Solutions Manual

In: Business and Management

Submitted By ladyk86
Words 72775
Pages 292
Answers to Concepts Review and Critical Thinking Questions

1. Capital budgeting (deciding on whether to expand a manufacturing plant), capital structure (deciding whether to issue new equity and use the proceeds to retire outstanding debt), and working capital management (modifying the firm’s credit collection policy with its customers).

2. Disadvantages: unlimited liability, limited life, difficulty in transferring ownership, hard to raise capital funds. Some advantages: simpler, less regulation, the owners are also the managers, sometimes personal tax rates are better than corporate tax rates.

3. The primary disadvantage of the corporate form is the double taxation to shareholders of distributed earnings and dividends. Some advantages include: limited liability, ease of transferability, ability to raise capital, and unlimited life.

4. The treasurer’s office and the controller’s office are the two primary organizational groups that report directly to the chief financial officer. The controller’s office handles cost and financial accounting, tax management, and management information systems. The treasurer’s office is responsible for cash and credit management, capital budgeting, and financial planning. Therefore, the study of corporate finance is concentrated within the functions of the treasurer’s office.

5. To maximize the current market value (share price) of the equity of the firm (whether it’s publicly traded or not).

6. In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone else’s best interests, rather than those of the shareholders. If such events occur,…...

Similar Documents

Chapter 3 Solutions Manual

...documents in an information system. Both documentation methods are limited by the nature of the models they employ, as well as by the talents and abilities of the designer to represent reality. 3.4 The major flowcharting symbols and their respective categories are shown in Fig. 3.8 in the text. With respect to how the symbols are used, student answers will vary. Possible examples include the following: Input/Output Symbols • Document: an employee time card, a telephone bill, a budget report, a parking ticket, a contract • Display: student information monitors, ATM monitors, the monitor on your microcomputer. • Manual input: cash registers, ATM machines Processing Symbols • Processing: processing a student payroll program, assessing late fees • Manual operation: writing a parking ticket, preparing a report, collecting and entering student payments Storage Symbols • Magnetic disk: alumni information data base, a report stored on your PC hard disk • Magnetic tape: archival student information • On-line storage: a student information data base or an airline reservation data base stored on-line. • File: purchase order file for a department, a student housing contract file Flow (Miscellaneous) • Communication link: a telephone linkage that connects you to Prodigy or some other on-line data base. SUGGESTED ANSWERS TO THE PROBLEMS 3.1......

Words: 1742 - Pages: 7

Solutions Manual for Statistical Inference, Second Edition

...Solutions Manual for Statistical Inference, Second Edition George Casella University of Florida Roger L. Berger North Carolina State University Damaris Santana University of Florida 0-2 Solutions Manual for Statistical Inference “When I hear you give your reasons,” I remarked, “the thing always appears to me to be so ridiculously simple that I could easily do it myself, though at each successive instance of your reasoning I am baffled until you explain your process.” Dr. Watson to Sherlock Holmes A Scandal in Bohemia 0.1 Description This solutions manual contains solutions for all odd numbered problems plus a large number of solutions for even numbered problems. Of the 624 exercises in Statistical Inference, Second Edition, this manual gives solutions for 484 (78%) of them. There is an obtuse pattern as to which solutions were included in this manual. We assembled all of the solutions that we had from the first edition, and filled in so that all odd-numbered problems were done. In the passage from the first to the second edition, problems were shuffled with no attention paid to numbering (hence no attention paid to minimize the new effort), but rather we tried to put the problems in logical order. A major change from the first edition is the use of the computer, both symbolically through Mathematicatm and numerically using R. Some solutions are given as code in either of these languages. Mathematicatm can be purchased from Wolfram Research, and R is......

