【正文】 n stock + Retained earnings Solving for this equation for equity gives us: Common stock = $4,176,000 – 1,934,000 – 1,760,300 = $481,700 17. The market value of shareholders‘ equity cannot be negative. A negative market value in this case would imply that the pany would pay you to own the stock. The market value of shareholders‘ equity can be stated as: Shareholders‘ equity = Max [(TA – TL), 0]. So, if TA is $8,400, equity is equal to $1,100, and if TA is $6,700, equity is equal to $0. We should note here that the book value of shareholders‘ equity can be negative. B10 SOLUTIONS 18. a. Taxes Growth = ($50,000) + ($25,000) + ($13,000) = $18,170 Taxes Ine = ($50,000) + ($25,000) + ($25,000) + ($235,000) + ($8,465,000) = $2,992,000 b. Each firm has a marginal tax rate of 34% on the next $10,000 of taxable ine, despite their different average tax rates, so both firms will pay an additional $3,400 in taxes. 19. Ine Statement Sales $730,000 COGS 580,000 Aamp。 equity $53,409 B14 SOLUTIONS 2020 Ine Statement 2020 Ine Statement Sales $7, Sales $8, COGS 2, COGS 2, Other expenses Other expenses Depreciation 1, Depreciation 1, EBIT $3, EBIT $3, Interest Interest EBT $2, EBT $2, Taxes (34%) Taxes (34%) 1, Net ine $1, Net ine $1, Dividends $ Dividends $1, Additions to RE Additions to RE 26. OCF = EBIT + Depreciation – Taxes = $3,543 + 1,085 – 1, = $3, Change in NWC = NWCend – NWCbeg = (CA – CL) end – (CA – CL) beg = ($19,488 – 4,742) – ($17,740 – 4,716) = $1,722 Net capital spending = NFAend – NFAbeg + Depreciation = $33,921 – 31,805 + 1,085 = $3,201 Cash flow from assets = OCF – Change in NWC – Net capital spending = $3, – 1,722 – 3,201 = –$1, Cash flow to creditors = Interest – Net new LTD Net new LTD = LTDend – LTDbeg Cash flow to creditors = $579 – ($15,435 – 12,700) = –$2,156 Net new equity = Common stockend – Common stockbeg Common stock + Retained earnings = Total owners‘ equity Net new equity = (OE – RE) end – (OE – RE) beg = OEend – OEbeg + REbeg – REend REend = REbeg + Additions to RE08 ? Net new equity = OEend – OEbeg + REbeg – (REbeg + Additions to RE08) = OEend – OEbeg – Additions to RE Net new equity = $33,232 – 32,129 – = $ CFS = Dividends – Net new equity CFS = $1,011 – = $ As a check, cash flow from assets is –$1,. CFA = Cash flow from creditors + Cash flow to stockholders CFA = –$2,156 + = –$1, CHAPTER 3 WORKING WITH FINANCIAL STATEMENTS Answers to Concepts Review and Critical Thinking Questions 1. a. If inventory is purchased with cash, then there is no change in the current ratio. If inventory is purchased on credit, then there is a decrease in the current ratio if it was initially greater than . b. Reducing accounts payable with cash increases the current ratio if it was initially greater than . c. Reducing shortterm debt with cash increases the current ratio if it was initially greater than . d. As longterm debt approaches maturity, the principal repayment and the remaining interest expense bee current liabilities. Thus, if debt is paid off with cash, the current ratio increases if it was initially greater than . If the debt has not yet bee a current liability, then paying it off will reduce the current ratio since current liabilities are not affected. e. Reduction of accounts receivables and an increase in cash leaves the current ratio unchanged. f. Inventory sold at cost reduces inventory and raises cash, so the current ratio is unchanged. g. Inventory sold for a profit raises cash in excess of the inventory recorded at cost, so the current ratio increases. 2. The firm has increased inventory relative to other current assets。 X($100,000) = $68,000 – 22,250 X = $45,750 / $100,000 X = % 25. Balance sheet as of Dec. 31, 2020 Cash $3,792 Accounts payable $3,984 Accounts receivable 5,021 Notes payable 732 Inventory 8,927 Current liabilities $4,716 Current assets $17,740 Longterm debt $12,700 Net fixed assets $31,805 Owners39。 OE $28,900 We know that total liabilities and owner‘s equity (TL amp。 Solutions Manual Fundamentals of Corporate Finance 9th edition Ross, Westerfield, and Jordan Updated 12202020 CHAPTER 1 INTRODUCTION TO CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. Capital budgeting (deciding 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, hard to raise 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. In response to SarbanesOxley, small firms have elected to go dark because of the costs of pliance. The costs to ply with Sarbox can be several million dollars, which can be a large percentage of a small firms profits. A major cost of going dark is less access to capital. Since the firm is no longer publicly traded, it can no longer raise money in the public market. Although the pany will still have access to bank loans and the private equity ma