Archives: Solution Manual

APPLY YOUR KNOWLEDGE BUSINESS PROJECTS Instructor Note: There are few right or wrong answers in the business world. There are really only ecient and inecient, and eective and ineective business decisions. If there were always right answers businesses would never fail. These questions were created to challenge your students to

SECTION 4.2 INFORMATION SECURITY Security is perhaps the most fundamental and critical of all the technologies/disciplines an organization must have squarely in place to execute its business strategy. Without solid security processes and procedures, none of the other technologies can develop business advantages. LEARNING OUTCOMES Learning Outcome 4.3: Describe the relationships and di(erences between

ETHICS AND INFORMATION SECURITY Ethics (from the Ancient Greek "ethikos" meaning "Theory of living") attempts to understand the nature of morality; to distinguish that which is right from that which is wrong. Ethics in plain words means studying and analyzing right from wrong; good from bad. Information security deals with

OPENING CASE TWO QUESTIONS PINTEREST 1. Do you consider Pinterest a form of disruptive or sustaining technology? Depending on the time when you review the case Pinterest could be considered 2. Categorize Pinterest as an example of Web 1.0 (ebusiness) or Web 2.0 (Business 2.0). Pinterest is an example of Web 2.0 3. Describe the ebusiness

CHAPTER three CLOSING MATERIAL OPENING CASE QUESTIONS BITCOIN 1. Knowledge: Do you consider Bitcoin a form of disruptive or sustaining technology? Depending on the time when you review the case Bitcoin could be considered disruptive or sustaining and you’ll want to ensure your student’s justify their 2. Comprehension: How can a web-based business bene0t

SECTION 3.2 web 2.0: business 2.0 Section 3.2 discusses dierent business departments (student majors) and how the Internet and ebusiness is aecting each major. This is a great opportunity for instructors to discuss how learning about technology can impact people’s careers and help them achieve success. Opening student’s eyes to how technology

EBUSINESS: ELECTRONIC BUSINESS VALUE One-hour lm processing and digital cameras both contributed to the demise of Polaroid, a solid company that had an innovative technology and a captive customer base. The dilemma that faced Polaroid is a dilemma that most organization face – the criteria an organization uses to make business

CRITICAL BUSINESS THINKING Instructor Note: There are few right or wrong answers in the business world. There are really only ecient and inecient, and eective and ineective business decisions. If there were always right answers businesses would never fail. These questions were created to challenge your students to apply the materials

CHAPTER TWO CLOSING MATERIAL OPENING CASE TWO QUESTIONS BUSINESS IS BOOMING FOR WEARABLE TECHNOLOGIES 1. Knowledge: Dene the three primary types of decision-making systems and how wearable technologies in the workplace could aect each. a. Decision-making skills are essential for all business professionals, at every company level, who make decisions that run the business. At

SECTION 2.2 BUSINESS processes LEARNING OUTCOMES Learning Outcome 2.5: Explain the value of business processes for a company, and di*erentiate between customer-facing and business-facing process. A business process is a standardized set of activities that accomplish a specic task, such as processing a customer’s order. Business processes transform a set of inputs into a set

DECISIONS AND PROCESSES VALUE DRIVEN BUSINESS This guide provides a number of classroom activities, videos, and debates to accompany Business Driven Information Systems Fourth Edition. A few course suggestions: Create one or two test questions based on the classroom activity to help reward students who attend lectures. Many professors have

CRITICAL BUSINESS THINKING Instructor Note: There are few right or wrong answers in the business world. There are really only ecient and inecient, and eective and ineective business decisions. If there were always right answers businesses would never fail. These questions were created to challenge your students to apply the materials

CHAPTER ONE CLOSING MATERIAL OPENING CASE QUESTIONS The Internet of Things 1. Knowledge: Explain the Internet of Things and list three IoT devices. Imagine your toothbrush telling you to visit your dentist because it senses a cavity. How would you react if your refrigerator placed an order at your local grocery store because your milk

SECTION 1.2 BUSINESS STRATEGY This section discusses how an organization can identify competitive advantages using tools such as Porter’s Five Forces, three generic strategies, and value chains. Gaining competitive advantages are critical for organizations. Organizations also must understand that competitive advantages are typically temporary since competitors are quick to copy competitive advantages. For