Words: 59353 - Pages: 238

Solution Manual of Stochastic Process- Shreve

...Stochastic Calculus for Finance, Volume I and II by Yan Zeng Last updated: August 20, 2007 This is a solution manual for the two-volume textbook Stochastic calculus for finance, by Steven Shreve. If you have any comments or find any typos/errors, please email me at The current version omits the following problems. Volume I: 1.5, 3.3, 3.4, 5.7; Volume II: 3.9, 7.1, 7.2, 7.5–7.9, 10.8, 10.9, 10.10. Acknowledgment I thank Hua Li (a graduate student at Brown University) for reading through this solution manual and communicating to me several mistakes/typos. 1 1.1. Stochastic Calculus for Finance I: The Binomial Asset Pricing Model 1. The Binomial No-Arbitrage Pricing Model Proof. If we get the up sate, then X1 = X1 (H) = ∆0 uS0 + (1 + r)(X0 − ∆0 S0 ); if we get the down state, then X1 = X1 (T ) = ∆0 dS0 + (1 + r)(X0 − ∆0 S0 ). If X1 has a positive probability of being strictly positive, then we must either have X1 (H) > 0 or X1 (T ) > 0. (i) If X1 (H) > 0, then ∆0 uS0 + (1 + r)(X0 − ∆0 S0 ) > 0. Plug in X0 = 0, we get u∆0 > (1 + r)∆0 . By condition d < 1 + r < u, we conclude ∆0 > 0. In this case, X1 (T ) = ∆0 dS0 + (1 + r)(X0 − ∆0 S0 ) = ∆0 S0 [d − (1 + r)] < 0. (ii) If X1 (T ) > 0, then we can similarly deduce ∆0 < 0 and hence X1 (H) < 0. So we cannot have X1 strictly positive with positive probability unless X1 is strictly negative with positive probability as well, regardless the choice of the number ∆0 . Remark: Here the condition X0 = 0 is......

Words: 19710 - Pages: 79

Audit Chapter 8 Solutions Manual

...Solutions for Chapter 8 Tools to Gather Audit Evidence Review Questions: 8-1. The three main tools the auditor might use in gathering and evaluating audit evidence are: • Audit sampling • Generalized Audit Software • Analytical procedures 8-2. Non-sampling risk is the risk that the auditor makes an improper assessment of inherent and/or control risk or did not apply audit procedures carefully. It can be minimized through: (1) Good hiring, training and supervision practices; and (2) Careful and knowledgeable review of audit documentation and audit procedures. Sampling risk is the risk that the misstatement projections based on the sample results lead to the wrong conclusion about the population because of a non-representative sample. Sampling risk can be reduced by increasing the sample size – to the extreme of auditing the entire population therefore eliminating sampling risk altogether. 8-3. Factors to consider when choosing between statistical and nonstatistical sampling include: • Need to quantify and control sampling risks. • Additional cost of designing, selecting, and evaluating a statistical sample. • Availability of computer software to assist in designing, selecting, and/or evaluating the sample. • Ability of the audit staff to properly implement statistical sampling. 8-4. a. Tolerable deviation rate depends on the significance of the control procedure being......

Words: 11678 - Pages: 47

Corporate Finance Solution Manual

...Solutions Manual Fundamentals of Corporate Finance 9th edition Ross, Westerfield, and Jordan Updated 12-20-2008 CHAPTER 1 INTRODUCTION TO CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. Capital budgeting (deciding whether to expand a manufacturing plant), capital structure (deciding whether to issue new equity and use the proceeds to retire outstanding debt), and working capital management (modifying the firm’s credit collection policy with its customers). 2. Disadvantages: unlimited liability, limited life, difficulty in transferring ownership, hard to raise capital funds. Some advantages: simpler, less regulation, the owners are also the managers, sometimes personal tax rates are better than corporate tax rates. 3. The primary disadvantage of the corporate form is the double taxation to shareholders of distributed earnings and dividends. Some advantages include: limited liability, ease of transferability, ability to raise capital, and unlimited life. 4. In response to Sarbanes-Oxley, small firms have elected to go dark because of the costs of compliance. The costs to comply with Sarbox can be several million dollars, which can be a large percentage of a small firms profits. A major cost of going dark is less access to capital. Since the firm is no longer publicly traded, it can no longer raise money in the public market. Although the company will still have access to bank loans and the private equity......

