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978-0134476308 Chapter 1
Part 1 Introduction to Managerial Finance Chapters in This Part Chapter 1 The Role of Managerial Finance Chapter 2 The Financial Market Environment © 2019 Pearson Education, Inc. Chapter 1 The Role of Managerial Finance Instructor’s Resources Chapter Overview […]
978-0134476308 Chapter 10 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 Refinements © 2019 Pearson Education, Inc. Chapter 10 Capital Budgeting Techniques Instructor Resources Chapter Overview This chapter […]
978-0134476308 Chapter 10 Part 2
212 Zutter/Smart • Principles of Managerial Finance Brief, Eighth Edition b. To find the number of years $10,000 would have to be received to make the project acceptable by the IRR decision rule, use the NPER command in Excel. The […]
978-0134476308 Chapter 11 Part 1
Chapter 11 Capital Budgeting Cash Flows and Risk Refinements NOTE TO INSTRUCTORS: Shortly after the first press run for the 15th edition, Congress passed the Tax Cuts and Jobs Act of 2017, which included changes in the corporate tax rate […]
978-0134476308 Chapter 11 Part 2
240 Zutter/Smart • Principles of Managerial Finance Brief, Eighth Edition b. and c. (40% tax rate) Year = (1) (2) (3) (4) (5) (6) Old Machine Revenue – Operating Expenses 14,000$ 16,000$ 20,000$ 18,000$ 14,000$ –$ Less: Depreciation (6,000)$ (6,000)$ […]
978-0134476308 Chapter 12 Part 1
© 2019 Pearson Education, Inc. Part 6 Long-Term Financial Decisions Chapters in This Part Chapter 12 Leverage and Capital Structure Chapter 13 Payout Policy © 2019 Pearson Education, Inc. Chapter 12 Leverage and Capital Structure Instructor Resources Chapter Overview […]
978-0134476308 Chapter 12 Part 2
Chapter 12 Leverage and Capital Structure 271 P12-18 Personal finance: Capital structures (LG 3; Intermediate) a. Monthly mortgage payment ÷ Monthly gross income = $1,100 ÷ $4,500 = 24.44% Kirsten’s ratio is less than the bank maximum of 28%. b. […]
978-0134476308 Chapter 13
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 […]
978-0134476308 Chapter 14
Part 7 Short-Term Financial Decisions Chapters in This Part Chapter 14 Working Capital and Current Assets Management Chapter 15 Current Liabilities Management © 2019 Pearson Education, Inc. Chapter 14 Working Capital and Current Assets Management Instructor’s Resources Overview This chapter […]
978-0134476308 Chapter 15
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 […]
978-0134476308 Chapter 2
Chapter 2 The Financial-Market Environment Instructor’s Resources Chapter Overview This chapter provides an overview of the institutional framework for channeling funds from net savers to net borrowers. The discussion begins with three basic types of financial institutions—commercial banks, investment […]
978-0134476308 Chapter 3 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 © 2019 Pearson Education, Inc. Chapter 3 Financial Statements and Ratio Analysis […]
978-0134476308 Chapter 3 Part 2
42 Zutter/Smart • Principles of Managerial Finance Brief, Eighth Edition P3-12. Personal finance: Liquidity ratio (LG 3; Basic) a. Liquidity ratio = Total liquid assets / Total current debts = ($3,200 + $1,000 + $800) / ($1,200 + $900) = […]
978-0134476308 Chapter 4 Part 1
Chapter 4 Cash Flow and Financial Planning Instructor’s Resources Chapter Overview This chapter introduces the financial-planning process, starting with an overview of long-term or strategic planning and moving to a detailed exploration of short-term (operating) financial planning and its […]
978-0134476308 Chapter 4 Part 2
Chapter 4 Cash Flow and Financial Planning 67 P4-13. Cash flow concepts (LG 4; Basic) Note to instructor: There are a variety of possible answers to this problem, depending on student assumptions. The question is designed to provoke discussion of […]
978-0134476308 Chapter 5 Part 1
Chapter 5 Time Value of Money Instructor’s Resources Chapter Overview This chapter introduces a key—indeed, perhaps the most important—concept in finance: the time value of money. The present and future value of a sum and an annuity are explained. […]
978-0134476308 Chapter 5 Part 2
Chapter 5 Time Value of Money 93 Case A PV3 = ($12,000 ÷ 0.07) × [1 − (1 + 0.07)-3] × (1 + 0.07) = $33,696.22 B PV15 = ($55,000 ÷ 0.12) × {1 − (1 + 0.12)-15] × (1 […]
978-0134476308 Chapter 6 Part 1
Part 3 Valuation of Securities Chapters in This Part Chapter 6 Interest Rates and Bond Valuation Chapter 7 Stock Valuation © 2019 Pearson Education, Inc. Chapter 6 Interest Rates and Bond Valuation Instructor’s Resources Chapter Overview This chapter introduces […]
978-0134476308 Chapter 6 Part 2
118 Zutter/Smart • Principles of Managerial Finance Brief, Eighth Edition b. and c. Five years ago, the yield curve was slightly upward sloping, suggesting (under the expectations theory) investors expected future short-term interest rates to be only slightly higher than […]
978-0134476308 Chapter 7
