Solutions to Problems: Chapter 5
P5-1.
Using a time line
LG 1; Basic
a, b, and c
d. Financial managers rely more on present value than future value because they typically make
decisions before the start of a project, at time zero, as does the present valu

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 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 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

Solutions to Problems: Chapter 7
P7-1.
Authorized and available shares
LG 2; Basic
a.
b.
c.
P7-2.
Preferred dividends
LG 2; Intermediate
a.
b.
c.
P7-3.
$8.80 per year or $2.20 per quarter.
$2.20. For a noncumulative preferred only the latest dividend has

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 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

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

PROBLEM
Agri-Magic Corporation grows corn in rural areas of the South. Agri-Magic's costs per bushel
of corn (based on an average yield of 130 bushels per acre) follow:
Direct material
Direct labor
Variable overhead
Fixed overhead
Variable selling costs
F