Fundamentals of. Financial Management. 13th. Edition. Van Horne. W .. PowerPoint slides plus PDF's of all figures and tables from the book. Shepherding_a_Childs_Heart_-_Tripp,brozokpulepsmen.cf Shepherding a Child\'s Heart Fundamentals of Financial Management (Van Horne 13th edition). Fundamentals of financial management / James C. Van Horne, John M. Wachowicz, Jr Van Horne, James C. (James Carter), [electronic resource] - 13th ed.
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Instructor's Manual Fundamentals of Financial Management twelfth edition James C. Van Horne John M. Wachowicz JR. ISBN 0 7 Pearson. Van Horne Fundamentals of Financial Management 13th Edition - Download as PDF File .pdf), Text File .txt) or read online. FINANCIAL MANAGEMENT. Fundamentals of Financial Management (13th edition). By James C. VanHorne, John M. Wachowicz. FT Prentice Hall, Harlow, Accounting, Finance.
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These areas have not been slighted.
Getting Things Done: The Art of Stress-Free Productivity
Many of the newer frontiers of finance are explored in the book. In fact, one of the book's distinguishing features is its ability to expose the student reader to many new concepts in modern finance.
By design, this exposure is mainly verbal with only limited use of mathematics. The last section of the book deals with the more specialized topics of: While the book may be used without any formal prerequisites, often the student will have had an introductory course in accounting and economics and perhaps a course in statistics. Completion of these courses allows the instructor to proceed more rapidly over financial analysis, capital budgeting, and certain other topics.
The book's continuity is not adversely affected if these appendices are omitted. While we feel that all of the appendices are relevant for a thorough understanding of financial management, the instructor can choose those most appropriate to his or her course.
If the book is used in its entirety, the appropriate time frame is a semester or, perhaps, two quarters.
For the one-quarter basic finance course, we have found it necessary to omit coverage of certain chapters. However, it is still possible to maintain the book's thrust of providing a fundamental understanding of financial management.
For the one-quarter course, the following sequencing has proven manageable: Fundamentals of Financial Management, 12e 2 5. Some instructors prefer to cover Chapters 6 and 7 before going into Chapters These chapters have been written so that this can be done without any problem.
Fundamentals of Financial Management, 12e 3 6. While chapter substitutions can be made, we think that 19 or 20 chapters are about all that one should try to cover in a quarter. This works out to an average of two chapters a week. For working-capital management and longer term financing, it is possible to cover more than two chapters a week.
For the time value of money and capital budgeting, the going is typically slower.
Depending on the situation, the pace can be slowed or quickened to suit the circumstances. The semester course allows one to spend more time on the material. In addition, one can take up most of the chapters omitted in a one-quarter course. Two quarters devoted to finance obviously permits an even fuller and more penetrating exploration of the topics covered in the book. Here the entire book, including many of the appendices, can be assigned together with a special project or two.
The coverage suggested above is designed to give students a broad perspective of the role of financial management. This perspective embraces not only the important managerial considerations but certain valuation and conceptual considerations as well. It gives a suitably wide understanding of finance for the non-major while simultaneously laying the groundwork for more advanced courses in finance for the student who wants to take additional finance courses.
For the one-quarter required course, the usual pedagogy is the lecture coupled perhaps with discussion sections. In the latter it is possible to cover cases and some computer exercises. The semester course or the two-quarter sequence permits the use of more cases and other assignments. Students and instructors are invited to visit the text's website, Wachowicz's Web World, currently residing at: Fundamentals of Financial Management, 12e 4 7.
The Pearson Education Website - http: Kuhlemeyer, Carroll College. This supplement is available as a custom computerized test bank for Windows through your Prentice Hall sales representative. In addition, Professor Kuhlemeyer has done a wonderful job in preparing an extensive collection of Microsoft PowerPoint slides as outlines with examples to go along with the text.
The PowerPoint presentation graphics are available for downloading through the following Pearson Education Website: Finally, computer application software that can be used in conjunction with specially identified end-of-chapter problems is available in Microsoft Excel format on the same web site.
