Intermediate Financial Management (with Thomson One)

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INTERMEDIATE FINANCIAL MANAGEMENT 9E Eugene F. Brigham University of Florida Phillip R. Daves University of Tennessee
Page 4: VP/Editorial Director: Jack W. Calh
Page 8: iv • Preface Now it is time to mo
Page 12: vi • Preface harder questions in
Page 16: viii • Preface DESIGN OF THE BOOK
Page 20: x • Preface MAJOR CHANGES IN THE
Page 24: xii • Preface us from having to r
Page 28: xiv • Preface ACKNOWLEDGMENTS Tho
Page 32: xvi • Preface Jones, Manuel Jose,
Page 36: ief contents Preface iii Part 1 Fun
Page 40: contents Preface iii Part 1 Fundame
Page 44: Changes in Equilibrium Stock Prices
Page 48: Adjusting the Cost of Capital for R
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Capital Structure Theory 519 Modigl
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Chapter 20 Hybrid Financing: Prefer
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Risk Management 848 Fundamentals of
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partone Fundamental Concepts
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C H A P T E R 1 An Overview of Fina
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B E G I N N I N G - O F - C H A P T
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6 • Part 1 Fundamental Concepts a
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8 • Part 1 Fundamental Concepts m
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Self-Test Questions 10 • Part 1 F
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12 • Part 1 Fundamental Concepts
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See http://www.bloomberg .com and s
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To see current estimates of DRP, go
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PROBLEMS 28 • Part 1 Fundamental
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k. Would potential agency problems
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Self-Test Questions STAND-ALONE RIS
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Table 2-2 36 • Part 1 Fundamental
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For more discussion of probability
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THE TRADE-OFF BETWEEN RISK AND RETU
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Figure 2-4 _ r W (%) 25 15 0 10 Sto
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Figure 2-6 _ r W(%) 25 15 0 15 Stoc
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THE RELATIONSHIP BETWEEN RISK AND R
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Figure 2-10 Required Rate of Return
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Self-Test Question SUMMARY 64 • P
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Expected and Required Rates of Retu
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whereas Repo Men’s are expected t
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C H A P T E R 3 Risk and Return: Pa
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In Chapter 1, we told you that mana
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Self-Test Questions EFFICIENT PORTF
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Figure 3-2 Case I: ρ = 1.0 AB Case
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Self-Test Questions 100 • Part 1
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AN ALTERNATIVE THEORY OF RISK AND R
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PROBLEMS 3-1 Characteristic Line an
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To begin, briefly review the Chapte
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C H A P T E R 4 Bond Valuation The
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In Chapter 1, we told you that mana
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An excellent site for information o
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BOND VALUATION 120 • Part 1 Funda
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See IFM9 Ch04 Tool Kit.xls. Figure
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Self-Test Questions BOND YIELDS 126
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Self-Test Question 130 • Part 1 F
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See IFM9 Ch04 Tool Kit.xls for deta
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Table 4-2 138 • Part 1 Fundamenta
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See the Standard & Poor’s Web sit
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Self-Test Questions BOND MARKETS 14
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Self-Test Questions SUMMARY 144 •
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Bond Valuation; Financial Calculato
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SELECTED ADDITIONAL REFERENCES AND
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THE MARKET FOR COMMON STOCK Note th
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Figure 5-4 1,600 1,400 1,200 1,000
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Self-Test Questions PREFERRED STOCK
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Return on Common Stock Constant Gro
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Sam Strother and Shawna Tibbs are s
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C H A P T E R 6 Financial Options T
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See the Web Extension for this chap
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Figure 6-3 Current Stock Value a $3
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There are many free binomial option
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Robert’s Online Option Pricer can
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THE VALUATION OF PUT OPTIONS 206
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QUESTIONS PROBLEMS 210 • Part 1 F
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c. Consider Triple Trice’s call o
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Self-Test Questions THE BALANCE SHE
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FINANCIAL ANALYSIS ON THE INTERNET
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STATEMENT OF CASH FLOWS 222 • Par
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FINANCIAL BAMBOOZLING: HOW TO SPOT
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For an updated estimate of Coca-Col
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H&R Block provides information for
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QUESTIONS 242 • Part 1 Fundamenta
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7-8 You have just obtained financia
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CYBERPROBLEM 246 • Part 1 Fundame
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Assume that you are Jamison’s ass
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INTERNATIONAL ACCOUNTING DIFFERENCE
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Self-Test Questions MARKET VALUE RA
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RATIO ANALYSIS IN THE INTERNET AGE
