Archives: Solution Manual
978-1337127363 Chapter 4 Solution Manual Part 2
23 4.8 a. If ( , ) min( , )U x y x y , utility maximization requires xy . Substitution into the budget constraint yields () xy x I p p y . Hence, ( , . […]
978-1337127363 Chapter 4 Solution Manual Part 1
The problems in this chapter focus mainly on the utility maximization assumption. Relatively simple computational problems (mainly based on Cobb–Douglas and CES utility functions) are included. Comparative statics exercises are included in a few problems, but for the most part, […]
978-1337127363 Chapter 3 Solution Manual
These problems provide some practice in examining utility functions by looking at indifference curve maps and at a few functional forms. The primary focus is on illustrating the notion of quasi-concavity (a diminishing MRS) in various contexts. The concepts of […]
978-1337127363 Chapter 2 Solution Manual
The problems in this chapter are primarily mathematical. They are intended to give students some practice with the concepts introduced in Chapter 2, but the problems in themselves offer few economic insights. Consequently, no commentary is provided. Results from some […]
978-1337127363 Chapter 19 Solution Manual
CHAPTER 19: Externalities and Public Goods The problems in this chapter illustrate how externalities in consumption or production can affect the optimal allocation of resources and, in some cases, describe the remedial action that may be appropriate. Many of the […]
978-1337127363 Chapter 18 Solution Manual
CHAPTER 18: Asymmetric Information Most of the problems in this chapter focus on different applications of the principal–agent model. Additional problems are provided on auctions and the lemons problem. Problem 18.5 requires the solution to a complicated maximization problem that […]
978-1337127363 Chapter 17 Solution Manual
CHAPTER 17: Capital and Time The problems in this chapter are of two general types: (1) those that focus on intertemporal maximization and (2) those that ask students to make fairly simple present discounted value calculations. Before undertaking any of […]
978-1337127363 Chapter 16 Solution Manual
CHAPTER 16: Labor Markets Because the subject of labor demand was extensively treated in Chapter 11, the problems in this chapter focus primarily on labor supply and on equilibrium in the labor market. Most of the labor supply problems (16.1–16.3) […]
978-1337127363 Chapter 15 Solution Manual Part 2
15.7 a. Solve the game using backward induction starting with firm 2’s action. We saw from Problem 15.1 part (b) that firm 2’s best-response function is 1 275 . q q b. If firm 1 accommodates 2’s entry, the outcome […]
978-1337127363 Chapter 15 Solution Manual Part 1
CHAPTER 15: Imperfect Competition The problems in this chapter provide the student with some practice with many of the different models of imperfect competition introduced in the text. Space considerations forced us to omit problems on search, advertising, and innovation. […]
978-1337127363 Chapter 14 Solution Manual Part 2
14.9 Since consumers only value ,XQ firms can be treated as selling that commodity (i.e., batteries of a specific useful life). Firms seek to minimize the cost of producing XQ for any level of that output. Setting up the Lagrangian, […]
978-1337127363 Chapter 14 Solution Manual Part 1
CHAPTER 14: Monopoly The problems in this chapter deal primarily with marginal revenue-marginal cost calculations in different contexts. For such problems, students’ primary difficulty is to remember that the marginal revenue concept requires differentiation with respect to quantity. Often students […]
978-1337127363 Chapter 13 Solution Manual Part 2
13.7 a. By changing the utility of household 1 to 0.2 0.6 0.2 1 1 1 1 1 ,U x y l l we increased household 1’s relative preference for x as opposed to y. By running the […]
