Archives: Solution Manual
978-1260153590 Chapter 14 Solutions Manual Part 2
21. The total cost including flotation costs was: Using the equation to calculate the total cost including flotation costs, we get: (Amount raised)(1 – fT) = Amount needed after flotation costs $37,200,000(1 – fT) = $35,000,000 fT = .0591, or […]
978-1260153590 Chapter 14 Solutions Manual Part 1
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. 5. […]
978-1260153590 Chapter 14 Case Solutions
CHAPTER 14 COST OF CAPITAL FOR SWAN MOTORS NOTE: The example below shows the results during early 2017. The actual answer to the case will change based on current market conditions. 1. The book value of the company’s liabilities and […]
978-1260153590 Chapter 13 Solutions Manual Part 2
18. There are two ways to correctly answer this question so we will work through both. First, we can use the CAPM. Substituting in the value we are given for each stock, we find: It is given in the problem […]
978-1260153590 Chapter 13 Solutions Manual Part 1
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, […]
978-1260153590 Chapter 13 Case Solutions
CHAPTER 13 THE BETA FOR COLGATE-PALMOLIVE NOTE: The example below shows the results from early 2017. The actual answer to the case will change based on current market conditions. 1. The information used for the analysis is presented below. Note […]
978-1260153590 Chapter 12 Solutions Manual
CHAPTER 12 SOME LESSONS FROM CAPITAL MARKET HISTORY Answers to Concepts Review and Critical Thinking Questions 3. Not necessarily, because stocks are riskier. Some investors are highly risk averse, and the extra possible return doesn’t attract them relative to the […]
978-1260153590 Chapter 12 Case Solutions
CHAPTER 12 A JOB AT S&S AIR 2. Both the APR and EAR are infinite. The match is instantaneous, so the number of periods in a year is infinite. As a result, the obvious conclusion is that you should contribute […]
978-1260153590 Chapter 11 Solutions Manual Part 3
22. To calculate the sensitivity of the NPV to changes in the price of the new club, we need to change the price of the new club. We will choose $855, but the choice is irrelevant as the sensitivity will […]
978-1260153590 Chapter 11 Solutions Manual Part 2
14. We can use the equation for DOL to calculate fixed costs. The fixed costs must be: DOL = 3.26 = 1 + FC/OCF If the output rises to 18,500 units, the percentage change in quantity sold is: %Q = […]
978-1260153590 Chapter 11 Solutions Manual Part 1
CHAPTER 11 PROJECT ANALYSIS AND EVALUATION Answers to Concepts Review and Critical Thinking Questions 1. Forecasting risk is the risk that a poor decision is made because of errors in projected cash flows. 2. With a sensitivity analysis, one variable […]
978-1260153590 Chapter 11 Case Solutions
CHAPTER 11 CONCH REPUBLIC ELECTRONICS, PART 2 1. Here we want to examine the sensitivity of NPV to changes in the price of the new smart phone. The calculations for sensitivity to changes in price are similar to the original […]
978-1260153590 Chapter 10 Solutions Manual Part 3
35. The salvage value and treatment of the land will remain the same as in the previous problem. The new cash flows each year will be: Year 0 Year 1 Year 2 Year 3 Year 4 Revenues $2,167,500 $2,465,000 $2,720,000 […]
978-1260153590 Chapter 10 Solutions Manual Part 2
18. To calculate the EAC of the project, we first need the PV of the costs of the project. Notice that we include the NWC expenditure at the beginning of the project, and recover the NWC at the end of […]
978-1260153590 Chapter 10 Solutions Manual Part 1
CHAPTER 10 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will be used in a 2. For tax […]
978-1260153590 Chapter 10 Case Solutions
CHAPTER 10 CONCH REPUBLIC ELECTRONICS, PART 1 This is an in-depth capital budgeting problem. The initial cash outlay at Time 0 is the cost of the new equipment, $43,500,000. The sales each year are a combination of the sales of […]
978-1260153590 Chapter 1 Solutions Manual
Solutions Manual Fundamentals of Corporate Finance 12th edition Ross, Westerfield, and Jordan 06-15-2018 Prepared by Brad Jordan University of Kentucky Joe SmoliraBelmont University CHAPTER 1 INTRODUCTION TO CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. Capital budgeting […]
978-1260153590 Chapter 1 Case Solutions
Case Solutions Fundamentals of Corporate Finance Ross, Westerfield, and Jordan 12th edition 06/15/2018 Prepared by Brad Jordan University of Kentucky Joe Smolira Belmont University CHAPTER 1 THE McGEE CAKE COMPANY 1. The advantages to an LLC are: (a) Reduction of […]
978-1260152616 Chapter 9 Solution Manual Part 2