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Self-Test Question SUMMARY 274 •
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8-4 Doublewide Dealers has an ROA o
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The first part of the case, present
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Jamison examined monthly data for 2
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parttwo Corporate Valuation
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C H A P T E R 9 Financial Planning
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The value of a firm is determined b
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Self-Test Questions SALES FORECAST
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296 • Part 2 Corporate Valuation
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Table 9-4 302 • Part 2 Corporate
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THE AFN FORMULA 304 • Part 2 Corp
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FORECASTING FINANCIAL REQUIREMENTS
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PROBLEMS 310 • Part 2 Corporate V
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Additional Funds Needed Long-Term F
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CYBERPROBLEM negative, Cumberland w
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g. Why does the percent of sales ap
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To find the rate on a T-bond, go to
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To find an estimate of earnings gro
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ESTIMATING THE COST OF CAPITAL FOR
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Self-Test Question 344 • Part 2 C
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PROBLEMS 348 • Part 2 Corporate V
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10-13 A summary of the balance shee
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CYBERPROBLEM of the common equity f
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Chen, Carl R., “Time-Series Analy
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Figure 11-1 364 • Part 2 Corporat
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Figure 11-3 366 • Part 2 Corporat
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Table 11-6 a Projected figures may
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Table 11-8 Panel A: FCF Valuation o
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INTERNATIONAL CORPORATE GOVERNANCE
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See http://www .esopassociation.org
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QUESTIONS 386 • Part 2 Corporate
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11-3 Brooks Enterprises has never p
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CYBERPROBLEM 392 • Part 2 Corpora
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partthree Project Valuation
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C H A P T E R 12 Capital Budgeting:
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You can calculate the free cash flo
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CAPITAL BUDGETING DECISION RULES Th
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402 • Part 3 Project Valuation Fi
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See IFM9 Ch12 Tool Kit.xls. 404 •
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406 • Part 3 Project Valuation Fo
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410 • Part 3 Project Valuation We
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MODIFIED INTERNAL RATE OF RETURN (M
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Self-Test Question 414 • Part 3 P
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Self-Test Questions BUSINESS PRACTI
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HOW DOES INDUSTRY EVALUATE PROJECTS
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420 • Part 3 Project Valuation to
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SUMMARY 424 • Part 3 Project Valu
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PROBLEMS 12-1 Project K has a cost
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428 • Part 3 Project Valuation c.
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12-14 Shao Airlines is considering
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You have just graduated from the MB
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Free cash flow 438 • Part 3 Proj
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440 • Part 3 Project Valuation hi
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Self-Test Questions TAX EFFECTS 442
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444 • Part 3 Project Valuation Ta
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448 • Part 3 Project Valuation Th
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Table 13-4 99 100 101 102 103 104 1
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Table 13-4 151 152 153 154 155 156
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Self-Test Question 454 • Part 3 P
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Figure 13-1 40,000 30,000 20,000 10
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See IFM9 Ch13 Tool Kit.xls for a sc
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Recent developments in technology h
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Figure 13-2 a. Sales Price Probabil
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PROJECT RISK CONCLUSIONS Self-Test
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Figure 13-4 466 • Part 3 Project
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468 • Part 3 Project Valuation Co
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Self-Test Question SUMMARY 470 •
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PROBLEMS 472 • Part 3 Project Val
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13-8 The Bartram-Pulley Company (BP
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SPREADSHEET PROBLEM Build a Model:
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(3) Use the worst-, most likely, an
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THE INVESTMENT TIMING OPTION: AN IL
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484 • Part 3 Project Valuation Ap
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486 • Part 3 Project Valuation In
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Figure 14-3 Notes: a The WACC is 14
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Figure 14-4 PART 1. FIND THE VALUE
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Figure 14-5 Self-Test Questions 492
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494 • Part 3 Project Valuation of
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Table 14-1 Cost of Capital Used to
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GROWTH OPTIONS AT DOT-COM COMPANIES
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CONCLUDING THOUGHTS ON REAL OPTIONS
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PROBLEMS Investment Timing Option:
