Complete Solutions Manual for Essentials of Corporate Finance, 11th Edition by Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan ; ISBN13: 9781264101573. Full Chapters included Chapter 1 to 18. Excel Master Solutions, Case Solutions included.
Chapter 1: Introduction to Financial Managem...
Essentials of Corporate Finance
11th Edition
by Stephen A. Ross
Complete Chapter Solutions Manual
are included (Ch 1 to 18)
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** Critical Thinkings Q & Ans.
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, Solutions Manual
Essentials of Corporate Finance
Ross, Westerfield, and Jordan
11th edition
, CHAPTER 1
INTRODUCTION TO CORPORATE
FINANCE
Answers to Concepts Review and Critical Thinking Questions
1. Capital budgeting (deciding on whether to expand a manufacturing plant), capital structure (deciding
whether to issue new equity and use the proceeds to retire outstanding debt), and working capital
management (modifying the firm’s credit collection policy with its customers).
2. Disadvantages: unlimited liability, limited life, difficulty in transferring ownership, difficulty in
raising capital funds. Some advantages: simpler, less regulation, the owners are also the managers,
sometimes personal tax rates are better than corporate tax rates.
3. The primary disadvantage of the corporate form is the double taxation to shareholders of distributed
earnings and dividends. Some advantages include: limited liability, ease of transferability, ability to
raise capital, and unlimited life.
4. The treasurer’s office and the controller’s office are the two primary organizational groups that report
directly to the chief financial officer. The controller’s office handles cost and financial accounting, tax
management, and management information systems. The treasurer’s office is responsible for cash and
credit management, capital budgeting, and financial planning. Therefore, the study of corporate
finance is concentrated within the functions of the treasurer’s office.
5. To maximize the current market value (share price) of the equity of the firm (whether it’s publicly
traded or not).
6. In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect
the directors of the corporation, who in turn appoint the firm’s management. This separation of
ownership from control in the corporate form of organization is what causes agency problems to exist.
Management may act in its own or someone else’s best interests, rather than those of the shareholders.
If such events occur, they may contradict the goal of maximizing the share price of the equity of the
firm.
7. A primary market transaction.
8. In auction markets like the NYSE, brokers and agents meet at a physical location (the exchange) to
buy and sell their assets. Dealer markets like NASDAQ represent dealers operating in dispersed locales
who buy and sell assets themselves, usually communicating with other dealers electronically or
literally over the counter.
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