Chapter 09 – Game Theory and Strategic Thinking 1. Muriel likes her job, but her boss gives lousy bonuses. Muriel was recently offered a new job with better rewards, and her friend wants to know if she intends to take […]
978-1260152616 Chapter 9 Solution Manual Part 1
Chapter 09 – Game Theory and Strategic Thinking CHAPTER 9 GAME THEORY AND STRATEGIC THINKING Chapter Overview This chapter introduced the concept of strategic games. Many real-life situations can be analyzed as if they were strategic games, with associated rules, […]
978-1260152616 Chapter 8 Solution Manual
Chapter 08 – Behavioral Economics: A Closer Look at Decision Making CHAPTER 8 DECISION MAKING Chapter Overview We can go a long way in economics by assuming that people act rationally to maximize their utility. Real people, though, make economic […]
978-1260152616 Chapter 7 Solution Manual
Chapter 07 – Consumer Behavior CHAPTER 7 CONSUMER BEHAVIOR Chapter Overview The ideas in this chapter are at the heart of economic analysis. Everything in the following chapters (and, for that matter, the preceding chapters) is in some way based […]
978-1260152616 Chapter 6 Solution Manual Part 2
9. The market shown in Figure 6P-6 is in equilibrium. Suppose there is a $1.50 per unit tax levied on sellers. [LO 6.3] a. Draw the after-tax supply curve. b. Plot the after-tax price paid by consumers and the after-tax […]
978-1260152616 Chapter 6 Solution Manual Part 1
Chapter 06 – Government Intervention CHAPTER 6 GOVERNMENT INTERVENTION Chapter Overview If you listen to the news, it might seem as if economics is all about business and the stock market. Business matters, but many of the most important, challenging, […]
978-1260152616 Chapter 5 Solution Manual Part 2
Chapter 05 – Efficiency 4. Based on Table 5P-1, calculate consumer surplus for each consumer when the price is $17. What is the total consumer surplus at this price? [LO 5.2] Answer: Consumer A: $0 (WTP < $17). Consumer B: […]
978-1260152616 Chapter 5 Solution Manual Part 1
Chapter 05 – Efficiency CHAPTER 5 EFFICIENCY Chapter Overview In this chapter we’ve introduced the concepts of willingness to pay and willingness to sell, which help explain when individual buyers and sellers will choose to make a trade. We’ve also […]
978-1260152616 Chapter 4 Solution Manual Part 2
Chapter 04 – Elasticity Problems and Applications 1. When the price of a bar of chocolate is $1.00, the quantity demanded is 100,000 bars. When the price rises to $1.50, the quantity demanded falls to 60,000 bars. Calculate the price […]
978-1260152616 Chapter 4 Solution Manual Part 1
Chapter 04 – Elasticity CHAPTER 4 ELASTICITY Chapter Overview Supply and demand may be the most common words in economics, but applying these concepts to the real world requires a bit of elaboration. Elasticity is the first of several concepts […]
978-1260152616 Chapter 3 Solution Manual Part 2
Chapter 03 – Markets Problems and Applications 1. Consider shopping for cucumbers in a farmers’ market. For each statement below, note which characteristic of competitive markets the statement describes. Choose from: standardized good, full information, no transaction costs, and participants […]
978-1260152616 Chapter 3 Solution Manual Part 1
Chapter 03 – Markets CHAPTER 3 MARKETS Chapter Overview By the time you reach the end of this course, you’ll be quite familiar with the words supply and demand. We take our time on this subject for good reason: An […]
978-1260152616 Chapter 23 Solution Manual
Chapter 23 – Public Policy and Choice Architecture CHAPTER 23 PUBLIC POLICY AND CHOICE ARCHITECTURE Chapter Overview Advertisers know that sales depend on more than delivering an appealing economic proposition. Clinching the deal often depends on hitting the right psychological […]
978-1260152616 Chapter 22 Solution Manual
Chapter 22 – Political Choices CHAPTER 22 POLITICAL CHOICES Chapter Overview As students of economics, we are interested in how policy is formed—both for its own sake as an important realm of human decision making and for the effect it […]
978-1260152616 Chapter 21 Solution Manual Part 2
Chapter 21 – Poverty, Inequality, and Discrimination 1. Table 21P-3 shows the incomes of 10 households in two different years, 2020 and 2030. Each household makes a choice in 2020 about how many years of education they will acquire. Suppose […]
978-1260152616 Chapter 21 Solution Manual Part 1
Chapter 21 – Poverty, Inequality, and Discrimination CHAPTER 21 POVERTY, INEQUALITY, AND DISCRIMINATION Chapter Overview Understanding the roots of poverty, inequality, and discrimination matters for economists and policy-makers alike. From an intellectual perspective, these topics push us to understand how […]
978-1260152616 Chapter 20 Solution Manual Part 2