Words: 122832 - Pages: 492

Solution Manual Gitman

...Principles of Managerial Finance Solution Lawrence J. Gitman PART 1 Introduction to Managerial Finance CHAPTERS IN THIS PART 1 2 3 The Role and Environment of Managerial Finance Financial Statements and Analysis Cash Flow and Financial Planning INTEGRATIVE CASE 1: TRACK SOFTWARE, INC. CHAPTER 1 The Role and Environment of Managerial Finance INSTRUCTOR’S RESOURCES Overview This chapter introduces the student to the field of finance and explores career opportunities in both financial services and managerial finance. The three basic legal forms of business organization (sole proprietorship, partnership, and corporation) and their strengths and weaknesses are described, as well as the relationship between major parties in a corporation. The managerial finance function is defined and differentiated from economics and accounting. The chapter then summarizes the three key activities of the financial manager: financial analysis and planning, investment decisions, and financing decisions. A discussion of the financial manager's goals – maximizing shareholder wealth and preserving stakeholder wealth – and the role of ethics in meeting these goals is presented. The chapter includes discussion of the agency problem – the conflict that exists between managers and owners in a large corporation. Money and capital markets and their major components are introduced in this chapter. The final section covers a discussion of the impact of taxation on the firm's......

Words: 5096 - Pages: 21

Solution Manual for a Course in Game Theory

...Solution Manual for A Course in Game Theory Solution Manual for A Course in Game Theory by Martin J. Osborne and Ariel Rubinstein Martin J. Osborne Ariel Rubinstein with the assistance of Wulong Gu The MIT Press Cambridge, Massachusetts London, England This manual was typeset by the authors, who are greatly indebted to Donald Knuth (the A creator of TEX), Leslie Lamport (the creator of L TEX), and Eberhard Mattes (the creator of emTEX) for generously putting superlative software in the public domain, and to Ed Sznyter for providing critical help with the macros we use to execute our numbering scheme. Version 1.1, 97/4/25 Contents Preface xi 2 Nash Equilibrium 1 Exercise 18.2 (First price auction ) 1 Exercise 18.3 (Second price auction ) 2 Exercise 18.5 (War of attrition ) 2 Exercise 19.1 (Location game ) 2 Exercise 20.2 (Necessity of conditions in Kakutani's theorem ) 4 Exercise 20.4 (Symmetric games ) 4 Exercise 24.1 (Increasing payo s in strictly competitive game ) 4 Exercise 27.2 (BoS with imperfect information ) 5 Exercise 28.1 (Exchange game ) 5 Exercise 28.2 (More information may hurt ) 6 Exercise 35.1 (Guess the average ) 7 Exercise 35.2 (Investment race ) 7 Exercise 36.1 (Guessing right ) 9 Exercise 36.2 (Air strike ) 9 Exercise 36.3 (Technical result on convex sets ) 10 Exercise 42.1 (Examples of Harsanyi's puri cation ) 10 Exercise 48.1 (Example of correlated equilibrium ) 11 Exercise 51.1 (Existence of ESS in 2 2 game ) 12......

Words: 27123 - Pages: 109

Solution Manual

...Database Modeling and Design – 4th Edition (2006) Toby Teorey, Sam Lightstone, Tom Nadeau Exercises with Solutions – Solutions Manual ER and UML Conceptual Data Modeling Problem 2-1 Draw a detailed ER diagram for an car rental agency database (e.g. Hertz), keeping track of current rental location of each car, its current condition and history of repairs, and customer information for a local office, expected return date, return location, car status (ready, being-repaired, currently-rented, being-cleaned). Select attributes from your intuition about the situation, and list them separately from the diagram, but associated with a particular entity or relationship in the ER model. Solution to 2-1 Problem 2-2 Given the following assertions for a relational database that represents the current term enrollment at a large university, draw an ER diagram for this schema that takes into account all the assertions given. There are 2000 instructors, 4000 courses, and 30,000 students. Use as many ER constructs as you can to represent the true semantics of the problem. Assertions: An instructor may teach one or more courses in a given term (average is 2.0 courses). An instructor must direct the research of at least one student (average = 2.5 students). A course may have none, one, or two prerequisites (average = 1.5 prerequisites). A course may exist even if no students are currently enrolled. All courses are taught by exactly one......