978-1337127363 Chapter 13 Solution Manual Part 1
CHAPTER 13: General Equilibrium and Welfare WelfareExternalities and Public Goods The problems in this chapter focus primarily on the simple two-good general equilibrium model in which “supply” is represented by the production possibility frontier and “demand” by a set of […]
978-1337127363 Chapter 12 Solution Manual Part 2
therefore reduce the number of firms. Analytical Problems 12.10. Ad valorem taxes a. [ (1 )] 0, ( ) 0, (1 ) 0 , 0. P P P p P D P t Q S P Q dP dQ dP […]
978-1337127363 Chapter 12 Solution Manual Part 1
CHAPTER 12: The Partial Equilibrium Competitive Model The problems in this chapter focus on competitive supply behavior in both the short and long runs. For short-run analysis, students are usually asked to construct the industry supply curve (by summing firms’ […]
978-1337127363 Chapter 11 Solution Manual Part 2
Analytical Problems 11.9 A CES profit function b. Diminishing returns is required if MC is to be increasing—the required second- order condition for profit maximization. 11.10 Some envelope results a. We have 22 . lk v v w w v […]
978-1337127363 Chapter 11 Solution Manual Part 1
Problems in this chapter consist mainly of applications of the P MC rule for profit maximization by a price-taking firm and some examination of the firm’s derived demand for inputs. A few of the problems (13.2–13.5) ask students to work […]
978-1337127363 Chapter 10 Solution Manual Part 2
Taking the first-order conditions, 1 2 1 2 20, 25 20. 100 q q q = = q = L L Therefore, 12 4.qq b. Since 12 4,qq we have 15qq and 24 5.qq Therefore, SMC […]
978-1337127363 Chapter 10 Solution Manual Part 1
The problems in this chapter focus mainly on the relationship between production and cost functions. Most of the examples developed are based on the Cobb–Douglas function (or its CES generalization), although a few of the easier ones employ a fixed […]
978-1337127363 Chapter 1 Solution Manual
Microeconomic Theory: Basic Principles and Extensions 12th Edition Solutions Manual Walter Nicholson & Christopher Snyder Preface This Solutions Manual for the 12th edition of Microeconomic Theory: Basic Principles and Extensions provides answers to all of the end-of-chapter problems, and the […]
978-1337090582 Chapter 9 Solution Manual Part 2
11. Installed cost of ACE generator: Cost $250,000 Delivery and Installed cost $300,000 Depreciation computed based on installed cost ($300,000). Current book value of generator: $300,000 less &rst two years of depreciation = $300,000 – $60,000 – $60,000 = $180,000 […]
978-1337090582 Chapter 9 Solution Manual Part 1
Chapter 9 Capital Budgeting and Cash Flow Analysis CHAPTER 9 CAPITAL BUDGETING AND CASH FLOW ANALYSIS ANSWERS TO QUESTIONS: 1. a. Personnel managers — the value of insurance programs and pension plans can be b. Research and development staffs — […]
978-1337090582 Chapter 8 Solution Manual
Chapter 8 Analysis of Risk and Return CHAPTER 8 ANALYSIS OF RISK AND RETURN ANSWERS TO QUESTIONS: 1. a. Risk refers to the chance for some unfavorable event to occur. In finance, risk is the b. Probability distributions define the […]
978-1337090582 Chapter 7 Solution Manual Part 3
Chapter 7 Common Stock: Characteristics, Valuation and Issuance 11. D0 = $1.50 D1 = $1.50(1.15) = $1.725 beginning of year 5, in present value terms.) P0 = $1.725(.893) + $1.984(.797) + $2.281(.712) + $2.509(.636) + 1.5P0(.636) P0 = $137.85 (tables) […]
978-1337090582 Chapter 7 Solution Manual Part 2
Chapter 7 Common Stock: Characteristics, Valuation and Issuance 6. a. 4 Po = D1/(1 + ke) + [D1(1 + g1)t-1/(1 + ke)t] t=2 + [D5/(ke – g2)]/[(1 + ke)4] Present Value of First Year Dividend PV(D1) = 3.00/(1 + […]
