Chapter 4
Time Value of Money
Solutions to Problems
P4-1.
LG 1: Using a Time Line
Basic
(a), (b), and (c)
Compounding
Future
Value
$25,000
$3,000
$6,000
$6,000
$10,000
$8,000
$7,000
|>
0
1
2
3
4
5
6
End of Year
Present
Value
Discounting
(d) Financial mana
Chapter 2
Financial Statements and Analysis
Solutions to Problems
P2-1.
LG 1: Reviewing Basic Financial Statements
Basic
Income statement: In this one-year summary of the firms operations, Technica, Inc. showed a
net profit for 2006 and the ability to pay
Chapter 18
International Managerial Finance
Solutions to Problems
P18-1
LG 1: Tax Credits
Intermediate
MNCs receipt of dividends can be calculated as follows:
Subsidiary income before local taxes
Foreign income tax at 33%
Dividend available to be declared
Chapter 16
Hybrid and Derivative Securities
Solutions to Problems
P16-1. LG 2: Lease Cash Flows
Basic
Firm
Year
A
B
C
D
E
Lease Payment
(1)
Tax Benefit
(2)
14
114
18
125
110
$100,000
80,000
150,000
60,000
20,000
$40,000
32,000
60,000
24,000
8,000
P16-2. L
Chapter 15
Current Liabilities Management
Solutions to Problems
P15-1. LG 1: Payment Dates
Basic
(a)
(b)
(c)
(d)
December 25
December 30
January 9
January 30
P15-2. LG 1: Cost of Giving Up Cash Discount
Basic
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(0.02 0.98) (365 2
Chapter 14
Working Capital and Current Assets Management
Solutions to Problems
P14-1. LG 2: Cash Conversion Cycle
Basic
= Average age of inventories
+ Average collection period
= 90 days + 60 days
= 150 days
(a) Operating cycle (OC)
(b) Cash Conversion Cy
Chapter 11
The Cost of Capital
Solutions to Problems
P11-1. LG 1: Concept of Cost of Capital
Basic
(a) The firm is basing its decision on the cost to finance a particular project rather than the firms
combined cost of capital. This decision-making method
Chapter 10
Risk and Refinements in Capital Budgeting
Solutions to Problems
P10-1. LG 1: Recognizing Risk
Basic
(a) & (b)
Project
Risk
Reason
A
Low
The cash flows from the project can be easily determined
since this expenditure consists strictly of outflow
Chapter 9
Capital Budgeting Techniques
Solutions to Problems
Note to instructor: In most problems involving the internal rate of return calculation, a financial calculator
has been used.
P9-1.
LG 2: Payback Period
Basic
(a) $42,000 $7,000 = 6 years
(b) Th
Chapter 8
Capital Budgeting Cash Flows
Solutions to Problems
Note: The MACRS depreciation percentages used in the following problems appear in Chapter 3,
Table 3.2. The percentages are rounded to the nearest integer for ease in calculation.
For simplifica
Chapter 7
Stock Valuation
Solution to Problems
P7-1.
LG 2: Authorized and Available Shares
Basic
(a)
Maximum shares available for sale
Authorized shares
2,000,000
Less: Shares outstanding
1,400,000
Available shares
600,000
$48,000,000
= 800, 000 shares
(b
Chapter 6
Interest Rates and Bond Valuation
Solutions to Problems
P6-1.
LG 1: Interest Rate Fundamentals: The Real Rate of Return
Basic
Real rate of return = 5.5% 2.0% = 3.5%
P6-2.
LG 1: Real Rate of Interest
Intermediate
(a)
Supply and Demand Curve
Inter