Chapter 7 Stock Valuation Instructor’s Resources Chapter Overview This chapter focuses on equity—distinctions between equity and debt, different forms of equity, and approaches to valuing equity instruments. The basic model for valuing equity is presented as an example of […]
978-0134476308 Chapter 8 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 © 2019 Pearson Education, Inc. Chapter 8 Risk and Return Instructor’s Resources Chapter Overview This […]
978-0134476308 Chapter 8 Part 2
Chapter 8 Risk and Return 161 Based on standard deviation, Asset G appears to have the greatest risk. c. Coefficient of variation (CV) is given by σ ÷ r, where so σis the standard deviation of returns on the asset […]
978-0134476308 Chapter 9
Chapter 9 The Cost of Capital NOTE TO INSTRUCTORS: Shortly after the first press run for the 15th edition, Congress passed the Tax Cuts and Jobs Act of 2017, which included changes in the corporate tax rate relevant to this […]
978-0134476308 Test Bank Chapter 1 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 1 The Role of Managerial Finance 1.1 Finance and the firm. 1) A firm is a business organization that sells goods and services. Answer: TRUE Diff: 1 Topic: Finance and the […]
978-0134476308 Test Bank Chapter 1 Part 2
26) The ________ has a role that focuses on budgeting, accounting, and tracking the performance of a single business unit. A) controller B) treasurer C) chief financial officer D) director of risk management Answer: A Diff: 1 Topic: Managing the […]
978-0134476308 Test Bank Chapter 10 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 10 Capital Budgeting Techniques 10.1 Overview of capital budgeting 1) Capital budgeting techniques are used to evaluate a firm’s fixed asset investments which provide the basis for the firm’s earning power […]
978-0134476308 Test Bank Chapter 10 Part 2
32) Which of the following is a disadvantage of payback period approach? A) It does not examine the size of the initial outlay. B) It does not use net profits as a measure of return. C) It does not explicitly […]
978-0134476308 Test Bank Chapter 10 Part 3
11) The ________ is the discount rate that equates the present value of the cash inflows with the initial investment. A) payback period B) net present value C) cost of capital D) internal rate of return Answer: D Diff: 1 […]
978-0134476308 Test Bank Chapter 11 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 11 Capital Budgeting Cash Flows and Risk Refinements 11.1 Project cash flows 1) Accounting figures and cash flows are not necessarily the same due to the presence of certain non-cash expenditures […]
978-0134476308 Test Bank Chapter 11 Part 2
22) Compute the initial purchase price for an asset with book value of $34,800 and total accumulated depreciation of $85,200. Answer: Initial purchase price = Book value + Accumulated depreciation = $34,800 + $85,200 = $120,000 Diff: 1 Topic: After-Tax […]
978-0134476308 Test Bank Chapter 11 Part 3
9) The risk-adjusted discount rate can be computed as the risk free rate plus the product of a project’s beta and the credit risk premium. Answer: FALSE Diff: 1 Topic: Determining Risk-Adjusted Discount Rates (RADRs) Learning Obj.: LG 4 Learning […]
978-0134476308 Test Bank Chapter 12 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 12 Leverage and Capital Structure 12.1 Leverage 1) Generally, increases in leverage result in increased return and risk. Answer: TRUE Diff: 1 Topic: Leverage Learning Obj.: LG 1 Learning Outcome: F-21 […]
978-0134476308 Test Bank Chapter 12 Part 2
81) With the existence of fixed operating costs, an increase in sales will result in ________ increase in EBIT. A) a proportional B) an equal C) a less than proportional D) a more than proportional Answer: D Diff: 1 Topic: […]
978-0134476308 Test Bank Chapter 12 Part 3
41) The inexpensive nature of long-term debt in a firm’s capital structure is partly because ________. A) the equity holders are the true owners of the firm B) equity capital has a fixed return C) interest payments are tax-deductible D) […]
978-0134476308 Test Bank Chapter 13 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 13 Payout Policy 13.1 The basics of payout policy 1) Payout policy refers to the decisions that firms make about whether to distribute cash to shareholders, how much cash to distribute, […]
978-0134476308 Test Bank Chapter 13 Part 2
12) Firms are usually prohibited by state law from distributing ________. A) retained earnings as dividends B) paid-in capital in excess of par as dividends C) dividends in a year the firm has a net loss D) preferred dividends Answer: […]
978-0134476308 Test Bank Chapter 14 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 14 Working Capital and Current Assets Management 14.1 Net working capital fundamentals 1) Short-term financial management is concerned with management of a firm’s current assets and current liabilities to achieve a […]
978-0134476308 Test Bank Chapter 14 Part 2
