Edrftgyihu jiuh
Intermediate Financial
Management, 14th Edition
ST
SOLUTIONS
UV
IA
MANUAL
_A
Eugene F. Brigham, Phillip R. Daves
PP
Comprehensive Solutions Manual for Instructors
RO
and Students
||| ||| || ||| || | || ||| | || ||| |
VE
9780357516669
© Eugene F. Brigham & Phillip R. Daves. All rights reserved.
D?
Reproduction or distribution without permission is prohibited.
© MEDGEEK
, TABLE OF CONTENTS
Solutions Manual – Intermediate Financial Management (14th Edition)
Authors: Eugene F. Brigham and Phillip R. Daves
ISBN: 9780357516669
ST
PART I: FUNDAMENTAL CONCEPTS
Chapter 1: An Overview of Financial Management and the Financial Environment
Chapter 2: Risk and Return: Part I
UV
Chapter 3: Risk and Return: Part II
Chapter 4: Bond Valuation
Chapter 5: Financial Statements, Cash Flow, and Taxes
Chapter 6: Analysis of Financial Statements
PART II: CORPORATE VALUATION
IA
Chapter 7: Stocks and Their Valuation
Chapter 8: Financial Planning and Forecasting Financial Statements
Chapter 9: Corporate Valuation and Value-Based Management
_A
PART III: PROJECT VALUATION AND CAPITAL BUDGETING
Chapter 10: The Cost of Capital
Chapter 11: The Basics of Capital Budgeting: Evaluating Cash Flows
PP
Chapter 12: Cash Flow Estimation and Risk Analysis
Chapter 13: Real Options
PART IV: STRATEGIC FINANCING DECISIONS
RO
Chapter 14: Distributions to Shareholders: Dividends and Repurchases
Chapter 15: Capital Structure Decisions: Part I
Chapter 16: Capital Structure Decisions: Part II
Chapter 17: Dynamic Capital Structures and Corporate Valuation
PART V: TACTICAL FINANCING DECISIONS
VE
Chapter 18: Initial Public Offerings, Investment Banking, and Financial Restructuring
Chapter 19: Lease Financing
Chapter 20: Hybrid Financing: Preferred Stock, Warrants, and Convertibles
D?
PART VI: WORKING CAPITAL MANAGEMENT
Chapter 21: Supply Chain and Working Capital Management
Chapter 22: Short-Term Financial Management
PART VII: SPECIAL TOPICS
, Chapter 23: Derivatives and Hedging
Chapter 24: Enterprise Risk Management
Chapter 25: Bankruptcy, Reorganization, and Liquidation
Chapter 26: Mergers, LBOs, Divestitures, and Holding Companies
ST
Chapter 27: Multinational Financial Management
Chapter 28: Ethics, Economics, and Financial Management
Chapter 29: Asset-Backed Securities
Chapter 30: Pension Plan Management
Chapter 31: Financial Management in Not-for-Profit Businesses
UV
IA
_A
PP
RO
VE
D?
, Chapter 1
ST
An Overview of Financial Management and
The Financial Environment
ANSWERS TO BEGINNING-OF-CHAPTER QUESTIONS
UV
1-1 The primary goal is assumed to be shareholder wealth maximization, which translates to
stock price maximization. That, in turn, means maximizing the PV of future free cash
flows.
Maximizing shareholder wealth requires that the firm produce things that customers
want, and at the lowest cost consistent with high quality. It also means holding risk
down, which will result in a relatively low cost of capital, which is necessary to
IA
maximize the PV of a given cash flow stream.
This also gets into the issue of capital structure—how much debt should we use? The
more debt the firm uses, the lower its taxes, and the fewer shares outstanding, hence less
dilution of earnings. However, more debt means more risk. So, it’s necessary to
consider capital structure when attempting to maximize share prices.
_A
Dividend policy is also an issue—how much of its earnings should the firm pay out as
dividends? The answer to that question depends on a number of factors, including the
firm’s investment opportunities, its access to capital markets, its stockholders’ desires
(and their tax rates), and the kind of signals stockholders get from dividend actions.
Shareholder wealth maximization is partially consistent and partially inconsistent
with generally accepted societal goals. It is consistent because well-run firms produce
PP
good products at low costs, sell them at competitive prices, employ people, pay taxes, and
generally improve society. However, without constraints, firms would tend to form
monopolies and end up charging prices that are too high and not producing enough
output. They might also pollute the air and water, engage in unfair labor practices, and so
on. So, constraints (antitrust, labor, environmental, etc. laws) should be and are imposed
on businesses. That said, stock price maximization is consistent with a strong
RO
economy, economic progress, and ―the good life‖ for most citizens.
In standard introductory microeconomics courses, we assume that firms attempt to
maximize profits. In more advanced econ courses, the goal is broadened to value
maximizing, so finance and economics are indeed consistent.
As WorldCom, Enron, and other corporate scandals demonstrated very clearly,
managers do not always have stockholders’ interests as a primary goal—some managers
have their own interests. This point is discussed further below.
VE
D?