978-1337090582 Chapter 7 Solution Manual Part 1
Chapter 7 Common Stock: Characteristics, Valuation and Issuance CHAPTER 7 COMMON STOCK: CHARACTERISTICS, VALUATION AND ISSUANCE ANSWERS TO QUESTIONS: 1.a. Nonvoting stock – common stock that is issued when the firm wishes to raise additional b. Stock split – the […]
978-1337090582 Chapter 6 Solution Manual Part 2
Chapter 6 Fixed Income Securities: Characteristics and Valuation 7. a. Po = M/(1 + kd)n = M(PVIFkd,n) From Table II, this present value interest factor in the 18-year row is between the values for 13% (0.111) and 14% (0.095). Calculator […]
978-1337090582 Chapter 6 Solution Manual Part 1
Chapter 6 Fixed Income Securities: Characteristics and Valuation CHAPTER 6 FIXED INCOME SECURITIES: CHARACTERISTICS AND VALUATION ANSWERS TO QUESTIONS: 1. a. Indenture – the contract between the issuing firm and the lenders in a debt obligation, b. Trustee – the […]
978-1337090582 Chapter 5 Solution Manual Part 2
Chapter 5 The Time Value of Money 31. FVANn = PMT(FVIFAi,n); n = 5 years x 4 quarters/year = 20 periods 32. Amount needed in account after final deposit on your 60th birthday: PV0 = $120,000(PVIFA.12,15) + $250,000(PVIF.12,15) PV0 = […]
978-1337090582 Chapter 5 Solution Manual Part 1
Chapter 5 The Time Value of Money CHAPTER 5 THE TIME VALUE OF MONEY ANSWERS TO QUESTIONS: 1. The investment paying five percent compound interest is more attractive because you will 2. The future value interest factor for 10 percent […]
978-1337090582 Chapter 4 Solution Manual Part 2
Chapter 4 Financial Planning and Forecasting Disbursements: Payment of accounts payable $438,000 $504,000 $552,000 Wages and salaries 250,000 290,000 290,000 Excess of available cash over $60,000 ($35,500) $40,750 disbursements Cash loans needed to maintain balance of $100,000 40,000 135,500 59,250 […]
978-1337090582 Chapter 4 Solution Manual Part 1
Chapter 4 Financial Planning and Forecasting CHAPTER 4 FINANCIAL PLANNING AND FORECASTING ANSWERS TO QUESTIONS: 1. Deferred taxes arise because of the timing difference of some expenses as recorded for financial reporting purposes and these same expenses as recorded for […]
978-1337090582 Chapter 3 Solution Manual Part 2
Chapter 3 Evaluation of Financial Performance 11. Profiteers, Inc. 2012 2013 2014 2015 2016 Industry Average ROI 15.00% 13.97% 14.30% 13.10% 13.40% ROE 21.30 20.26 21.02 19.78 20.50 In the face of declining profit margins and less than average efficiency […]
978-1337090582 Chapter 3 Solution Manual Part 1
Chapter 3 Evaluation of Financial Performance CHAPTER 3 EVALUATION OF FINANCIAL PERFORMANCE ANSWERS TO QUESTIONS: 1. The primary limitations of ratio analysis as a technique of financial statement analysis are: a. Ratios are retrospective and do not directly incorporate forecasts […]
978-1337090582 Chapter 23 Solution Manual Part 2
Chapter 23 Corporate Restructuring 5. a. Distribution of the Proceeds from the Liquidation of Failures Galore, Inc.: Total liquidation proceeds $5,950,000 (1) Bankruptcy administration expenses $ 550,000 Funds available for general Settlement percentage for general = and unsecured creditors and […]
978-1337090582 Chapter 23 Solution Manual Part 1
Chapter 23 Corporate Restructuring CHAPTER 23 CORPORATE RESTRUCTURING ANSWERS TO QUESTIONS: 1. a. A merger is technically a combination of two or more companies in which all but one of b. A consolidation is a combination in which all of […]
978-1337090582 Chapter 22 Solution Manual
Chapter 22 International Financial Management CHAPTER 22 INTERNATIONAL FINANCIAL MANAAGEMENT ANSWERS TO QUESTIONS: 1. The theory of interest rate parity states that the annual percentage differential in the forward 2. Covered interest arbitrage is a riskless technique used by foreign […]