We hope that Fundamentals of Financial Management contributes to your students' understanding of finance and imparts a sense of excitement in the process.
We thank you for choosing our textbook and welcome your comments and suggestions please E-mail: Knoxville, Tennessee Van Horne and Wachowicz: Fundamentals of Financial Management, 12e 5 8. Fundamentals of Financial Management, 12e 6 9.
Chapter 1: With an objective of maximizing shareholder wealth, capital will tend to be allocated to the most productive opportunities on a risk-adjusted return basis.
There will be a greater level of overall economic want satisfaction. Presumably people overall will benefit, but this depends in part on the redistribution of income and wealth via taxation and social programs. In other words, the economic pie will grow larger and everybody should be better off if there is no reslicing. With reslicing, it is possible some people will be worse off, but that is the result of a governmental change in redistribution.
It is not due to the objective function of corporations. Maximizing earnings is a nonfunctional objective for the following reasons: Earnings is a time vector. Unless one time vector of earnings clearly dominates all other time vectors, it is impossible to select the vector that will maximize earnings. Each time vector of earning possesses a risk characteristic. Maximizing expected earnings ignores the risk parameter. Fundamentals of Financial Management, 12e 7 The Role of Financial Management c.
Earnings will continue to increase since stock does not require out-of-pocket costs. The impact of dividend policies is ignored. If all earnings However, stock prices may decrease as a result of adverse reaction to the absence of dividends. Maximizing wealth takes into account earnings, the timing and risk of these earnings, and the dividend policy of the firm.
Financial management is concerned with the acquisition, financing, and management of assets with some overall goal in mind. Thus, the function of financial management can be broken down into three major decision areas: Yes, zero accounting profit while the firm establishes market position is consistent with the maximization of wealth objective.
Other investments where short-run profits are sacrificed for the long run also are possible. The goal of the firm gives the financial manager an objective function to maximize. Fundamentals of Financial Management, 12e 8 The Role of Financial Management 6. These three functional areas are all interrelated e. If managers have sizable stock positions in the company, they will have a greater understanding for the valuation of the company.
Moreover, they may have a greater incentive to maximize shareholder wealth than they would in the absence of stock holdings. However, to the extent persons have not only human capital but also most of their financial capital tied up in the company, they may be more risk averse than is desirable. If the company deteriorates because a risky decision proves bad, they stand to lose not only their jobs but have a drop in the value of their assets.
Excessive risk aversion can work to the detriment of maximizing shareholder wealth as can excessive risk seeking if the manager is particularly risk prone. Regulations imposed by the government constitute constraints against which shareholder wealth can still be maximized. It is important that wealth maximization remain the principal goal of firms if economic efficiency is to be achieved in society and people are to have increasing real standards of living.
The benefits of regulations to society must be evaluated relative to the costs imposed on economic efficiency. Where benefits are small Van Horne and Wachowicz: Fundamentals of Financial Management, 12e 9 Presently there is considerable attention being given in Washington to deregulation. Some things have been done to make regulations less onerous and to allow competitive markets to work.
As in other managers. To the extent managers are paid in excess of their economic contribution, the returns available to investors will be less.
However, stockholders can sell their stock and invest elsewhere. Therefore, there is a balancing factor that works in the direction of equilibrating managers' pay across business firms for a given level of economic contribution. In competitive obtained only and with efficient greater markets, risk. For the company, it is important that it do well what it knows best. There is little reason to believe that if it gets into a new area in which it has no expertise that the rewards will be commensurate with the risk that is involved.
The risk-reward trade-off will become increasingly apparent to the student as this book unfolds. Fundamentals of Financial Management, 12e 10 The Role of Financial Management These relationships provide the framework within which corporate objectives are set and performance is monitored. Boards review and approve strategy, significant investments, and acquisitions. The controller's nature. The treasurer's responsibilities fall into the decision areas most commonly associated with financial management: Fundamentals of Financial Management, 12e 11 An ingenious device for obtaining individual profit without individual responsibility.