Words: 3109 - Pages: 13

Manual Solution of Chapter 2

...principal (owner) knows that the auditor is not independent, the owner will not trust the auditor’s work. Thus, the agent will not hire the auditor because the auditor’s report will not be effective in reducing information risk from the perspective of the owner. Answers to Multiple-Choice Questions 2-15 | b | | 2-20 | a | 2-16 | a | | 2-21 | a | 2-17 | a | | 2-22 | c | 2-18 | d | | 2-23 | c | 2-19 | c | | | | Solutions to Problems 2-24 Item Number | Type of Audit | Type of Auditor | a. | Operational | Government | b. | Financial statement | External | c. | Compliance or operational or possibly internal control | Internal or external | d. | Forensic | Internal, external, or forensic | e. | Operational | Government, external, or internal | f. | Operational | Internal or external | g. | Compliance | Government | h. | Compliance......

Words: 4760 - Pages: 20

Auditing Eilifsen Solutions Manual

...knowledge about: (1) the nature of the entity, (2) its objectives and strategies, (3) its industry, regulatory, and other external factors, (4) its management, (5) its governance, (6) its measurement and performance process, and (7) its business processes. 1-11 Sometimes auditors will face situations where no standard audit procedure exists, such as the example from the text of verifying the inventory of reindeer. Such circumstances require that the auditor possess creativity and innovation when planning and administering audit procedures where little or no precedent exists. Every client is different, and applying auditing concepts in different situations requires logic and common sense, and frequently creativity and innovation. Solutions to Problems 1-12 The memo should cite the following facts: • There is a historical relationship between accounting and auditing. 2 • • • When parties to the agency relationship (contract) do not possess the same amount of information (information asymmetry) there is a natural conflict of interest between the parties. For example, when an owner and manager are negotiating an employment contract, the owner may assume that the manager likely will use organizational funds for personal uses. Auditing plays an important role in such relationships. The owner and manager will consummate an employment contract only if the manager agrees to be monitored. Auditing can be used to monitor the contract agreed to by the......

Words: 26005 - Pages: 105

Manual Solution Lakeside 11e

...The Lakeside Company: Auditing Cases SOLUTIONS MANUAL 11e Table of Contents John M. Trussel and J. Douglas Frazer A Not on Ethics, Fraud and Sox Questions 2 A Note on Research Assignments 4 Introductory Case 6 Case 1 13 Case 2 21 Case 3 29 Case 4 39 Case 5 51 Case 6 67 Case 7 74 Case 8 83 92 Case 10 100 Case 11 105 Case 12 115 Case 13 127 A NOTE ON ETHICS, FRAUD, AND SOX QUESTIONS The Lakeside Company: Auditing Cases, 11th edition, has been updated in light of the accounting scandals of the early 2000s and the passage of the Sarbanes-Oxley Act of 2002, and the renewed interest in ethics within the accounting and auditing profession. Ethics questions are now specifically identified with an ethics logo. The ethics questions are often open ended, and this solutions manual does not try to give exact answers to these questions. Rather, we intend to give some ideas for classroom discussion, and to help with student research on these questions. Fraud questions are now specifically identified with a fraud triangle The introduction of Sarbanes-Oxley issues has been accomplished in two ways. First, case content has been altered to include Lakeside’s consideration of financing expansio n through an initial public offering, and......

Words: 42357 - Pages: 170

Solution Manual Chapter 2 Cost Accounting

...Solutions Manual COST ACCOUNTING © 2012 Pearson Education, Inc. Publishing as Prentice Hall. SM Cost Accounting 14/e by Horngren © 2012 Pearson Education, Inc. Publishing as Prentice Hall. SM Cost Accounting 14/e by Horngren Solutions Manual COST ACCOUNTING Fourteenth Edition Charles T. Horngren Srikant M. Datar Madhav Rajan Upper Saddle River, NJ 07458 © 2012 Pearson Education, Inc. Publishing as Prentice Hall © 2012 Pearson Education, Inc. Publishing as Prentice Hall. SM Cost Accounting 14/e by Horngren This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials. Acquisition Editor: Stephanie Wall Editorial Project Manager: Christina Rumbaugh Editorial Assistant: Brian Reilly Project Manager, Production: Lynne Breitfeller Operations Specialist: Natacha Moore Printer/Binder: OPM Digital Print Services Cover Printer: OPM Digital Print Services Credits and......