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Growth Option: Option Analysis 504
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partfour Strategic Financing Decisi
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C H A P T E R 15 Capital Structure
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A firm’s financing choices obviou
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Self-Test Question 512 • Part 4 S
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Figure 15-1 Revenues and Costs (Tho
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Table 15-1 Section I. Zero Debt Deb
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520 • Part 4 Strategic Financing
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Figure 15-2 524 • Part 4 Strategi
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Table 15-4 536 • Part 4 Strategic
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PROBLEMS 542 • Part 4 Strategic F
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WACC and Optimal Capital Structure
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h. With the above points in mind, n
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C H A P T E R 16 Capital Structure
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This chapter extends the discussion
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Figure 16-1 a. Without Taxes Cost o
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INTRODUCING PERSONAL TAXES: THE MIL
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For Kunkel Inc., 570 • Part 4 Str
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QUESTIONS 576 • Part 4 Strategic
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16-3 Refer to Problem 16-2. Assume
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David Lyons, CEO of Lyons Solar Tec
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C H A P T E R 17 Distributions to S
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CORPORATE VALUATION AND DISTRIBUTIO
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DIVIDEND YIELDS AROUND THE WORLD Di
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INFORMATION CONTENT, OR SIGNALING,
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Self-Test Question Table 17-2 594
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See IFM9 Ch17 Tool Kit.xls for all
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PROBLEMS Residual Distribution Mode
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Alternative Dividend Policies 612
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(3) What are the advantages and dis
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partfive Tactical Financing Decisio
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C H A P T E R 18 Initial Public Off
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CORPORATE VALUATION, IPOs, AND FINA
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622 • Part 5 Tactical Financing D
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Table 18-3 13 14 15 16 17 18 19 20
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QUESTIONS PROBLEMS 652 • Part 5 T
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Randy’s, a family-owned restauran
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C H A P T E R 19 Lease Financing Th
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Leasing is another form of financin
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Table 19-2 670 • Part 5 Tactical
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Self-Test Question 678 • Part 5 T
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PROBLEMS 680 • Part 5 Tactical Fi
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Build a Model: Lessee’s Analysis
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ut that $200,000 is the expected va
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C H A P T E R 20 Hybrid Financing:
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Preferred stock, warrants, and conv
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Suppose your company needs cash to
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Figure 20-1 702 • Part 5 Tactical
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PROBLEMS 710 • Part 5 Tactical Fi
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Because he expects earnings to cont
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partsix Working Capital Management
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C H A P T E R 21 Working Capital Ma
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Superior working capital management
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722 • Part 6 Working Capital Mana
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Self-Test Questions Table 21-1 724
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THE BEST AT MANAGING WORKING CAPITA
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See IFM9 Ch21 Tool Kit.xls for all
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THE GREAT DEBATE: HOW MUCH CASH IS
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Self-Test Question 734 • Part 6 W
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Self-Test Questions Table 21-3 738
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SHORT-TERM FINANCING Self-Test Ques
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QUESTIONS 752 • Part 6 Working Ca
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21-6 McDowell Industries sells on t
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Dan Barnes, financial manager of Sk
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f. In his preliminary cash budget,
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C H A P T E R 22 Providing and Obta
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CORPORATE VALUATION AND CREDIT POLI
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SETTING THE COLLECTION POLICY Self-
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Table 22-1 768 • Part 6 Working C
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QUESTIONS 790 • Part 6 Working Ca
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22-4 On March 1, Minnerly Motors ob
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e. What is the firm’s forecasted
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INVENTORY CONTROL SYSTEMS 808 • P
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ACCOUNTING FOR INVENTORY 810 • Pa
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THE ECONOMIC ORDERING QUANTITY (EOQ
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Self-Test Questions Why are safety
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PROBLEMS Economic Ordering Quantity
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Andria Mullins, financial manager o
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partseven Special Topics
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C H A P T E R 24 Derivatives and Ri
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Risk management can reduce firm ris
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836 • Part 7 Special Topics finan