46) A firm has an operating cycle of 170 days, an average payment period of 50 days, and an average age of inventory of 145 days. The firm’s average collection period is ________ days. A) 25 B) 75 C) 95 […]
978-0134476308 Test Bank Chapter 14 Part 3
41 Table 14.3 Copyright © 2019 Pearson Education, Inc. 100) Ace’s Business Forms has compiled several factors relative to its financing mix. The firm pays 8 percent on short-term funds and 10 percent on long-term funds. The firm’s monthly current, […]
978-0134476308 Test Bank Chapter 14 Part 4
8) The objective for managing accounts receivable is to avoid credit sales as much as possible. Answer: FALSE Diff: 1 Topic: Credit Selection and Standards Learning Obj.: LG 4 Learning Outcome: F-24 AACSB: Analytical Thinking 9) In analyzing an applicant’s […]
978-0134476308 Test Bank Chapter 14 Part 5
Table 14.6 A breakdown of Teffan, Inc.’s outstanding accounts receivable dated June 30, 2019 on the basis of the month in which the credit sale was initially made follows. The firm extends 30-day credit terms. 71) Accounts receivable over 90 […]
978-0134476308 Test Bank Chapter 14 Part 6
36) 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 days, and an average payment period […]
978-0134476308 Test Bank Chapter 15 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 15 Current Liabilities Management 15.1 Spontaneous liabilities 1) Spontaneous unsecured financing has a specific interest cost associated with it that can be at a fixed or floating rate. Answer: FALSE Diff: […]
978-0134476308 Test Bank Chapter 15 Part 2
36) Short-term, self-liquidating loans are intended to ________. A) provide one-time loan to the borrower who needs funds for a specific purpose B) cover seasonal peaks in financing caused by inventory and receivable buildups C) provide maximum amount to the […]
978-0134476308 Test Bank Chapter 15 Part 3
83) Bessey Aviation has just sold an issue of 30-day commercial paper with a face value of $5,000,000. The firm has just received $4,958,000. What is the effective annual interest rate on the commercial paper? Answer: {($5,000,000 – $4,958,000)/$4,958,000} × […]
978-0134476308 Test Bank Chapter 2 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 2 The Financial Market Environment 2.1 Financial institutions 1) A financial institution is an intermediary that channels the savings of individuals, businesses, and governments into loans or investments. Answer: TRUE Diff: […]
978-0134476308 Test Bank Chapter 2 Part 2
47) One piece of evidence suggesting that the stock market is efficient is that most individual investors cannot earn returns that beat the overall market average return, but professional investors such as mutual fund and pension fund managers generally do […]
978-0134476308 Test Bank Chapter 3 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 3 Financial Statements and Ratio Analysis 3.1 The stockholder’s report 1) The Financial Accounting Standards Board (FASB) is the federal regulatory body that governs the sale and listing of securities. Answer: […]
978-0134476308 Test Bank Chapter 3 Part 2
66) Ag Silver Mining, Inc. has $500,000 of earnings before interest and taxes at the year end. Interest expenses for the year were $10,000. The firm expects to distribute $100,000 in dividends. Calculate the earnings after taxes for the firm […]
978-0134476308 Test Bank Chapter 3 Part 3
10) The ________ ratio indicates whether a firm will be able to meet interest obligations due on outstanding debt. A) debt-to-equity B) interest turnover C) total assets turnover D) times interest earned Answer: D Diff: 1 Topic: Times Interest Earned […]
978-0134476308 Test Bank Chapter 3 Part 4
58 13) The financial leverage multiplier is the ratio of ________. A) current assets to common stockholders’ equity B) total assets to common stockholders’ equity C) total assets to total debt D) current assets to current liabilities Answer: B Diff: […]
978-0134476308 Test Bank Chapter 4 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 4 Long- and Short-Term Financial Planning 4.1 The financial planning process 1) Strategic financial plans are planned long-term financial actions and the anticipated financial impact of those actions. Answer: TRUE Diff: […]
978-0134476308 Test Bank Chapter 4 Part 2
55) Cash flows that result from debt and equity financing transactions, including incurrence and repayment of debt, cash inflows from the sale of stock, and cash outflows to pay cash dividends or repurchase stock are called cash flow from ________. […]
978-0134476308 Test Bank Chapter 4 Part 3
26) Cash disbursements include ________. A) amortization expense B) rent payments C) depreciation expense D) depletion Answer: B Diff: 1 Topic: Preparing The Cash Budget Learning Obj.: LG 4 Learning Outcome: F-25 AACSB: Analytical Thinking 27) A projected excess cash […]
978-0134476308 Test Bank Chapter 4 Part 4
