash flows for a capital
Copyright © 2015 Pearson Education, Inc. 94) A corporation is evaluating the relevant cash flows for a capital budgeting decision and must estimate the terminal cash flow. The proposed machine will be disposed of at the end of its usable […]
Chapter 11 4 Using the risk-adjusted discount rate method of project evaluation
Copyright © 2015 Pearson Education, Inc. Table 11.8 Tangshan Mining Company is considering investment in one of two mutually exclusive projects M and N which are described below. Tangshan Mining’s overall cost of capital is 15 percent, the market return […]
Chapter 12 1 increases in leverage result in increased return and risk
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 12 Leverage and Capital Structure 12.1 Discuss leverage, capital structure, breakeven analysis, the operating breakeven point, and the effect of changing costs the breakeven point. 1) […]
Chapter 12 2 When a firm has fixed operating costs, operating leverage
Copyright © 2015 Pearson Education, Inc. 9) When a firm has fixed operating costs, operating leverage is present. In that case, an increase in sales results in a more-than-proportional increase in EBIT, and a decrease in sales results in a […]
Chapter 12 3 When Considering Fixed Operating Cost Increases
Copyright © 2015 Pearson Education, Inc. 22) When considering fixed operating cost increases, a financial manager must weigh the increased financial risk associated with greater operating leverage against the expected increase in returns. Answer: FALSE Diff: 1 Topic: Capital Structure […]
Chapter 12 4 A firm is analyzing two possible capital structures—30
Copyright © 2015 Pearson Education, Inc. 5) The cost of equity increases with increasing financial leverage in order to compensate the stockholders for the higher degree of financial risk. Answer: TRUE Diff: 1 Topic: Optimal Capital Structure Learning Obj.: LG […]
Chapter 13 1 Payout policy refers to the decisions that firms
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 13 Payout Policy 13.1 Understand cash payout procedures, their tax treatment, and the role of dividend reinvestment plans. 1) Payout policy refers to the decisions that […]
Chapter 13 2 The market rewards firms that adopt a constant dividend
Copyright © 2015 Pearson Education, Inc. 12) The market rewards firms that adopt a constant dividend payout policy rather than a fixed or increasing level of dividends through higher share prices. Answer: FALSE Diff: 1 Topic: Arguments for Dividend Relevance […]
Chapter 13 3 A firm has had the indicated earnings per share over the last
Copyright © 2015 Pearson Education, Inc. 18) An advantage of a ________ is that it avoids giving shareholders false hopes. A) constant-payout-ratio policy B) regular dividend policy C) low-regular-and-extra dividend policy D) target dividend policy Answer: C Diff: 1 Topic: […]
Chapter 14 1 liabilities to achieve a balance between profitability and risk
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 14 Working Capital and Current Assets Management 14.1 Understand working capital management, net working capital, and the related trade-off between profitability and risk. 1) Short-term financial […]
Chapter 14 2 A firm has an operating cycle of 170 days
Copyright © 2015 Pearson Education, Inc. 43) Other factors remaining constant, a decrease in the average age of inventory will result in ________. A) a decrease in the average collection period B) a decrease in the cash conversion cycle C) […]
Chapter 14 3 A firm has arranged for a lockbox system to reduce collection
Copyright © 2015 Pearson Education, Inc. 100) A firm has arranged for a lockbox system to reduce collection time of accounts receivable. Currently the firm has an average collection period of 43 days, an average age of inventory of 50 […]
Chapter 14 4 Taizhou Products uses 800 units of a product per year
Copyright © 2015 Pearson Education, Inc. 40) Taizhou Products uses 800 units of a product per year on a continuous basis. The product has carrying costs of $50 per unit per year and order costs of $300 per order. It […]
Chapter 14 5 Increased collection expenditures should reduce the investment
Copyright © 2015 Pearson Education, Inc. 5) If a firm’s credit period is decreased, the sales volume, the investment in accounts receivable, and the bad debt expenses can be expected to increase. Answer: FALSE Diff: 1 Topic: Credit Terms Learning […]
Chapter 14 6 The yields on negotiable certificates of deposit are typically
Copyright © 2015 Pearson Education, Inc. 29) The yields on negotiable certificates of deposit are typically above those on U.S. Treasury issues and comparable to the yields on commercial paper with similar maturities. Answer: TRUE Diff: 1 Topic: Investing in […]
Chapter 15 1 Spontaneous unsecured financing has a specific interest cost
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 15 Current Liabilities Management 15.1 Review accounts payable, the key components of credit terms, and the procedures for analyzing those terms. 1) Spontaneous unsecured financing has […]
Chapter 15 2 Tangshan Mining borrowed $10,000 for one year under a line
Copyright © 2015 Pearson Education, Inc. 28) Tangshan Mining borrowed $10,000 for one year under a line of credit with a stated interest rate of 8 percent and a 10 percent compensating balance. Thus, the firm keeps a balance of […]
Chapter 15 3 The cost of borrowing through the sale of commercial paper