Fundamentals of Financial Management, 12e 12 Chapter 2: The principal advantage of the corporate form of business organization is that the corporation has limited liability. The owner of a small family restaurant might be required to personally guarantee corporate borrowings or downloads anyway, so much of this advantage might be eliminated.
The wealthy individual has more at stake and unlimited liability might cause one failing business to bring down the other, healthy businesses. The liability is limited to the amount of the investment in both the limited partnership and in the corporation.
However, the limited partner generally does not have a role in selecting the management or in influencing the direction of the enterprise. On a pro rata basis, stockholders are able to select management and affect the direction of the enterprise.
Also, partnership income is taxable to the limited partners as personal income whereas corporate income is not taxed unless distributed to the stockholders as dividends. With both a sole proprietorship and partnership, a major drawback is the legal liability of the owners. Also, both forms of organization lack the corporate feature of "unlimited life. The ownership is not liquid when it comes Van Horne and Wachowicz: Fundamentals of Financial Management, 12e to planning for 13 Decision making can be cumbersome.
Accelerated depreciation is used up to the point it is advantageous to switch to straight line depreciation. A one-half year convention is followed in the first year, which reduces the cost recovery in that year from what would otherwise be the case.
Additionally, a one-half year convention is followed in the year following the asset class. This pushes out the depreciation schedule, which is disadvantageous from a present value standpoint. The double declining balance method is used for the first four asset classes, 3, 5, 7 and 10 years. The asset category determines the project's depreciable life.
The immunity from each other's taxing power dates back to the early part of the 19th century. It used to apply to salaries of government employees as well. Personal tax rates are progressive up to a point, then become regressive. Fundamentals of Financial Management, 12e 14 The Business, Tax, and Financial Environments 8. These include low dividend common stocks, common stocks in general, discount bonds, real estate, and other investments of this sort.
Depreciation changes the timing of tax payments. The longer these payments can be delayed, the better off the business is.
One advantage to Subchapter S occurs when investors have outside income against which to use losses by the company. Even with no outside income, stockholders still may find Subchapter S to be advantageous. If dividends are paid, the stockholder under Subchapter S is subject only to taxation on the profits earned by the company. Under the corporate method, the company pays taxes on its profits and then the owners pay personal income taxes on the dividends paid to them.
Tax incentives are the result influencing legislators. Some of these incentives benefit society as a whole; others benefit only a few at the expense of the rest of society. It is hard to imagine all individuals interest of the whole above their own interests. Further, some incentives can be used to benefit large groups of people.
Fundamentals of Financial Management, 12e 15 The Business, Tax, and Financial Environments While if a company has steady losses it does not benefit from this provision, the marginal company with profit swings does.
Financial markets allow for efficient allocation in the flow of savings in an economy to ultimate users. In a macro sense, savings originate from savings-surplus economic units whose savings exceed their investment in real assets.
The ultimate users of these savings are savings-deficit economic units whose investments in real assets exceed their savings. Since the savings-surplus and savings-deficit units are usually different entities, markets serve to channel these funds at the least cost and inconvenience to both.
As specialization develops, efficiency Loan brokers, secondary markets, and investment bankers all serve to expedite this flow from savers to users. Financial intermediaries provide an indirect channel for the flow of funds from savers to ultimate users. These institutions include commercial banks, savings and loan associations, life insurance companies, pension and profit-sharing funds and savings banks.
Their primary function is the transformation of funds into more attractive packages for savers. Services and economies of scale Van Horne and Wachowicz: Fundamentals of Financial Management, 12e 16 Pooling of funds, diversifica- tion of risk, transformation of maturities and investment expertise are desirable functions that financial intermediaries perform.
Differences in maturity, default risk, marketability, taxability, and option features affect yields on financial instruments. In general, the longer the maturity, the greater the default risk, the lower the marketability and the more the return is subject to ordinary income taxation as opposed to capital gains taxation or no taxation, the higher the yield on the instrument. If the investor receives an option e. Conversely, if the firm issuing the security receives an option, such as a call feature, the investor must be compensated with a higher yield.
Another factor -- one not taken up in this chapter -- is the coupon rate. The lower the coupon rate, the greater the price volatility of a bond, all other things the same, and generally the higher the yield. The market becomes more intermediation is difference interest receives in and efficient reduced.