978-1337090582 Chapter 21 Solution Manual
Chapter 21 Risk Management CHAPTER 21 RISK MANAGEMENT ANSWERS TO QUESTIONS: 1. Managers should seek to manage risks that are large enough that they have the potential to cause financial distress or failure of the firm. Because the costs associated […]
978-1337090582 Chapter 20 Solution Manual
Chapter 20 Financing with Derivatives CHAPTER 20 FINANCING WITH DERIVATIVES ANSWERS TO QUESTIONS: 1. a. An option is a contract that gives holders the right to buy or sell a commodity (such as 100 shares of a particular stock) at […]
978-1337090582 Chapter 2 Solution Manual
Chapter 2 The Domestic and International Financial Marketplace CHAPTER 2 THE DOMESTIC AND INTERNATIONAL FINANCIAL MARKETPLACE ANSWERS TO QUESTIONS: 1. The saving-investment cycle consists of net savers (surplus spending units) transferring funds to net investors (deficit spending units). The transfer […]
978-1337090582 Chapter 19 Solution Manual Part 2
Chapter 19 Lease and Intermediate-Term Financing 9. Net investment: $100,000 ___________________________________________________________________________ (1) (2) (3) (4) End of Lease Depreciation Actual Salvage Pretax Tax After-tax NCF PVIF Present Year Income Value Income (40%) Income @20% Value 0 – – – – […]
978-1337090582 Chapter 19 Solution Manual Part 1
Chapter 19 Lease and Intermediate-Term Financing CHAPTER 19 LEASE AND INTERMEDIATE-TERM FINANCING ANSWERS TO QUESTIONS: 1. Operating leases provide for the use of an asset on a period by period basis. They are cancelable and frequently provide for maintenance, insurance […]
978-1337090582 Chapter 18 Solution Manual Part 2
8. (A) Decrease in annual sales = Present annual sales x Percent reduction Decrease in pro t contribution = Decrease in sales x Pro t contribution ratio =$1,300,000 x (1 – .75) = $325,000 (B) Decrease in average receivables balance […]
978-1337090582 Chapter 18 Solution Manual Part 1
Chapter 18 The Management of Accounts Receivable and Inventories CHAPTER 18 THE MANAGEMENT OF ACCOUNTS RECEIVABLE AND INVENTORIES ANSWERS TO QUESTIONS: 1. The marginal returns associated with a more liberal extension of credit to the firm’s customers are the increased […]
978-1337090582 Chapter 17 Solution Manual Part 2
Chapter 17 The Management of Cash and Marketable Securities 4. Reduction in Collection Time = Collection Time (Centralized System) – Collection Time (Decentralized System) Average Daily Collections = Annual Collections/365 = $900,000,000/365 = $2,465,753 Amount of Funds Released = Average […]
978-1337090582 Chapter 17 Solution Manual Part 1
Chapter 17 The Management of Cash and Marketable Securities CHAPTER 17 THE MANAGEMENT OF CASH AND MARKETABLE SECURITIES ANSWERS TO QUESTIONS: 1. a. Demand deposits are the funds firms (or individuals) keep in their bank checking b. Compensating balances are […]
978-1337090582 Chapter 16 Solution Manual Part 3
20. Interest costs = $20,000 x 0.10 x 182/365 = $997.26 Usable funds = $20,000 – $997 = $19,003 AFC = ($997/$19,003) x (365/182) x 100 = 10.52% 21. Assume a 365-day borrowing period a. Annual ,nancing cost = (Interest […]
978-1337090582 Chapter 16 Solution Manual Part 2
6. a. Alternative Working Capital Investment and Financing Policies (millions of dollars) Aggressive Moderate Conservative Current Assets (C/A) $56 $64 $104 Current Liab. (C/L) (STD) $48 (6.5%) $24 (5.5%) Long-term Debt (LTD) 0 (9.5%) 14 (9%) 28 (8.5%) Total Liab. […]
978-1337090582 Chapter 16 Solution Manual Part 1
Chapter 16 Working Capital Policy and Short-Term Financing CHAPTER 16 WORKING CAPITAL POLICY AND SHORT-TERM FINANCING ANSWERS TO QUESTIONS: 1. The need for working capital arises because the normal operating cycle of the firm requires 2. The operating cycle represents […]