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Contents iii
Instructors Manual
Contents
Preface
Alternative Formats for the Introductory Course v
Contents of the Instructor’s Manual v
Integrated Cases and Lecture Presentation Software v
PowerPoint
Slide Show vii
Comprehensive/Spreadsheet Problems vii
Chapter Spreadsheet Models vii
Textbook Companion Website viii
Study Guide viii
Test Bank viii
Ordering Ancillary Materials ix
Conclusion x
Course Syllabus xi
Course Schedule xv
Answers to End-of-Chapter Problems xvii
Chapter 1 An Overview of Financial Management 1
Chapter 2 Financial Markets and Institutions 7
Chapter 3 Financial Statements, Cash Flow, and Taxes 23
Chapter 4 Analysis of Financial Statements 47
Chapter 5 Time Value of Money 79
Chapter 6 Interest Rates 121
Chapter 7 Bonds and Their Valuation 145
Chapter 8 Risk and Rates of Return 183
Chapter 9 Stocks and Their Valuation 215
Chapter 10 The Cost of Capital 247
Chapter 11 The Basics of Capital Budgeting 269
Chapter 12 Cash Flow Estimation and Risk Analysis 307
Chapter 13 Real Options and Other Topics in Capital Budgeting 353
iv Contents
Chapter 14 Capital Structure and Leverage 371
Chapter 15 Distributions to Shareholders: Dividends and Share Repurchases 407
Chapter 16 Working Capital Management 433
Chapter 17 Financial Planning and Forecasting 461
Chapter 18 Derivatives and Risk Management 485
Chapter 19 Multinational Financial Management 511
Chapter 20 Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles 539
Chapter 21 Mergers and Acquisitions 569
Preface
This preface explains how we have used
Fundamentals of Financial Management, Fourteenth
Edition
, and it then describes the instructional aids contained in the
Instructor’s Manual
or
available separately from Cengage Learning.
Alternative Formats for the Introductory Course
There is no one best way to teach the introductory finance class—the optimal course structure
varies with students’ backgrounds, instructors’ interests, number of credit hours, and position of
the course in the overall curriculum. Further, since these factors change over time, most of us
vary our approaches from year to year. Still, you may find it useful to learn how
Fundamentals
has been used at Florida and elsewhere.
Contents of the Instructor’s Manual
This
Instructor’s Manual
contains Learning Objectives, Lecture Suggestions, Answers to End-of-
Chapter Questions, Solutions to End-of-Chapter Problems, Solutions to Comprehensive/
Spreadsheet Problems, and complete restatement and full solution to the Integrated Cases. In
Integrated Cases and Lecture Presentation Software
One of the most important pedagogic aids in
Fundamentals
is the set of “Integrated Cases”
provided with the end-of-chapter problems. The integrated cases have been extremely well
received by instructors and students alike. They provide an excellent vehicle for covering the
vi Preface
The cases are good lecture vehicles for three reasons. First, they reduce instructors’
preparation time. We spent a tremendous amount of time producing carefully structured
“lecture problems” so that instructors will not have to do so. Second, students like lectures
based on the cases because this ensures that the lecture is consistent with the text, and that
the two reinforce one another. Third, the case-oriented lectures are useful for both prepared
and unprepared students, and that is helpful for instructors whose students don’t always read
the material before class.
We originally thought the slides would be too inflexible, but that was not the case. It is
extremely easy to break away from the slides and use the blackboard to clarify examples, to
make additional points, and the like. All in all, the
PowerPoint
slides really are a great addition
to our ancillary package, and all instructors would be well advised to download them from the
text’s website, and run a quick slide show to get an idea of just how useful they can be.
Note also that the Integrated Cases can be assigned as homework or used by students as self-
study problems if you decide against using them as lecture vehicles. In addition, we have
added
Excel
spreadsheet models for the cases in Chapters 3-21. We have also added a
PowerPoint
Slide Show
As mentioned earlier, a set of
PowerPoint
slides has been developed. Previously, we used the
Integrated Cases, transparencies, and a black board as a complete lecture system, and with
good results. But just as computer and communication technologies are altering the world of
finance, so are these advances influencing the way we learn and teach. Thus, along with Larry
Wolken, we created a
PowerPoint
“slide show” lecture presentation that matches the Integrated
Case solutions, with additional improvements by Christopher Buzzard.
Any instructors with access to
PowerPoint
will have the ability to customize the slides. In
addition, if you are going to print the
PowerPoint
slides in black and white, for best results set
the color/grayscale field in the print dialog box to grayscale.
Comprehensive/Spreadsheet Problems
We have added the Comprehensive/Spreadsheet Problem to Chapters 3–21. This problem
provides instructors who use the Integrated Case for their lectures with another problem that
Chapter Spreadsheet Models
Spreadsheet programs such as Microsoft
Excel
®
are ideally suited for analyzing many financial
issues, and knowledge of spreadsheets is becoming essential for people in business.
Throughout the text, we illustrate how spreadsheets are used to deal with the financial
concepts/analyses covered.
We developed a spreadsheet model for Chapters 3–21. These chapter models show exactly
how the decisions discussed in the chapter can be analyzed with an
Excel
spreadsheet.
Therefore, our models include a good bit of explanation and serve both as an
Excel
tutorial and
as a template for analyzing whatever financial issues are covered in the particular chapter. The
chapter models also include worked-out solutions for quantitative Self-Test Questions that are
located at the end of each major section within each chapter.
Excel
spreadsheet models have
also been added for the Integrated Cases and the Comprehensive/Spreadsheet problems.
