Solution Manual Essentials of Corporate Finance 11th edition BY Ross Westerfield – Updated 2024
Complete Solution Manual With Answers
Sample Chapter Is Below
Case Solutions
Corporate Finance
Ross, Westerfield, Jaffe, and Jordan
13th edition
Prepared by:
Brad Jordan
University of Florida
Joe Smolira
Belmont University
Copyright © 2022 by McGraw-Hill Education.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.C-2 CASE SOLUTIONS
CHAPTER 2
CASH FLOWS AT WARF
COMPUTERS
The operating cash flow for the company is: (Note: All numbers are in thousands of dollars)
OCF = EBIT + Depreciation – Current taxes
OCF = $2,922 + 336 – 615
OCF = $2,643
To calculate the cash flow from assets, we need to find the capital spending and change in net
working capital. The capital spending for the year was:
Capital spending
Ending net fixed assets $4,746
– Beginning net fixed assets 3,692
+ Depreciation 336
Net capital spending $1,390
And the change in net working capital was:
Change in net working capital
Ending NWC $1,494
– Beginning NWC 1,203
Change in NWC $291
So, the cash flow from assets was:
Cash flow from assets
Operating cash flow $2,643
– Net capital spending 1,390
– Change in NWC 291
Cash flow from assets $962
The cash flow to creditors was:
Cash flow to creditors
Interest paid $180
– Net New Borrowing 40
Cash flow to Creditors $140
Copyright © 2022 by McGraw-Hill Education.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.C-3 CASE SOLUTIONS
The cash flow to stockholders was:
Cash flow to stockholders
Dividends paid $757
– Net new equity raised – 55
Cash flow to Stockholders $822
The accounting cash flow statement of cash flows for the year was:
Statement of Cash Flows
Operations
Net income $2,055
Depreciation 336
Deferred taxes 72
Changes in assets and liabilities
Accounts receivable –62
Inventories 29
Accounts payable 40
Accrued expenses –200
Other –18
Total cash flow from operations $2,252
Investing activities
Acquisition of fixed assets –$1,955
Sale of fixed assets 565
Total cash flow from investing activities –$1,390
Financing activities
Retirement of debt –$261
Proceeds of long-term debt 301
Dividends –757
Repurchase of stock –87
Proceeds from new stock issues 22
Total cash flow from financing activities –$782
Change in cash (on balance sheet) $80
Copyright © 2022 by McGraw-Hill Education.
All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.C-4 CASE SOLUTIONS
1. 2. 3. Answers to questions
The firm had positive earnings in an accounting sense (NI > 0) and had positive cash flow
from operations and a positive cash flow from assets. The firm invested $291 in new net
working capital and $1,390 in new fixed assets. The firm was able to return $822 to its
stockholders and $140 to creditors.
The financial cash flows present a more accurate picture of the company since it accurately
reflects interest cash flows as a financing decision rather than an operating decision.
The expansion plans look like they are probably a good idea. The company was able to return
a significant amount of cash to its shareholders during the year, but a better use of these cash
flows may have been to retain them for the expansion. This decision will be discussed in more
detail later in the book.
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