Parrino et al. Fundamentals of Corporate Finance, 5th edition
Solutions Manual
Solution Manual for Fundamentals of Corporate Finance, 5th Edition by Robert Parrino, David Kidwell, Bates & Gillan. ISBN 9781119795438
Chapter 1-21 With Appendix
Chapter 1 The Financial Manager and the Firm Before You Go On Questions and Answers
Section 1.1 1. What are the three basic types of financial decisions managers must make? The three basic decisions each business must make are the capital budgeting decision, the financing decision, and the working capital management decision. These decisions determine which productive assets to buy, how to pay for or finance these purchases, and how to manage the day-to-day financial matters so the company can pay its bills.
2. Explain why you would make an investment if the value of the expected cash flows exceeds the cost of the project. You would accept an investment project whose cash flows exceed the cost of the project because such projects will increase the value of the firm, making the owners wealthier. Most people start a business to increase their wealth. Remember that the cost of capital (time value of money) will affect the decision about whether to invest.
3. Why are capital budgeting decisions among the most important decisions in the life of a firm? The capital budgeting decisions are considered the most important in the life of the firm because these decisions determine which productive assets the firm purchases, and which assets generate most of the firm’s cash flows. Furthermore, capital budgeting decisions are
Copyright © 2022 John Wiley & Sons, Inc.
SM 4-1