MANAGEMENT INFORMATION SYSTEMS: BUSINESS DRIVEN mis This guide provides a number of classroom activities, videos, and debates to accompany Business Driven Information Systems Fourth Edition. A few course suggestions: Create one or two test questions based on the classroom activity to help reward students who attend lectures. Many professors have found that assigning

DESIGNING DATABASES LEARNING OUTCOMES 1. Identify the relational database model’s basic components. The relational database model stores information in the form of logically-related two-dimensional tables. Entities Attributes Entity identiers Constraints Primary keys Foreign keys 2. Explain the importance of documenting entity relationship diagrams. An entity is a person, place, thing, transaction, or event about which information is stored. A customer

NETWORKS AND TELECOMMUNICATIONS Networks and telecommunications are the transmission of signals over a distance for the purpose of communication. In modern times, this process almost always involves the sending of electromagnetic waves by electronic transmitters but in earlier years it may have involved the use of smoke signals, drums or semaphore.

HARDWARE AND SOFTWARE BASICS Technical architecture refers to the structured process of designing and building software architecture, with focus on interaction with software and hardware developers. Technical architecture is a part of software architecture, which focuses on how to deal with certain aspects of the software engineering process. It allows us

B-358 SOLUTIONS 14. Sysco must have felt that the combination of fixed plus swap would result in an overall better rate. In other words, variable rate available via a swap may have been more attractive than the rate available from issuing a floating-rate bond. Solutions

CHAPTER 23 RISK MANAGEMENT: AN INTRODUCTION TO FINANCIAL ENGINEERING Answers to Concepts Review and Critical Thinking Questions 1. Since the firm is selling futures, it wants to be able to deliver the lumber; therefore, it is a supplier. Since a decline in lumber prices would

CHAPTER 22 BEHAVIORAL FINANCE: IMPLICATIONS FOR FINANCIAL MANAGEMENT Answers to Concepts Review and Critical Thinking Questions 1. The least likely limit to arbitrage is firm-specific risk. For example, in the 3Com/Palm case, the stocks are perfect substitutes after accounting for the exchange ratio. An investor

CHAPTER 21 B-345 c. True. The market would only be correct on average, while you would be correct all the time. 9. a. American exporters: their situation in general improves because a sale of the exported goods for a fixed number of euros

CHAPTER 21 INTERNATIONAL CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. a. The dollar is selling at a premium because it is more expensive in the forward market than in the spot market (SFr 1.53 versus SFr 1.50).

B-340 SOLUTIONS APPENDIX 20A 1. The cash flow from the old policy is the quantity sold times the price, so: Cash flow from old policy = 40,000($510) Cash flow from old policy = $20,400,000 2. a. The

CHAPTER 20 B-331 e. A: Rugs are fairly standardized and they are transportable, while carpets are custom fit and are not particularly transportable. 7. The three main categories of inventory are: raw material (initial inputs to the firm’s production process), work-in-progress (partially

CHAPTER 20 CREDIT AND INVENTORY MANAGEMENT Answers to Concepts Review and Critical Thinking Questions 1. a. A sight draft is a commercial draft that is payable immediately. b. A time draft is a commercial draft that does not require immediate payment. c. A

B-326 SOLUTIONS APPENDIX 19A 1. a. Decrease. This will lower the trading costs, which will cause a decrease in the target cash balance. b. Decrease. This will increase the holding cost, which will cause a decrease in the target cash c.

CHAPTER 19 B-319 e. The primary disadvantages of RANs is that some possess non-trivial levels of default risk, and also, corporations are somewhat restricted in the type and amount of these tax-exempts that they can hold in their portfolios. f. The primary

CHAPTER 19 CASH AND LIQUIDITY MANAGEMENT Answers to Concepts Review and Critical Thinking Questions 1. Yes. Once a firm has more cash than it needs for operations and planned expenditures, the excess cash 2. If it has too much cash it can simply

B-310 SOLUTIONS 11. The sales collections each month will be: Sales collections = .35(current month sales) + .60(previous month sales) Given this collection, the cash budget will be: April May June Beginning cash balance $140,000 $101,600

B-304 SOLUTIONS 10. BlueSky will need less financing because it is essentially borrowing more from its suppliers. Among other things, BlueSky will likely need less short-term borrowing from other sources, so it will save on interest expense. Solutions to Questions and Problems NOTE: All end of

CHAPTER 18 SHORT-TERM FINANCE AND PLANNING Answers to Concepts Review and Critical Thinking Questions 1. These are firms with relatively long inventory periods and/or relatively long receivables periods. Thus, 2. These are firms that have a relatively long time between the time purchased inventory

CHAPTER 17 B-293 Solutions to Questions and Problems NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and readability constraints, when these intermediate steps are included in this solutions manual, rounding may appear to have occurred.

