Problem Set 1- Introduction to Managerial Finance.docx -...

Matthew Milewski
Problem Set 1: Introduction to Managerial Finance
FIN 504
Complete the following problems from Chapters 1 and 2 in Principles of Managerial Finance :
1. The Role of Managerial Finance: P1-1; P1-3; P1-4; P1-5
2. The Financial Markets: E2-4; P2-1; P2-2; P2-4
Chapter 1
P1-1
Liability comparisons Merideth Harper has invested $25,000 in Southwest Development
Company. The firm has recently declared bankruptcy and has $60,000 in
unpaid debts. Explain the nature of payments, if any, by Merideth in each of the
following situations.
a. Southwest Development Company is a sole proprietorship owned by
Ms. Harper.
b. Southwest Development Company is a 50–50 partnership of Merideth Harper
and Christopher Black.
c. Southwest Development Company is a corporation.
P1-3
Cash flows It is typical for Jane to plan, monitor, and assess her financial position
using cash flows over a given period, typically a month. Jane has a savings account,
and her bank loans money at 6% per year while it offers short-term investment rates
of 5%. Jane’s cash flows during August were as follows:
a. Determine Jane’s total cash inflows and cash outflows.

b. Determine the net cash flow for the month of August.
c. If there is a shortage, what are a few options open to Jane?