Solution Manual For Corporate Finance 13TH Edition By Stephen Ross Randolph Westerfield Jeffrey Jaffe - Complete All Chapters.

Solution Manual For Corporate Finance 13TH Edition By Stephen Ross Randolph Westerfield Jeffrey Jaffe - Complete All Chapters. Chapter 1: Introduction to Corporate Finance 1.2 Key Concepts and Skills 1.3 Chapter Outline 1.4 1.1 What Is Corporate Finance? 1.5 The Balance Sheet Model of the Firm 1.6 The Capital Budgeting Decision 1.7 The Capital Structure Decision 1.8 Short-Term Asset Management 1.9 The Financial Manager 1.10 Hypothetical Organization Chart 1.11 1.2 The Corporate Firm 1.12 Forms of Business Organization 1.13 A Comparison of Corporations and Partnerships 1.14 1.3 The Importance of Cash Flow 1.15 1.4 The Goal of Financial Management 1.16 1.5 The Agency Problem and Control of the Corporation 1.17 Management Goals 1.18 Managing Managers 1.19 1.6 Regulation 1.20 Quick Quiz 1.21 End of Main Content 1.22 Accessibility Content: Text Alternatives for Images 1.23 Short-Term Asset Management Text Alternative 1.24 Hypothetical Organization Chart Text Alternative 1.25 1.3 The Importance of Cash Flows Text Alternative CHAPTER WEB SITES Section Web Address 1.1 CFO: 1.2 ―Launch your Business‖: 1.4 Business Ethics magazine: 1.6 Sarbanes-Oxley survey: CHAPTER ORGANIZATION 1.1 What Is Corporate Finance? The Balance Sheet Model of the Firm Chapter 01 - Introduction to Corporate Finance 1-2 . The Financial Manager 1.2 The Corporate Firm The Sole Proprietorship The Partnership The Corporation A Corporation by Another Name… 1.3 The Importance of Cash Flows Identification of Cash Flows Timing of Cash Flows Risk of Cash Flows 1.4 The Goal of Financial Management Possible Goals The Goal of the Financial Manager A More General Goal 1.5 The Agency Problem and Control of the Corporation Agency Relationships Management Goals Do Managers Act in the Stockholders‘ Interests? Stakeholders 1.6 Regulation The Securities Act of 1933 and the Securities Exchange Act of 1934 Sarbanes-Oxley ANNOTATED CHAPTER OUTLINE Slide 1.1 Chapter 1: Introduction to Corporate Finance Slide 1.2 Key Concepts and Skills Slide 1.3 Chapter Outline PowerPoint Note: If there is a slide that you do not wish to include in your presentation, choose to hide the slide under the “Slide Show” menu, instead of deleting it. If you decide that you would like to use that slide at a later date, you can just unhide it. PowerPoint Note: Be sure to check out the notes that accompany some of the slides on the “Notes Pages” within PowerPoint. Chapter 01 - Introduction to Corporate Finance 1-3 . 1.1. What is Corporate Finance? Slide 1.4 1.1 What Is Corporate Finance? Corporate finance addresses several important questions: 1. In what long-term assets should the firm invest? (Capital budgeting) 2. How should the firm raise funds for required capital expenditures? (Capital structure) 3. How should short-term operating cash flows be managed? (Net working capital) A. The Balance Sheet Model of the Firm Slide 1.5 The Balance Sheet Model of the Firm The Balance Sheet presents a picture of the firm at a point in time, and it provides a model by which to address the three basic questions that corporate finance managers must answer. Slide 1.6 The Capital Budgeting Decision 1. Long-term investment decisions determine the level of fixed assets. Slide 1.7 The Capital Structure Decision 2. Financing policy determines the liabilities and equity side of the balance sheet. Slide 1.8 Short-Term Asset Management 3. Short-term asset management choices (e.g., conservative versus aggressive) affect the level of net working capital. B. The Financial Manager Slide 1.9 The Financial Manager Chapter 01 - Introduction to Corporate Finance 1-4 . Financial Managers should make decisions that increase firm value, which effectively involves three primary categories of financial decisions. 1. Capital budgeting – process of planning and managing a firm‘s investments in fixed assets. The key concerns are the size, timing, and risk of future cash flows. 2. Capital structure – mix of debt (borrowing) and equity (ownership interest) used by a firm. What are the least expensive sources of funds? Is there an optimal mix of debt and equity? When and where should the firm raise funds? 3. Working capital management – managing short-term assets and liabilities. How much inventory should the firm carry? What credit policy is best? Where will we get our shortterm loans? These broad categories, however, can be summarized with two concrete responsibilities: a. Selecting value creating projects b. Making smart financing decisions Slide 1.10 Hypothetical Organization Chart The Chief Financial Officer (CFO) or Vice-President of Finance coordinates the activities of the treasurer and the controller. The controller handles cost and financial accounting, taxes, and information systems (i.e., data processing). The treasurer handles cash and credit management, financial planning, and capital expenditures. Video Note: The Role of the Chief Financial Officer - This video looks at the changing role of the CFO. 1.2. The Corporate Firm Slide 1.11 1.2 The Corporate Firm Chapter 01 - Introduction to Corporate Finance 1-5 . Although many forms of business organizations exist, the corporate form is the standard by which