Fundamentals of Corporate Finance 4th Edition Parrino Solution Manual
Solution Manual for Fundamentals of Corporate Finance 4th Edition by Robert Parrino, David S. Kidwell, Thomas Bates, Stuart L. Gillan, ISBN: 1119371430, ISBN: 9781119371434
TABLE OF CONTENTS
PART 1: INTRODUCTION
1. The Financial Manager and the Firm
PART 2: FOUNDATIONS
2. The Financial System and the Level of Interest Rates
3. Financial Statements, Cash Flows, and Taxes
4. Analyzing Financial Statements
PART 3: VALUATION OF FUTURE CSAH FLOWS AND RISK
5. The Time Value of Money
6. Discounted Cash Flows and Valuation
7. Risk and Return
8. Bond Valuation and the Structure of Interest Rates
9. Stock Valuation
PART 4: CAPITAL BUDGETING DECISIONS
10. The Fundamentals of Capital Budgeting
11. Cash Flows and Capital Budgeting
12. Evaluating Project Economics
13. The Cost of Capital
PART 5: WORKING CAPITAL MANAGEMENT AND FINANCING DECISIONS
14. Working Capital Management
15. How Firms Raise Capital
16. Capital Structure Policy
17. Dividends, Stock Repurchases and Payout Policy
PART 6 BUSINESS FORMATION, VALUATION, AND FINANCIAL PLANNING
18. Business Formation, Growth, and Valuation
19. Financial Planning and Managing Growth
PART 7 OPTIONS IN CORPORATE FINANCE AND INTERNATIONAL DECISIONS
20. Options and Corporate Finance
21. International Financial Management
Chapter 1
The Financial Manager and the Firm
Before You Go On Questions and Answers
Section 1.1
1. What are the three most basic types of financial decisions managers must make?
The three most basic decisions each business must make are the capital budgeting decision, the financing decision, and the working capital management decision. These decisions determine which productive assets to buy, how to pay for or finance these purchases, and how to manage the day-to-day financial matters so the company can pay its bills.
2. Explain why you would make an investment if the value of the expected cash flows exceeds the cost of the project.
You would accept an investment project whose cash flows exceed the cost of the project because such projects will increase the value of the firm, making the owners wealthier. Most people start a business to increase their wealth. Remember that the cost of capital (time value of money) will affect the decision about whether to invest.
3. Why are capital budgeting decisions among the most important decisions in the life of a firm?
The capital budgeting decisions are considered the most important in the life of the firm because these decisions determine which productive assets the firm purchases and these assets generate most of the firm’s cash flows. Furthermore, capital budgeting decisions are long-term decisions and if you make a mistake in selecting a productive asset, you are stuck with the decision for a long time.
Section 1.2
1. Why are many businesses operated as sole proprietorships or partnerships?
Many businesses elect to operate as sole proprietorships or partnerships because of the small operating scale and capital base of their firms. Both of these forms of business organization are fairly easy to start and impose few regulations on the owners.