2) In a period of rising sales utilizing past cost and expense ratios (percent-of-sales method), when preparing pro forma financial statements and planning financing, will tend to ________. A) understate retained earnings and understate the additional financing needed B) overstate […]
978-0134476308 Test Bank Chapter 5 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 5 Time Value of Money 5.1 The role of time value in finance 1) The main idea behind the time value of money is that a dollar today is worth more […]
978-0134476308 Test Bank Chapter 5 Part 2
37) You have been given a choice between two retirement policies as described below. Policy A: You will receive equal annual payments of $10,000 beginning 35 years from now for 10 years. Policy B: You will receive one lump-sum of […]
978-0134476308 Test Bank Chapter 5 Part 3
23) Assume you have a choice between two deposit accounts. Account X has an annual percentage rate of 12.25 percent but with interest compounded monthly. Account Y has an annual percentage rate of 12.20 percent with interest compounded continuously. Which […]
978-0134476308 Test Bank Chapter 5 Part 4
35) Aunt Tilly borrows $3,500 from the bank at 12 percent annually compounded interest to be repaid in four equal annual installments. The interest paid in the first year is ________. A) $152 B) $277 C) $420 D) $1,152 Answer: […]
978-0134476308 Test Bank Chapter 6 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 6 Interest Rates and Bond Valuation 6.1 Interest rates and required returns 1) An interest rate or a required rate of return represents the cost of money. Answer: TRUE Diff: 1 […]
978-0134476308 Test Bank Chapter 6 Part 2
6) Restrictive covenants, coupled with standard debt provisions, help the lender to monitor the borrower’s activities to ensure efficient use of funds. Answer: TRUE Diff: 1 Topic: Legal Aspects of Corporate Bonds Learning Obj.: LG 2 Learning Outcome: F-06 AACSB: […]
978-0134476308 Test Bank Chapter 6 Part 3
80) ________ 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 Types of Bonds Learning Obj.: LG […]
978-0134476308 Test Bank Chapter 6 Part 4
21) Zheng Corporation plans to issue new bonds to finance its expansion plans. In its efforts to price the issue, Zheng Corporation has identified a company of similar risk with an outstanding bond issue that has an 8 percent coupon […]
978-0134476308 Test Bank Chapter 7 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 7 Stock Valuation 7.1 Differences between debt and equity 1) Unlike creditors, equityholders are owners of the firm. Answer: TRUE Diff: 1 Topic: Voice in Management Learning Obj.: LG 1 Learning […]
978-0134476308 Test Bank Chapter 7 Part 2
67) The risk cost of preferred stock is ________. A) lower than the cost of long-term debt. B) higher than the cost of common stock. C) higher than the cost of long-term debt and lower than the cost of common […]
978-0134476308 Test Bank Chapter 7 Part 3
40) In response to the stock market’s reaction to its dividend policy, the Nico’s Toy Company has decided to increase its dividend payment at a rate of 4 percent per year. The firm’s most recent dividend is $3.25 and the […]
978-0134476308 Test Bank Chapter 8 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 8 Risk and Return 8.1 Risk and return fundamentals 1) Investment A guarantees its holder $100 return. Investment B earns $0 or $200 with equal chances (i.e., an average of $100) […]
978-0134476308 Test Bank Chapter 8 Part 2
2) New investments must be considered in light of their impact on the risk and return of the portfolio of assets because the risk of any single proposed asset investment is not independent of other assets. Answer: TRUE Diff: 1 […]
978-0134476308 Test Bank Chapter 8 Part 3
31) An increase in nondiversifiable risk would ________. A) cause an increase in the beta and would lower the required return B) have no effect on the beta and would, therefore, cause no change in the required return C) cause […]
978-0134476308 Test Bank Chapter 8 Part 4
71) In the capital asset pricing model, the general risk preferences of investors in the marketplace are reflected by ________. A) the risk-free rate B) the level of the security market line C) the slope of the security market line […]
978-0134476308 Test Bank Chapter 9 Part 1
Principles of Managerial Finance, Brief Ed., 8e (Zutter/Smart) Chapter 9 The Cost of Capital 9.1 Overview of the cost of capital 1) Holding risk constant, the implementation of projects with a rate of return above the cost of capital will […]
978-0134476308 Test Bank Chapter 9 Part 2
18) The cost of retained earnings will always equal the cost of preferred stock. Answer: FALSE Diff: 1 Topic: Cost of Retained Earnings Learning Obj.: LG 5 Learning Outcome: F-14 AACSB: Analytical Thinking 19) The cost of common stock equity […]
978-0134476308 Test Bank Chapter 9 Part 3
Table 9.1 A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Debt: The firm can sell a 12-year, $1,000 par value, 7 percent bond for $960. A flotation cost […]