we address most large scale problems. This approach, however, does not imply that the methods we develop are inappropriate for other business types. Slide 1.12 Forms of Business Organization A. The Sole Proprietorship – A business owned by one person Advantages include ease of start-up, lower regulation, single owner keeps all the profits, and taxed once as personal income. Disadvantages include limited life, limited equity capital, unlimited liability and low liquidity. B. The Partnership – A business with multiple owners, but not incorporated General partnership – all partners share in gains or losses; all have unlimited liability for all partnership debts. Limited partnership – one or more general partners run the business and have unlimited liability. A limited partner‘s liability is limited to his or her contribution to the partnership, and they cannot help in running the business. Advantages include more equity capital than is available to a sole proprietorship, relatively easy to start (although written agreements are essential), and income taxed once at personal tax rate. Disadvantages include unlimited liability for general partners, dissolution of partnership when one partner dies or wishes to sell, low liquidity. C. The Corporation – A distinct legal entity composed of one or more owners Slide 1.13 A Comparison of Corporations and Partnerships Chapter 01 - Introduction to Corporate Finance 1-6 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Corporations account for the largest volume of business (in dollar terms) in the U.S. Advantages include limited liability, unlimited life, separation of ownership and management (ability to own shares in several companies without having to work for all of them), liquidity, and ease of raising capital. Disadvantages include separation of ownership and management (agency costs) and double taxation. Recent tax laws reduce the level of double taxation, but it has not been eliminated. D. A Corporation by Another Name… Corporations exist around the world under a variety of names. Table 1.2 lists several well-known companies, along with the type of company in the original language. Lecture Tip: Although the corporate form of organization has the advantage of limited liability, it has the disadvantage of double taxation. A small business of 75 or fewer stockholders is allowed by the IRS to form an S Corporation. The S Corp. organizational form provides limited liability but allows pretax corporate profits to be distributed on a pro rata basis to individual shareholders, who are only obligated to pay personal income taxes on the income. A similar form of organization is the limited liability corporation, or LLC. LLC‟s are a hybrid form of organization that falls between partnerships and corporations. Investors in LLC‟s have the protection of limited liability, but they are taxed like partnerships. LLC‟s first appeared in Wyoming in 1977 and have skyrocketed since. They are especially beneficial for small- and medium-sized businesses such as law firms or medical practices. 1.3. The Importance of Cash Flows Slide 1.14 1.3 The Importance of Cash Flow A. Identification of Cash Flows To create value, the firm must generate more cash than it uses. Stated differently, the firm must generate sufficient cash flow, after taxes, to compensate investors for providing the firm with financing. B. Timing of Cash Flows Chapter 01 - Introduction to Corporate Finance 1-7 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Additionally, the value of the cash flows generated by the firm must be analyzed in light of both the timing of the cash flows, as well as … C. Risk of Cash Flows …the risk of the cash flows. Lecture Tip: It is an important reminder for students to reiterate that Net Income and Cash Flow can be extremely different values for various reasons, some of which are non-cash expenses (e.g., depreciation, amortization), revenue recognition principles, and credit policies. 1.4. The Goal of Financial Management Slide 1.15 1.4 The Goal of Financial Management A. Possible Goals Profit Maximization – this is an imprecise goal. Do we want to maximize long-run or short-run profits? Do we want to maximize accounting profits or some measure of cash flow? Because of the different possible interpretations, this should not be the main goal of the firm. Other possible goals that students might suggest include minimizing costs or maximizing market share. Both have potential problems. We can minimize costs by not purchasing new equipment today, but that may damage the long-run viability of the firm. Many companies got into trouble in the late 1990‘s because their goal was to maximize market share. They raised substantial amounts of capital in IPO‘s and then used the money on advertising to increase the number of ―hits‖ on their site. However, many firms failed to translate those ―hits‖ into enough revenue to meet expenses, and they quickly ran out of capital. The stockholders of these firms were not happy. Stock prices fell dramatically, and it became difficult for these firms to raise funds. In fact, many of these companies have gone out of business. B. The Goal of the Financial Manager Chapter 01 - Introduction to Corporate Finance 1-8 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education