CFIN 5th Edition

Chapter 1 CFIN5 Chapter 1 Solutions 1-1 Finance deals with decisions about money. Finance decisions deal with how money is raised and used by businesses, governments, and individuals. In business, decisions about cash inflows include forwhat price products should be sold, how funds should be raised when the firms has good investmentopportunities,

Chapter 10 CFIN5 Chapter 10 Solutions 10-1 a. 1 3 Operating income before depreciation $25,000 $25,000 Depreciation* (19 ,800) ( 9 ,000) NOI 5,200 16,000Taxes (0.40) ( 2 ,080) ( 6 ,400)After-tax NOI $ 3,120 $ 9,600*Depreciation, based on MACRS 3-year class: Depreciation in Year 1 = $60,000(0.33) = $19,800Depreciation in Year 3

Chapter 11 CFIN5 Chapter 11 Solutions 11-1 a. Equation solution (set up): - + = + + 10 10 1 11 (1 YTM) $1,077 $60 $1,000 YTM (1 YTM) Calculator solution for YTM: N = 10 PV = -1,077 PMT = 60 FV = 1,000 I/Y = ? = 5.0% = YTM = rd The coupon rate of

Chapter 12 CFIN5 Chapter 12 Solutions 12-1 Sales $200,000 Variable operating costs (60%) (120,000) Fixed operating costs ( 48 ,000)EBIT $32,000Interest ( 3 ,400)Earnings before taxes $28,600Taxes (40%) ( 11 ,440)Net income $17,160EPS = $17,160/10,000 = $1.72Debt = $200,000(0.2) = $40,000Interest = $40,000 x 0.085 = $3,400 Fixed operating costs ( 48 ,000)EBIT $32,000Interest (

Chapter 13 CFIN5 Chapter 13 Solutions 13-1 Capital budget = $50,000,000 Debt/assets ratio = 60%Net income = $25,000,000Amount of capital budget that will be raised using equity = $50,000,000 x (1 0.6) = $20,000,000Dividends = $25,000,000 - $20,000,000 = $5,000,000 Debt/assets ratio = 60%Net income = $25,000,000Amount of capital budget that will be raised

Chapter 14 CFIN5 Chapter 14 Solutions 14-1 Inventory conversion period = 45 days DSO = 30 days DPO = 20 days a. Cash conversion cycle = 45 days + 30 days 20 days = 55 days b. Accounts receivable = $1,800,000/(360 days) x 30 days = $150,000c. Inventory turnover = (360 days)/(45 days) = 8.0d.

Chapter 15 CFIN5 Chapter 15 Solutions 15-1 Following is the cash budget for the next three months: Month 1 Month 2 Month 3 Sales $130,000 $130,000 $130,000 Raw materials 91,000 91,000 91,000 Cash Receipts: Collection of sales in month of sale $ 50,440 $ 50,440 $ 50,440 Collection of sales one month after sale 78

Chapter 16 CFIN5 Chapter 16 Solutions 16-1 The following table shows the initial forecast and the AFN: Current Growth Initial Forecast Total assets $800,000 x 1.20 $960,000 Accounts payable/Accruals $150,000 x 1.20 $180,000 Notes payable 25,000 25,000 Long-term debt 100,000 100,000 Common stock 450,000 450,000 Retained earnings 75,000 81,000 Accounts payable/Accruals $150,000 x 1.20

Chapter 2 CFIN5 Chapter 2 Solutions 2-1 Publically-traded companies are required to provide adequate financial information to their shareholders. Information generally is provided through financial reports that a company periodically produces, which include a balance sheet, an income statement, a statement of cash flows, and a statement of retained earnings. In addition,

Chapter 3 CFIN5 Chapter 3 Solutions 3-1 Free and efficient financial markets allocate funds more efficiently than would occur without free financial markets. As a result, the real output of the economy is increased with such financial markets; that is, the net cost of funds is lower and the net returns investors

Chapter 4 CFIN5 Chapter 4 Solutions (Most solutions are rounded in the final answers, not in the intermediate computations.) 0 1 2 3 4 4-1 -700 FV = ? FV4 = $700(1.04)4 = $700(1.16986) = $818.90 Using a financial calculator, enter N = 4, I/Y= 4, PV = -700, and PMT = 0; compute FV =

Chapter 5 CFIN5 Chapter 5 Solutions 5-1 1,000($29-$28)+1,000(4 0.10) $1.40 Return= = =0.05=5.0% 1,000($28) $28 5-2 40($9-$10)+40(0.50) -$0.50 Return= = =-0.05=-5.0% 40($10) $10 5-3 ($44-$42)+2(0.05) $2.10 Return= = =0.05=5.0% $42 $42 5-4 $156-$150+0 $6 Return= = =0.04=4.0% $150 $150 5-5 a. 1,000($45-$50)+1,000[($0.50)(8)] -$1 Return= = =-0.02=-2.0% 1,000($50) $50 b. Year 1 1,000($45-$50)+1,000[($0.50)(4)] -$3 Return = = =-0.06=-6.0% 1,000($50) $50 Year 2 1,000($45-$45)+1,000[($0.50)(4)] $2 Return = = =0.044=4.4% 1,000($45) $45 5-6 a. 200($32-$28)+200[($0.60+$0.60+$0.60] $5.80 Return= = =0.207=20.7% 200($28) $28 b. Year 1 200($26-$28)+200($0.60) -$1.40 Return = = =-0.05=-5.0% 200($28) $28 Year

Chapter 6 CFIN5 Chapter 6 Solutions 6-1 $1,000 Minimum $40 stock price 25 = = 6-2 a. Each bond can be converted into 40 shares of common stock. b. $1,000 Minimum $25 stock price 40 = = ; As long as the stock is selling for greater than $25 per share, it is worthwhile to convert (ignoring transactions costs). 6-3

Chapter 7 CFIN5 Chapter 7 Solutions 7-1 Total dollar return per share = ($19 - $20) + 4($0.20) = -$0.20 a. $19 - $20 $0.80 -$0.20 Rate of = 0.01 1.0% return $20 $20 $20 + = =- =- b. $19 - $20 $0.80 Rate of Dividend Capital = 0.05 0.04 5.0% 4.0% gains yield return $20 $20

5Chapter 8 CFIN5 Chapter 8 Solutions 8-1 a. r = (0.2)(19%) + (0.7)(9%) + (0.1)(4%) = 10.5% b. 2 2 2 = (0.2)(19 - 10.5 + (0.7)(9 - 10.5 + (0.1)(4 - 10.5 20.25 4.5% ) ) ) s = = c. 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a

Chapter 9 CFIN5 Chapter 9 Solutions 9-1 6 1 1(1.10) Value PV of CFs 36,950 36,950(4.355261) 160,926.88 0.10 - = = = = Calculator solution: N = 6, I/Y = 10, PMT = 36,950, FV = 0; PV = ? = -160,926.88 Calculator solution: N = 6, I/Y = 10, PMT = 36,950, FV