CHAPTER 17 DIVIDENDS AND DIVIDEND POLICY Answers to Concepts Review and Critical Thinking Questions 1. Dividend policy deals with the timing of dividend payments, not the amounts ultimately paid. Dividend 2. A stock repurchase reduces equity while leaving debt unchanged. The debt ratio rises.

B-286 SOLUTIONS 11. If there are corporate taxes, the value of an unlevered firm is: V U = EBIT(1 – tC)/RU Using this relationship, we can find EBIT as: 12. a. With the information provided, we can use the equation

CHAPTER 16 B-277 9. One side is that Continental was going to go bankrupt because its costs made it uncompetitive. The bankruptcy filing enabled Continental to restructure and keep flying. The other side is that Continental abused the bankruptcy code. Rather than renegotiate labor agreements,

CHAPTER 16 FINANCIAL LEVERAGE AND CAPITAL STRUCTURE POLICY Answers to Concepts Review and Critical Thinking Questions 1. Business risk is the equity risk arising from the nature of the firm’s operating activity, and is directly related to the systematic risk of the firm’s assets. Financial

B-268 SOLUTIONS Solutions to Questions and Problems NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and readability constraints, when these intermediate steps are included in this solutions manual, rounding may appear to have occurred. However, the final

CHAPTER 15 RAISING CAPITAL Answers to Concepts Review and Critical Thinking Questions 1. A company’s internally generated cash flow provides a source of equity financing. For a profitable company, outside equity may never be needed. Debt issues are larger because large companies have the 2.

CHAPTER 14 B-259 b. The weighted average floatation cost is the weighted average of the floatation costs for debt and equity, so: c. The total cost of the equipment including floatation costs is: Amount raised(1 –

B-252 SOLUTIONS 8. a. This only considers the dividend yield component of the required return on equity. b. This is the current yield only, not the promised yield to maturity. In addition, it is based on the book value of the liability, and it ignores taxes.

CHAPTER 14 COST OF CAPITAL Answers to Concepts Review and Critical Thinking Questions 1. It is the minimum rate of return the firm must earn overall on its existing assets. If it earns more than this, value is created. 2. Book values for debt

B-242 SOLUTIONS b. We need to find the portfolio weights that result in a portfolio with a  of 0.95. We know the  of the risk-free asset is zero. We also know the weight of the risk-free asset is one minus the weight of the stock

CHAPTER 13 B-237 9. Such layoffs generally occur in the context of corporate restructurings. To the extent that the market views a restructuring as value-creating, stock prices will rise. So, it’s not layoffs per se that are being cheered on. Nonetheless, Wall Street does encourage corporations

CHAPTER 13 RISK, RETURN, AND THE SECURITY MARKET LINE Answers to Concepts Review and Critical Thinking Questions 1. Some of the risk in holding any asset is unique to the asset in question. By investing in a variety of assets, this unique portion of the total

B-230 SOLUTIONS Intermediate 13. To find the real return, we first need to find the nominal return, which means we need the current price of the bond. Going back to the chapter on pricing bonds, we find the current price is: P 1 = $80(PVIFA7%,6)

CHAPTER 12 B-225 b. Under (2), if the market is not semi-strong form efficient, then this information could be used to buy the stock “cheap” before the rest of the market discovers the financial statement anomaly. Since (2) is stronger than (1), both imply that

CHAPTER 12 SOME LESSONS FROM CAPITAL MARKET HISTORY Answers to Concepts Review and Critical Thinking Questions 1. They all wish they had! Since they didn’t, it must have been the case that the stellar performance was not foreseeable, at least not by most. 2.

CHAPTER 11 B-217 Using the bottom up OCF calculation, we get: OCF = NI + Depreciation = $4,005,000 + 3,200,000 OCF = $7,205,000 The NPV at this quantity is: NPV = –$22,400,000 –

CHAPTER 11 B-211 19. a. The base-case, best-case, and worst-case values are shown below. Remember that in the best-case, sales and price increase, while costs decrease. In the worst-case, sales and price decrease, and costs increase.