Finance for Executives Managing
for Value Creation, 8th Edition by
Gabriel Hawawini
Complete Chapter Solutions Manual
are included (Ch 1 to 19)
** Immediate Download
** Swift Response
** All Chapters included
,Table of Contents are given below
Chapter 1: Financial Management and Value Creation: An Overview
Chapter 2: The Time Value of Money
Chapter 3: The Time Value of Money
Chapter 4: Interpreting Financial Statements
Chapter 5: Analyzing Operational Efficiency and Liquidity
Chapter 6: Analyzing Profitability, Risk, and Growth
Chapter 7: Using the Net Present Value Rule to Make Value-Creating Investment Decisions
Chapter 8: Alternatives to the Net Present Value Rule
Chapter 9: Identifying and Estimating a Project’s Cash Flows
Chapter 10: Valuing Bonds and Stocks
Chapter 11: Raising Capital and Paying Out Cash
Chapter 12: Estimating the Cost of Capital
Chapter 13: Designing a Capital Structure
Chapter 14: Valuing and Acquiring a Business
Chapter 15: Managing Corporate Risk
Chapter 16: Understanding Forward, Futures, and Option Contracts and Their Contribution to
Corporate Finance
Chapter 17: Making International Business Decisions
Chapter 18: Sustainability and Corporate Finance
Chapter 19: Managing for Value Creation
,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that
all chapters are included in this document. (Complete Chapters included Ch19-2)
Chapter 19
Answers to Review Problems
Finance for Executives – 8th Edition
1. Understanding market value added and economic value added
a.
The firm with the highest market value added, which is not necessarily the one with the
highest market value, is the one that has created the most value for its shareholders.
b.
Positive MVA means that the present value of the future stream of EVAs is positive. This
does not necessarily imply that current ROIC exceeds the firm’s WACC.
c.
Growth will increase a firm’s MVA only if expected ROICs exceed the firm’s WACC. If
this is not the case, growth will destroy value.
d.
Not necessarily so. Positive MVA means that the present value of the future stream of
EVAs is positive, not necessarily this year.
e.
Higher ROIC is only half the story. ROIC must exceed the WACC in order to create value.
A business will still create value if its ROIC falls, as long as ROIC remains above the
WACC.
, 2. Value drivers
The following tree shows the value drivers and their relationship to value creation
measured by EVA.
Drivers related to the management of operations
1. Self-sustainable growth
2. Sales growth
3. Operating margin
4. Amount of working capital requirement
Strategic value drivers
1. Ability to raise equity
2. Tax management
3. Amount of cash and fixed assets
4. Financial structure
SELF-SUSTAINABLE GROWTH
ABILITY TO RAISE EQUITY
SALES GROWTH
OPERATING MARGIN
EFFECTIVE TAX AFTER-TAX
OPERATING
MARGIN
minus EVA
CASH
WORKING CAPITAL
CHARGE FOR
NET FIXED ASSETS CAPITAL
EMPLOYED
INVESTED CAPITAL
AFTER-TAX COST OF DEBT WEIGHTED AVERAGE
COST OF CAPITAL
PROPORTION OF DEBT
COST OF EQUITY
PROPORTION OF EQUITY
for Value Creation, 8th Edition by
Gabriel Hawawini
Complete Chapter Solutions Manual
are included (Ch 1 to 19)
** Immediate Download
** Swift Response
** All Chapters included
,Table of Contents are given below
Chapter 1: Financial Management and Value Creation: An Overview
Chapter 2: The Time Value of Money
Chapter 3: The Time Value of Money
Chapter 4: Interpreting Financial Statements
Chapter 5: Analyzing Operational Efficiency and Liquidity
Chapter 6: Analyzing Profitability, Risk, and Growth
Chapter 7: Using the Net Present Value Rule to Make Value-Creating Investment Decisions
Chapter 8: Alternatives to the Net Present Value Rule
Chapter 9: Identifying and Estimating a Project’s Cash Flows
Chapter 10: Valuing Bonds and Stocks
Chapter 11: Raising Capital and Paying Out Cash
Chapter 12: Estimating the Cost of Capital
Chapter 13: Designing a Capital Structure
Chapter 14: Valuing and Acquiring a Business
Chapter 15: Managing Corporate Risk
Chapter 16: Understanding Forward, Futures, and Option Contracts and Their Contribution to
Corporate Finance
Chapter 17: Making International Business Decisions
Chapter 18: Sustainability and Corporate Finance
Chapter 19: Managing for Value Creation
,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that
all chapters are included in this document. (Complete Chapters included Ch19-2)
Chapter 19
Answers to Review Problems
Finance for Executives – 8th Edition
1. Understanding market value added and economic value added
a.
The firm with the highest market value added, which is not necessarily the one with the
highest market value, is the one that has created the most value for its shareholders.
b.
Positive MVA means that the present value of the future stream of EVAs is positive. This
does not necessarily imply that current ROIC exceeds the firm’s WACC.
c.
Growth will increase a firm’s MVA only if expected ROICs exceed the firm’s WACC. If
this is not the case, growth will destroy value.
d.
Not necessarily so. Positive MVA means that the present value of the future stream of
EVAs is positive, not necessarily this year.
e.
Higher ROIC is only half the story. ROIC must exceed the WACC in order to create value.
A business will still create value if its ROIC falls, as long as ROIC remains above the
WACC.
, 2. Value drivers
The following tree shows the value drivers and their relationship to value creation
measured by EVA.
Drivers related to the management of operations
1. Self-sustainable growth
2. Sales growth
3. Operating margin
4. Amount of working capital requirement
Strategic value drivers
1. Ability to raise equity
2. Tax management
3. Amount of cash and fixed assets
4. Financial structure
SELF-SUSTAINABLE GROWTH
ABILITY TO RAISE EQUITY
SALES GROWTH
OPERATING MARGIN
EFFECTIVE TAX AFTER-TAX
OPERATING
MARGIN
minus EVA
CASH
WORKING CAPITAL
CHARGE FOR
NET FIXED ASSETS CAPITAL
EMPLOYED
INVESTED CAPITAL
AFTER-TAX COST OF DEBT WEIGHTED AVERAGE
COST OF CAPITAL
PROPORTION OF DEBT
COST OF EQUITY
PROPORTION OF EQUITY