1- 1
© 2022 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Intermediate Financial
Management, 14th Edition
ST
SOLUTIONS
UV
IA
MANUAL
_A
Eugene F. Brigham, Phillip R. Daves
PP
Comprehensive Solutions Manual for Instructors
RO
and Students
||| ||| || ||| || | || ||| | || ||| |
VE
9780357516669
© Eugene F. Brigham & Phillip R. Daves. All rights reserved.
D?
Reproduction or distribution without permission is prohibited.
© MEDGEEK
, TABLE OF CONTENTS
Solutions Manual – Intermediate Financial Management (14th Edition)
Authors: Eugene F. Brigham and Phillip R. Daves
ISBN: 9780357516669
ST
PART I: FUNDAMENTAL CONCEPTS
Chapter 1: An Overview of Financial Management and the Financial Environment
Chapter 2: Risk and Return: Part I
UV
Chapter 3: Risk and Return: Part II
Chapter 4: Bond Valuation
Chapter 5: Financial Statements, Cash Flow, and Taxes
Chapter 6: Analysis of Financial Statements
PART II: CORPORATE VALUATION
IA
Chapter 7: Stocks and Their Valuation
Chapter 8: Financial Planning and Forecasting Financial Statements
Chapter 9: Corporate Valuation and Value-Based Management
_A
PART III: PROJECT VALUATION AND CAPITAL BUDGETING
Chapter 10: The Cost of Capital
Chapter 11: The Basics of Capital Budgeting: Evaluating Cash Flows
PP
Chapter 12: Cash Flow Estimation and Risk Analysis
Chapter 13: Real Options
PART IV: STRATEGIC FINANCING DECISIONS
RO
Chapter 14: Distributions to Shareholders: Dividends and Repurchases
Chapter 15: Capital Structure Decisions: Part I
Chapter 16: Capital Structure Decisions: Part II
Chapter 17: Dynamic Capital Structures and Corporate Valuation
PART V: TACTICAL FINANCING DECISIONS
VE
Chapter 18: Initial Public Offerings, Investment Banking, and Financial Restructuring
Chapter 19: Lease Financing
Chapter 20: Hybrid Financing: Preferred Stock, Warrants, and Convertibles
D?
PART VI: WORKING CAPITAL MANAGEMENT
Chapter 21: Supply Chain and Working Capital Management
Chapter 22: Short-Term Financial Management
PART VII: SPECIAL TOPICS
, Chapter 23: Derivatives and Hedging
Chapter 24: Enterprise Risk Management
Chapter 25: Bankruptcy, Reorganization, and Liquidation
Chapter 26: Mergers, LBOs, Divestitures, and Holding Companies
ST
Chapter 27: Multinational Financial Management
Chapter 28: Ethics, Economics, and Financial Management
Chapter 29: Asset-Backed Securities
Chapter 30: Pension Plan Management
Chapter 31: Financial Management in Not-for-Profit Businesses
UV
IA
_A
PP
RO
VE
D?
, Chapter 1
ST
An Overview of Financial Management and
The Financial Environment
ANSWERS TO BEGINNING-OF-CHAPTER QUESTIONS
UV
1-1 The primary goal is assumed to be shareholder wealth maximization, which translates to
stock price maximization. That, in turn, means maximizing the PV of future free cash
flows.
Maximizing shareholder wealth requires that the firm produce things that customers
want, and at the lowest cost consistent with high quality. It also means holding risk
down, which will result in a relatively low cost of capital, which is necessary to
IA
maximize the PV of a given cash flow stream.
This also gets into the issue of capital structure—how much debt should we use? The
more debt the firm uses, the lower its taxes, and the fewer shares outstanding, hence less
dilution of earnings. However, more debt means more risk. So, it’s necessary to
consider capital structure when attempting to maximize share prices.
_A
Dividend policy is also an issue—how much of its earnings should the firm pay out as
dividends? The answer to that question depends on a number of factors, including the
firm’s investment opportunities, its access to capital markets, its stockholders’ desires
(and their tax rates), and the kind of signals stockholders get from dividend actions.
Shareholder wealth maximization is partially consistent and partially inconsistent
with generally accepted societal goals. It is consistent because well-run firms produce
PP
good products at low costs, sell them at competitive prices, employ people, pay taxes, and
generally improve society. However, without constraints, firms would tend to form
monopolies and end up charging prices that are too high and not producing enough
output. They might also pollute the air and water, engage in unfair labor practices, and so
on. So, constraints (antitrust, labor, environmental, etc. laws) should be and are imposed
on businesses. That said, stock price maximization is consistent with a strong
RO
economy, economic progress, and ―the good life‖ for most citizens.
In standard introductory microeconomics courses, we assume that firms attempt to
maximize profits. In more advanced econ courses, the goal is broadened to value
maximizing, so finance and economics are indeed consistent.
As WorldCom, Enron, and other corporate scandals demonstrated very clearly,
managers do not always have stockholders’ interests as a primary goal—some managers
have their own interests. This point is discussed further below.
VE
D?
1- 1
© 2022 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
