NEW Corporate Finance Online 1st Edition Eakins Solutions Manual

NEW Corporate Finance Online 1st Edition Eakins Solutions Manual

Product details:

• ISBN-10 ‏ : ‎ 9780132828949
• ISBN-13 ‏ : ‎ 978-0132828949
• Author: Stan Eakins

A fully digital choice for learning about Corporate Finance, Corporate Finance Online (CFO) offers core content while enabling readers to interact with the material like never before.

CFO provides a new kind of learning experience: interactive, supportive, engaging. Its wealth of fully integrated videos, animations, and solution tools brings finance to life, fostering deep interest in the subject.

Table contents:

Pa r t I
Overview 1 
Chapter 1
 Introduction to Corporate Finance 2 Executive Summary 2
1.1 What Is Corporate Finance?
3 
Generally Accepted Accounting Principles 25
Noncash Items 25 Time and Costs 25 
2.3 Net Working Capital 
26
2.4 Financial Cash Flow 
26
2.5 The Accounting Statement of Cash Flows
29 
The Balance-Sheet Model of the Firm 3 Capital Structure 4 The Financial Manager 
5 
1.2 Corporate Securities as Contingent Claims on Total Firm Value 
Cash Flow from Operating Activities 29 Cash Flow from Investing Activities 30 
Cash Flow from 
Financing Activities 30 
2.6 Summary and Conclusions 
31
Appendix 2A Financial Statement Analysis
34
9Appendix 2B U.S. Federal Tax Rates
42
1.3 The Corporate Firm 
10
The Sole Proprietorship 10 The Partnership 10 
Chapter 3
Financial Planning and Growth
 The Corporation 11 Case Study: Making the Decision to Become a 
Corporation:The 
Case of PLM International, Inc. 12 
44
Executive Summary 44
3.1 What Is Financial Planning?
44
3.2 A Financial-Planning Model: The Ingredients
45 
1.4 Goals of the Corporate Firm
14
Agency Costs and the Set-of-Contracts Perspective 14 Managerial Goals 15 
Separation of Ownership 
and Control 15 Do Shareholders Control Managerial Behavior? 16 
1.5 Financial Markets 
17 
3.3 The Percentage Sales Method
47
The Income Statement 48 The Balance Sheet 49 
3.4 What Determines Growth? 
51
3.5 Some Caveats of Financial-Planning Models
54
The Primary Market: New Issues 17 
3.6 Summary and Conclusions
55
Secondary Markets 
18
Exchange Trading of Listed Stocks 18 Listing 18 
1.6 Outline of the Text 
19 
Chapter 2
Accounting Statements and Cash Flow 21 
Executive Summary 21
2.1 The Balance Sheet
21 
Pa r t II
Value and Capital Budgeting 59 
Chapter 4
Net Present Value 60 
Executive Summary 60
4.1 The One-Period Case
60 
The Dividend Growth Model 123 The NPVGO Model 123 Summation 125 
5.8 Price-Earnings Ratio 
125 
4.2 The Multiperiod Case 
63
Future Value and Compounding 63 The Power of Compounding: A Digression
67
Present Value and Discounting 68 The Algebraic Formula 71 
5.9 Stock Market Reporting
127
4.3 Compounding Periods
 72 Distinction between Stated Annual Interest 
Rate and Effective 
Annual Interest Rate 73 Compounding over Many Years 73 Continuous Compounding 
(Advanced) 74 
4.4 Simplifications 
5.10 Summary and Conclusions
128
Appendix 5A The Term Structure of Interest Rates, Spot Rates, and Yield to 
Maturity 134 
Chapter 6
Some Alternative Investment Rules 144 
Executive Summary 144
6.1 Why Use Net Present Value?
144 
 
75
Perpetuity 75 Growing Perpetuity 77 Annuity 79 Growing Annuity 83 Case Study: 
Making the 
Decision to Convert Lottery Prize Winnings:The Case of the Singer Asset Finance 
Company 85
4.5 What Is a Firm Worth?
86 
6.2 The Payback Period Method
146
Defining the Rule 146 Problems with the Payback Method 147 Managerial 
Perspective 
148 Summary of 
Payback 148
4.6 Summary and Conclusions
87 
6.3 The Discounted Payback Period Method
149
Appendix 4A Net Present Value: First Principles of Finance 94 
Chapter 5
How to Value Bonds and Stocks 106 
Executive Summary 106
5.1 Definition and Example of a Bond
106 
6.4 The Average Accounting Return Method
149
Defining the Rule 149 Analyzing the Average Accounting Return Method 151 
6.5 The Internal Rate of Return 
152
6.6 Problems with the IRR Approach
 154 Definition of Independent and Mutually 
Exclusive Projects
 154 Two General Problems Affecting Both 
Independent and Mutually 
Exclusive Projects 154 Problems Specific to Mutually Exclusive Projects 159 
Redeeming Qualities of IRR 
163 A Test 163 
6.7 The Profitability Index 
5.2 How to Value Bonds 
106
Pure Discount Bonds 106 Level-Coupon Bonds 107 Consols 109 
5.3 Bond Concepts 
110164 
Interest Rates and Bond Prices 110 Yield to Maturity 110 Bond Market Reporting 
111 
Calculation of Profitability Index 164 
6.8 The Practice of Capital Budgeting 
166
5.4 The Present Value of Common Stocks
112 
6.9 Summary and Conclusions
168
Dividends versus Capital Gains 112 Valuation of Different Types of Stocks 113 
5.5 Estimates of Parameters in the Dividend-Discount Model 116 Where Does g 
Come From? 
Chapter 7
Net Present Value and Capital Budgeting 178 
Where Does r Come From? 118 
116Executive Summary 178
7.1 Incremental Cash Flows
 178 Cash Flows?Not Accounting Income 178 Sunk 
Costs 179 
Opportunity Costs 179 
A Healthy Sense of Skepticism 118 
5.6 Growth Opportunities 
119 Growth in Earnings and Dividends versus Growth Opportunities 121
Dividends or Earnings:Which to Discount? 122
The No-Dividend Firm 122 
5.7 The Dividend-Growth Model and the NPVGO Model (Advanced) 123 
Side Effects 179 Allocated Costs 180 
7.2 The Baldwin Company:An Example 
180
An Analysis of the Project 182
Which Set of Books? 184 A Note on Net Working Capital 185 Interest Expense 186 
7.3 The Boeing 777: A Real-World Example 
186 
9.6 Summary and Conclusions
249
Appendix 9A The Historical Market Risk Premium: The Very Long Run 253 
 