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840 • Part 7 Special Topics fluct
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842 • Part 7 Special Topics Forwa
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844 • Part 7 Special Topics Figur
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846 • Part 7 Special Topics bonds
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Self-Test Question RISK MANAGEMENT
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MICROSOFT’S GOAL: MANAGE EVERY RI
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Table 24-2 852 • Part 7 Special T
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854 • Part 7 Special Topics Futur
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856 • Part 7 Special Topics and i
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858 • Part 7 Special Topics the c
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QUESTIONS PROBLEMS 860 • Part 7 S
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Assume that you have just been hire
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C H A P T E R 25 Bankruptcy, Reorga
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CORPORATE VALUATION AND BANKRUPTCY
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Table 25-2 ISSUES FACING A FIRM IN
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870 • Part 7 Special Topics as a
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874 • Part 7 Special Topics subsi
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876 • Part 7 Special Topics The p
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880 • Part 7 Special Topics sold
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882 • Part 7 Special Topics What
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QUESTIONS 888 • Part 7 Special To
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890 • Part 7 Special Topics singl
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of directors. In turn, Ron asked yo
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C H A P T E R 26 Mergers, LBOs, Div
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CORPORATE VALUATION AND MERGERS The
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898 • Part 7 Special Topics merge
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TYPES OF MERGERS Self-Test Question
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906 • Part 7 Special Topics The v
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Self-Test Questions SETTING THE BID
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918 • Part 7 Special Topics The E
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920 • Part 7 Special Topics In a
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Figure 26-2 Mostly cash Note: These
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928 • Part 7 Special Topics stake
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Self-Test Questions CORPORATE ALLIA
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932 • Part 7 Special Topics priva
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Self-Test Questions HOLDING COMPANI
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PROBLEMS 938 • Part 7 Special Top
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Build a Model: Merger Analysis 940
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offer for Lyons Lighting? If so, ho
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C H A P T E R 27 Multinational Fina
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The special issues facing a multina
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MULTINATIONAL VERSUS DOMESTIC FINAN
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The Bloomberg World Currency Values
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954 • Part 7 Special Topics For e
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956 • Part 7 Special Topics gover
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Table 27-3 Notes: aThese are repres
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HUNGRY FOR A BIG MAC? GO TO THE PHI
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STOCK MARKET INDICES AROUND THE WOR
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974 • Part 7 Special Topics equip
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QUESTIONS 978 • Part 7 Special To
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980 • Part 7 Special Topics On th
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and 4 percent in Spain. Does intere
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appendix b Answers to End-of-Chapte
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8-9 a. Current ratio 1.98; DSO 76
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15-4 30% debt: WACC 11.14%; V $10
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23-1 a. 3,000 bags. b. 4,000 bags.
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n p B a (rpi rˆ p) i1 2Pi . bi
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994 • Appendix C Selected Equatio
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996 • Appendix C Selected Equatio
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Chapter 13 n NPV a t0 n NPV B a i
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V Tax shield r dTD r TS g . VL V
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TCC (C)(P)(A). TOC (F)(N) F(S/2A
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annuity due An annuity with payment
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coefficient of variation (CV) Equal
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the percentage of funds provided by
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eturn will equal the expected rate
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improper accumulation The retention
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stock) and the book value of the fi
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operating leverage The extent to wh
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lessors. The most important aspect
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presentations in 10 to 20 cities, w
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tax preference theory Proposes that
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name index Abreo, Leslie, 645n Acke
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subject index AAII. See American As
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Capital budgeting, 396, 398 in Asia
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DaimlerChrysler AG, 867 Dalkon Shie
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Financial reporting, 214-216. See a
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Kashima Oil, 858-859 Keiretsus, 380
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Opportunity costs, 233, 323, 440 as
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Risk, (continued) project, 435, 464
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TVA, interest expenses of, 645 Two-
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