Words: 289926 - Pages: 1160

Finance Solution Manual

...budgeting decision. Solution: Financing decisions determine how a firm will raise capital. Examples of financing decisions would be securing a bank loan or the sale of debt in the public capital markets. Capital budgeting involves deciding which productive assets the firm invests in, such as buying a new plant or investing in a renovation of an existing facility. 2. What is the decision criterion for financial managers when selecting a capital project? Solution: Financial managers should only select a capital project if the value of the project’s future cash flows exceeds the cost of the project. In other words, managers should only take on investments that will increase the firm’s value and thus increase the shareholders’ wealth. 3. What are some ways to manage working capital? Solution: Working capital is the day-to-day management of a firm’s short-term assets and liabilities. It can be managed through maintaining the optimal level of inventory, keeping track of all the receivables and payables, deciding to whom the firm should extend credit, and making appropriate investments with excess cash. 4. Which one of the following characteristics does not pertain to corporations? a. can enter into contracts b. can borrow money c. are the easiest type of business to form d. can be sued e. can own stock in other companies Solution: c 5. What are typically the main components of an executive compensation package? Solution: The......

Words: 7130 - Pages: 29

Solution Manuals

...Management Accounting: Information for Decision-Making and Strategy Execution - 6.Edition - 2012 Anthony A. Atkinson, Robert S. Kaplan Pearson I have both Solution Manulas And Test Banks Of this Book Contact Chapter 1 How Management Accounting Information Supports Decision Making QUESTIONS 1-1 Management accounting is a discipline that designs planning and performance measurement systems, using financial and nonfinancial information, to help an organization develop and implement its strategy. The information must be relevant and helpful, and customized to serve multiple purposes, such as making decisions, allocating resources, and monitoring, evaluating, and rewarding performance. Information for the “plan” and “do” steps of the PDCA cycle includes prospective data on costs, profits, efficiency, and quality associated with alternative ways to produce or provide goods or services. Information for the “check” and “act” steps includes assessments of how well the organization is achieving its objectives. Common information requirements include measures of cost, quality, profitability, and timeliness. 1-2 A company’s operators, managers, and executives need information for their operational control and improvement activities, as well as on the performance of their individual processes, products, services, and customers. This information is important to direct managers’ attention to areas where improvement is needed, to provide......

Words: 7550 - Pages: 31

Solution Manual of Principles of Corporate Finance to solve for the present value of: (1) $100 per year for 10 years, and (2) $100 per year in perpetuity, with the first cash flow at year 11. If this is a fair deal, these present values must be equal, and thus we can solve for the interest rate (r). The present value of $100 per year for 10 years is: ⎡1 ⎤ 1 PV = $100 × ⎢ − 10 ⎥ ⎣ r (r) × (1 + r) ⎦ The present value, as of year 10, of $100 per year forever, with the first payment in year 11, is: PV10 = $100/r At t = 0, the present value of PV10 is: ⎡ 1 ⎤ ⎡ $100 ⎤ PV = ⎢ × ⎥ 10 ⎥ ⎢ ⎣ (1 + r) ⎦ ⎣ r ⎦ Equating these two expressions for present value, we have: ⎡1 ⎤ ⎡ 1 ⎤ ⎡ $100 ⎤ 1 = × $100 × ⎢ − ⎥ 10 ⎥ ⎢ 10 ⎥ ⎢ ⎣ r (r) × (1 + r) ⎦ ⎣ (1 + r) ⎦ ⎣ r ⎦ Using trial and error or algebraic solution, we find that r = 7.18%. 17. Assume the amount invested is one dollar. Let A represent the investment at 12 percent, compounded annually. Let B represent the investment at 11.7 percent, compounded semiannually. Let C represent the investment at 11.5 percent, compounded continuously. After one year: FVA = $1 × (1 + 0.12)1 FVB = $1 × (1 + 0.0585)2 FVC = $1 × e(0.115 × 1) After five years: FVA = $1 × (1 + 0.12)5 FVC = $1 × e(0.115 × 5) = $1.7623 FVB = $1 × (1 + 0.0585)10 = $1.7657 = $1.7771 = $1.1200 = $1.1204 = $1.1219 13 After twenty years: FVA = $1 × (1 + 0.12)20 FVC = $1 × e(0.115 × 20) The preferred investment is C. 1 + rnominal = (1 + rreal) × (1 + inflation rate) Nominal Interest Rate 6.00% 23.20% 9.00% Inflation Rate......

Words: 74775 - Pages: 300