Chapter 20 – Taxation and the Public Budget 1. Suppose the government wants to levy a new excise tax. For each of the following goods, determine whether you would expect an excise tax to result in high or low deadweight […]
978-1260152616 Chapter 20 Solution Manual Part 1
Chapter 20 – Taxation and the Public Budget CHAPTER 20 TAXATION AND THE PUBLIC BUDGET Chapter Overview The fine points of tax law are complex, but the basics are fairly straightforward. The ideas and evidence in this chapter show what’s […]
978-1260152616 Chapter 2 Solution Manual Part 2
Chapter 02 – Specialization and Exchange 5. Use the production possibilities frontier in Figure 2P-2 to answer the following questions. [LO 2.1] a. What is the slope of the PPF between point A and point B? b. What is the […]
978-1260152616 Chapter 2 Solution Manual Part 1
Chapter 02 – Specialization and Exchange CHAPTER 2 SPECIALIZATION AND EXCHANGE Chapter Overview Specialization and trade can make everyone better off. It is not surprising, then, that in an economy driven by individuals seeking to make a profit or improve […]
978-1260152616 Chapter 19 Solution Manual
Chapter 19 – Public Goods and Common Resources CHAPTER 19 PUBLIC GOODS AND COMMON RESOURCES Chapter Overview Public goods and common resources are a significant source of market failure. Generally speaking, unregulated public goods will encounter the free- rider problem, […]
978-1260152616 Chapter 18 Solution Manual Part 2
Chapter 18 – Externalities 3. Figure 18P-1 shows the demand curve for a U.S. farmer for irrigating his land. It costs the farmer $100 per acre to irrigate the land. Each acre of land irrigation generates salty runo# that winds […]
978-1260152616 Chapter 18 Solution Manual Part 1
Chapter 18 – Externalities CHAPTER 18 EXTERNALITIES Chapter Overview Typically, we rely on the invisible hand of markets to maximize total surplus by allocating the right quantity of goods to the right people. But what happens when one person’s choices […]
978-1260152616 Chapter 17 Solution Manual Part 2
Chapter 17 – International Trade 1. If capital is domestically scarce in a country, do you expect owners of capital in that country to be free-traders or protectionists? Why? [LO 17.7] Answer: If capital is domestically scarce in a country, […]
978-1260152616 Chapter 17 Solution Manual Part 1
Chapter 17 – International Trade CHAPTER 17 INTERNATIONAL TRADE Chapter Overview The chapter has taken a close look at one of the most powerful economic insights: There can be big gains from specialization and exchange. This is true for countries […]
978-1260152616 Chapter 16 Solution Manual Part 2
Chapter 16 – The Factors of Production Problems and Applications 1. Recently, some college alumni started a moving service for students living on campus. They have three employees and are debating hiring a fourth. The hourly wage for an employee […]
978-1260152616 Chapter 16 Solution Manual Part 1
Chapter 16 – The Factors of Production CHAPTER 16 THE FACTORS OF PRODUCTION Chapter Overview Why do some people earn more than others? That is one of the most fundamental questions in economics and politics. When markets are competitive, everyone […]
978-1260152616 Chapter 15 Solution Manual Part 2
1. Explain why government is usually more concerned about regulating an oligopoly than a monopolistically competitive market. [LO 15.8] Answer: From an efficiency standpoint, an oligopoly will be more problematic than a monopolistically competitive market. If an oligopoly is Problems […]
978-1260152616 Chapter 15 Solution Manual Part 1
Chapter 15 – Monopolistic Competition and Oligopoly CHAPTER 15 MONOPOLISTIC COMPETITION AND OLIGOPOLY Chapter Overview In previous chapters, we’ve explored two opposite ends of the spectrum of market structures: perfect competition and monopoly. In this chapter, we’ve moved to the […]
978-1260152616 Chapter 14 Solution Manual Part 2
Chapter 14 – Monopoly 1. Table 14P-1 presents the demand schedule and marginal costs facing a monopolist producer. [LO 14.3] a. Fill in the total revenue and marginal revenue columns. b. What is the profit-maximizing level of output? c. What […]
978-1260152616 Chapter 14 Solution Manual Part 1
Chapter 14 – Monopoly CHAPTER 14 MONOPOLY Chapter Overview Monopolies can use their market power to hold price above the level that would prevail in a competitive market. By doing so, they turn consumer surplus into positive economic profits and […]
978-1260152616 Chapter 13 Solution Manual Part 2
Chapter 13 – Perfect Competition 1. Paulina sells beef in a competitive market where the price is $5 per pound. Her total revenue and total costs are given in Table 13P-2. [LO 13.3] a. Fill out the table. b. At […]