7.4 Inflation and Capital Budgeting
189 
Chapter 10
Return and Risk: The Capital-Asset-Pricing Model (CAPM) 255
Interest Rates and Inflation 189 Cash Flow and Inflation 191 Discounting: 
Nominal 
or Real? 191
7.5 Investments of Unequal Lives:The Equivalent Annual Cost Method
 193 The General Decision to Replace (Advanced) 
195 
Executive Summary 255 
10.1 Individual Securities 
255
10.2 Expected Return,Variance, and Covariance
256 
 
7.6 Summary and Conclusions 
197 
Expected Return and Variance 256 Covariance and Correlation 258 
20610.3 The Return and Risk for Portfolios 
261 
Minicases: Goodweek Tires, Inc.
I. Q. Inc. 
207 
The Example of Supertech and Slowpoke 261
 Jimmy?s Hot Dog Stand 208 Appendix 7A Depreciation 209 
The Expected Return on a Portfolio
 261 Variance and Standard Deviation of a 
Portfolio 262
 
10.4 The Efficient Set for Two Assets 
265 
Chapter 8
Risk Analysis, Real Options, and Capital Budgeting 211 
10.5 The Efficient Set for Many Securities
270
Variance and Standard Deviation in a Portfolio of Many Assets 271
 
10.6 Diversification:An Example 
272 
Executive Summary 211
8.1 Decision Trees 
Risk and the Sensible Investor 275 
21110.7 Riskless Borrowing and Lending 
276 
8.2 Sensitivity Analysis, Scenario Analysis, and Break-Even Analysis 213 
Sensitivity Analysis and Scenario Analysis 214 Break-Even Analysis 216 
8.3 Monte Carlo Simulation 
219 
The Optimal Portfolio 
278
10.8 Market Equilibrium
 280 Definition of the Market-Equilibrium 
Portfolio
 280 Definition of Risk When Investors Hold the 
Market Portfolio 281
8.4 Options 
223
The Option to Expand 223 The Option to Abandon 224 Timing Options 226 
8.5 Summary and Conclusions 
227 
The Formula for Beta 283 A Test 283 
10.9 Relationship between Risk and Expected Return (CAPM) 284
Expected Return on Market 284 Expected Return on Individual Security 284 
10.10 Summary and Conclusions 
287 
Pa r t III
Risk 233 
Chapter 9
Capital Market Theory: An Overview 234 
Executive Summary 234
9.1 Returns
235 
Appendix 10A Is Beta Dead?
295
Chapter 11
An Alternative View of Risk and Return: The Arbitrage Pricing Theory 297 
Dollar Returns 235 Percentage Returns 237 
9.2 Holding-Period Returns 
239 
Executive Summary 297 
11.1 Factor Models:Announcements, Surprises, and Expected Returns 298 
11.2 Risk: Systematic and Unsystematic 
299
9.3 Return Statistics 
244 
11.3 Systematic Risk and Betas
300
11.4 Portfolios and Factor Models
303 
9.4 Average Stock Returns and Risk-Free Returns 246 
9.5 Risk Statistics 
247 
Portfolios and Diversification 305 
11.5 Betas and Expected Returns 
307 
Variance 247 Normal Distribution and Its Implications for Standard Deviation 248 
The Linear Relationship 307 The Market Portfolio and the Single Factor 309
11.6 The Capital-Asset-Pricing Model and the Arbitrage Pricing Theory 310 
13.2 A Description of Efficient Capital Markets
351 
Differences in Pedagogy 310 Differences in Application 310 
11.7 Empirical Approaches to Asset Pricing 
311 
Foundations of Market Efficiency 352 
13.3 The Different Types of Efficiency 
354
The Weak Form 
355 
Empirical Models 311 Style Portfolios 313 
The Semistrong and Strong Forms 356 Some Common Misconceptions about the 
Efficient-Market 
Hypothesis 357 
13.4 The Evidence 
358 
11.8 Summary and Conclusions
313 
Chapter 12
Risk, Cost of Capital, and Capital Budgeting 
The Weak Form 
358
 318 
The Semistrong Form 360 The Strong Form 363 
13.5 The Behavioral Challenge to Market Efficiency 364 
13.6 Empirical Challenges to Market Efficiency 
366
Executive Summary 318 
12.1 The Cost of Equity Capital 
318 
13.7 Reviewing the Differences
370 
12.2 Estimation of Beta 
321 
Representativeness 371 Conservatism 371
13.8 Implications for Corporate Finance
371 
Real-World Betas 323 Stability of Beta 323 Using an Industry Beta 324 
1. Accounting Choices, Financial Choices, and Market Efficiency 372 
2. The Timing Decision373 
12.3 Determinants of Beta
326
3. Speculation and Efficient Markets 375 
Cyclicality of Revenues 326 Operating Leverage 327 Financial Leverage and Beta 
328 
12.4 Extensions of the Basic Model 
330 
4. Information in Market Prices 377
13.9 Summary and Conclusions
378

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