Copyright © 2015 Pearson Education, Inc. 13) The cost of borrowing through the sale of commercial paper is typically ________ the prime bank loan rate. A) lower than B) the same as C) unrelated to D) higher than Answer: A […]
Chapter 5 1 Dan Can Earn Percent His contributions How Much
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 5 Time Value of Money 5.1 Discuss the role of time value in finance, the use of computational tools, and the basic patterns of cash flow. […]
Chapter 5 2 Ashley is planning to attend college when she graduates
Copyright © 2015 Pearson Education, Inc. 38) Ashley is planning to attend college when she graduates from high school 7 years from now. She anticipates that she will need $10,000 at the beginning of each of the four college years […]
Chapter 5 3 Inflation is expected to cause this price to increase
Copyright © 2015 Pearson Education, Inc. 14) Adam borrows $4,500 at 12 percent annually compounded interest to be repaid in four equal annual installments. The actual end-of-year payment is ________. A) $ 942 B) $1,125 C) $1,482 D) $2,641 Answer: […]
Chapter 6 1 the term structure of interest rates, and risk premiums
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 6 Interest Rates and Bond Valuation 6.1 Describe interest rate fundamentals, the term structure of interest rates, and risk premiums. 1) An interest rate or a […]
Chapter 6 2 The purpose of the debt covenant that requires maintaining
Copyright © 2015 Pearson Education, Inc. 19) A ________ is a restrictive provision in a bond indenture, providing for the systematic retirement of the bonds prior to their maturity. A) redemption clause B) sinking-fund requirement C) conversion feature D) subordination […]
Chapter 6 3 Payment of interest required only when earnings are made available
Copyright © 2015 Pearson Education, Inc. 53) ________ are secured by stock and/or bonds that are owned by the issuer. A) Mortgage bonds B) Equipment trust certificates C) Collateral trust bonds D) Subordinated debentures Answer: C Diff: 1 Topic: Common […]
Chapter 6 4 If interest is paid annually for both bonds
Copyright © 2015 Pearson Education, Inc. 19) Calculate the value of a $1,000 bond which has 10 years until maturity and pays quarterly interest at an annual coupon rate of 12 percent. The required return on similar-risk bonds is 20 […]
Chapter 7 1 Holders of equity have claims on both income and assets
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 7 Stock Valuation 7.1 Differentiate between debt and equity. 1) Unlike creditors, equityholders are owners of the firm. Answer: TRUE Diff: 1 Topic: Voice in Management […]
Chapter 7 2 Venture capitalists invest in promising early-stage
Copyright © 2015 Pearson Education, Inc. 13) Venture capitalists invest in promising early-stage companies in exchange for a portion of the firm’s equity. Answer: FALSE Diff: 1 Topic: Issuing Common Stock Learning Obj.: LG 3 Learning Outcome: F-15 Question Status: […]
Chapter 7 3 What The Current Value The Outstanding Preferred
Copyright © 2015 Pearson Education, Inc. 25) In the Gordon model, the value of a common stock is the ________. A) net value of all assets which are liquidated for their exact accounting value B) actual amount each common stockholder […]
Chapter 7 4 The common stock book value model ignores a firm’s expected
Copyright © 2015 Pearson Education, Inc. 5) The common stock book value model ignores a firm’s expected earnings potential and generally lacks any true relationship to the firm’s value in the marketplace. Answer: TRUE Diff: 1 Topic: Other Approaches to […]
Chapter 8 1 The return on an asset is the change in its value
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 8 Risk and Return 8.1 Understand the meaning and fundamentals of risk, return, and risk preferences. 1) Investment A guarantees its holder $100 return. Investment B […]
Chapter 8 2 Discuss the measurement of return and standard deviation
Copyright © 2015 Pearson Education, Inc. 37) The College Copy Shop is in process of purchasing a high-tech copier. In its search, it has gathered the following information about two possible copiers A and B. (a) Compute expected rate of […]
Chapter 8 3 A beta coefficient of 0 represents an asset that
41 22) Strikes, lawsuits, regulatory actions, or the loss of a key account are all examples of ________. A) diversifiable risk B) market risk C) economic risk D) systematic risk Answer: A Diff: 1 Topic: Types of Risk Learning Obj.: […]
Chapter 9 1 The cost of capital is described as the rate of return
Copyright © 2015 Pearson Education, Inc. Principles of Managerial Finance, Brief, 7e (Gitman) Chapter 9 The Cost of Capital 9.1 Understand the basic concept and the sources of capital associated with the cost of capital. 1) Holding risk constant, the […]
Chapter 9 2 The Growth Rate Dividends Has Been Percent
Copyright © 2015 Pearson Education, Inc. 8) One measure of the cost of common stock equity is the rate at which investors discount the expected common stock dividends of the firm to determine its share value. Answer: TRUE Diff: 1 […]
Chapter 9 3 In computing the weighted average cost of capital
Copyright © 2015 Pearson Education, Inc. 7) In computing the weighted average cost of capital, from a strictly theoretical point of view, the preferred weighing scheme is target market value proportions. Answer: TRUE Diff: 1 Topic: Weighting Schemes Learning Obj.: […]