The models are accessible from the Cengage Learning website. The models are not necessary
for going through the book and learning the essential financial concepts. However, if a student
wants to learn how these concepts are implemented in the real world, and thus get a leg up in
the job market, the models will be helpful. And, of course if an instructor wants to build
spreadsheet analysis into the course, our models will provide an excellent platform.
Textbook Companion Website
Designed to be both a teaching and learning tool, the
Fundamentals
14e
instructor’s companion
website can be accessed via login.cengage.com. (You must log in using your Faculty
Account username and password and use ISBN 9781285867977 to add
Fundamentals
14e
resources to your account “Bookshelf.”) A number of the
Fundamentals
ancillaries can be
Study Guide
We have found, in common with reviewers, that many students need a supplement (1) that
contains a summarized treatment of the main concepts of each chapter, and (2) that gives
students an opportunity to apply the concepts to relatively short, focused problems with
Test Bank
The
Test Bank
that accompanies
Fundamentals
is available in the Cognero online test creation
system, and as Blackboard, Angel, and Microsoft Word files on the Instructor Companion
Website. The Test Bank is also available through Respondus.
The questions and problems are all machine gradable, and we have used them often enough so
that most of the ambiguities that frequently plague objective tests have been removed. The
questions. Now that it is done, we are glad that we did, because we have become convinced
that relatively short, objective questions really are the best way to construct and fairly grade an
exam that covers a large amount of material and is given to a large number of students.
Incidentally, it is very easy to make a set of short-answer essay questions or “regular” exam
problems by removing the set of possible answers from selected questions and problems.
Ordering Ancillary Materials
Ancillary materials may be ordered by adopters through their local Cengage Learning sales
representative or directly by calling Cengage Learning Customer Service at 1-800-354-9706,
emailing higheredcs@cengage.com, or visiting www.cengage.com/contact.
Conclusion
We have tried to make this
Instructor’s Manual
as clear and error-free as possible; however,
there are almost certainly some mistakes and unclear sections. Any suggestions for improving
the manual will be greatly appreciated. Address your correspondence to us at the address
below.
Preface xi
Syllabus for Finance 3403
Finance 3403
Course Outline
Spring 2015
Instructor: Joel F. Houston
303D STZ
392-7546
Office Hours: M W 10:30 A.M. – 11:30 A.M., and by appointment.
Course Pre-requisite: ACG 2021 or an approved equivalent.
Required materials
Calculator
You must have a financial calculator to get through the course. Many of the exam problems involve
complex arithmetic and financial calculations—and a financial calculator is necessary to solve them.
I recommend either the HP-10BII+ or the HP-17BII+. The 10BII+ does everything needed in the course. I
will use one in class and explain how to work various problems with it, so you can follow lectures most easily if
you use a 10BII+. Moreover, the TAs will all know how to help you with a 10BII+, but you might have
trouble getting help with another calculator. The HP-17BII+ does more and costs more. Some argue that the
17BII+ is easier to use once you get used to it. Also, some students argue that the 17BII+ is better to have
in some of the upper level Finance classes. Again, however, everything in this class can be done with a
10BII+.
xii Preface
Course objectives
This course is designed for the general business student, not just the finance major. Since this is a survey
course, we will cover a lot of ground. We will begin with a general overview and then go into more detail
on several concepts, financial instruments, and techniques used in financial decision making.
The chief objectives of the course are:
1. To introduce you to the world of finance. Anyone involved with the management of a business needs
to have at least some minimal knowledge of business finance.
Class procedures
1. The structure of this class makes your individual study and preparation outside class extremely
important. The lecture material will focus on the major points introduced in the text. Reading the
2. Throughout the semester we will also have a number of review sessions. These review sessions will
take place during the regularly scheduled class periods, and will generally be offered by the head
3. There are a number of learning aids offered in addition to the regularly scheduled lectures and review
sessions. You should utilize those that may contribute to your understanding of the material.
(a) There are several teaching assistants associated with this course. The TAs will hold office hours in
Bryan 125A. The TA schedule will vary from week to week and will be posted (1) outside the
Finance office, 321 STZ, (2) outside Bryan 125A, and (3) on the class web page. The TAs know the
material quite well and they are more than willing to help you, so you should use them. You should
study the text, your notes, and the problems, and then ask the TAs for help in clearing up any
questions you might have.
Preface xiii
4. There is also a home page for Finance 3403 on the World Wide Web. The class web page will include
the course outline, office hours, schedules, class examples, and exam solutions. As time goes by, the
resources available on the class web page will expand, so it is worth checking it from time to time.
Examinations
There will be three exams, two during the semester and one during the final exam week. The exam
schedule is as follows:
First Midterm: Wednesday February 4, 2015, 7:00-9:00 P.M.
Second Midterm: Tuesday March 17, 2015 7:00-9:00 P.M.
Final Exam: Wednesday April 29, 2015, 1:00-3:00 P.M.
Your total score has a maximum of 60 points.
To calculate the “cutoffs” for each course grade, we calculate a weighted average of the lowest scores for
each grade. So, for example, to determine the cutoff for an A:
Lowest A = (Lowest A, 1st Exam) + (Lowest A, 2nd Exam) + (Lowest A, Final Exam).
Likewise, the lowest C grade would be a weighted average of the lowest C grades from each of the exams.
Please recognize that the size of this class makes it necessary for the cutoffs to be firm, i.e.,
there will be no rounding up, regardless of how close you are to the higher grade.
There will be NO makeup exams. If you have a valid excuse for missing either of the first two exams,
your final grade will be based on your performance on the other two examinations—each of these