Also, inconvenience to one or both parties is an indirect cost. The market becomes more complete when special types of financial instruments and financial processes are offered Van Horne and Wachowicz: Fundamentals of Financial Management, 12e 17 For example, the new product might be a zero-coupon bond and the new process, automatic teller machines.
These exchanges serve as secondary markets wherein the downloader and seller meet to exchange shares of companies that are listed on the exchange. These markets have provided economies of time and scale in the past and have facilitated exchange among interested parties. If there are no disparities in savings pattern, the effect would fall on all financial markets. Disequilibrium would likely continue to occur until the rate of inflation reduced to a reasonable level.
Fundamentals of Financial Management, 12e 18 Answers to this question will differ depending on the financial intermediary that is chosen.
Their presence improves the efficiency of financial markets in allocating savings to the most productive investment opportunities. Money markets serve the short-term liquidity needs of investors.
The usual line of demarkation is one year; money markets include instruments with maturities of less than a year while capital markets involve securities with maturities of more than one year. However, both markets are financial markets with the same economic purpose so the distinction of maturity is somewhat arbitrary.
Money markets involve instruments that are impersonal; funds flow on the basis of risk and return. A bank loan, for example, is not a money-market instrument even though it might be short term. Transaction costs impede the efficiency of financial markets. Financial institutions and brokers perform an economic service for which they must be compensated.
Van Horne: Fundamentals of Financial Management (13th Edition) by
The means of compensation is If there is competition among them, transaction costs will be reduced to justifiable levels. Fundamentals of Financial Management, 12e 19 Financial brokers, such as investment bankers in particular as well as mortgage bankers, facilitate the matching of borrowers in need of funds with savers having funds to lend. For this matching and servicing, the broker earns a fee that is determined by competitive forces. In addition, security exchanges and the over-the-counter market improve the secondary market and hence the efficiency of the primary market where securities are sold originally.
If sued, they could lose up to their full combined net worths. Fundamentals of Financial Management, 12e 10, In contrast, the borrower suffers in having to pay a higher real return than expected. In other words, the loan is repaid with more expensive dollars than anticipated. No specific solution is recommended. The student should consider default risk, maturity, marketability, and any tax effects. Fundamentals of Financial Management, 12e 21 Henry is responsible for all liabilities, book as well as contingent.
He still could lose all his net assets because Kobayashi's net worth is insufficient to make a major dent in the lawsuit: As the two partners have substantially different net worths, they do not share equally in the risk.
Henry has much more to lose. Under the corporate form, he could lose the business, but that is all.
Fundamentals of Financial Management, 12e 22 The Business, Tax, and Financial Environments 2. In addition, market conditions dictate that 3 percent is the floor for the deposit rate, while 7 percent is the ceiling for the mortgage rate.
Fundamentals of Financial Management (13th edition)
Suppose that Wallopalooza wished to increase the current deposit rate and lower the current mortgage rate by equal amounts while earning a before-tax return spread of 1 percent. It would then offer a deposit rate of 3. Of course, other answers are possible, depending on your profit assumptions.
Fundamentals of Financial Management, 12e 23 The Business, Tax, and Financial Environments 4. The premium attributable to maturity is 7. In this case, default risk is held constant and marketability, for the most part, is also held constant.
Fundamentals of Financial Management, 12e 24 Fundamentals of Financial Management, 12e 25 Chapter 3: Simple interest is interest that is paid earned on only the original amount, or principal, borrowed lent. With compound principal and interest, both then interest earn Hence interest is compounded.
The greater the number of periods and the more times a period interest is paid, the greater the compounding and future value. The answer here will vary according to the individual. Common answers include a savings account and a mortgage loan. An annuity is a series of cash receipts of the same amount over a period of time. It is worth less than a lump sum equal to the sum of the annuities to be received because of the time value of money. Interest compounded continuously. It will result in the highest terminal value possible for a given nominal rate of interest.
In calculating the future terminal value, we need to know the beginning amount, the interest rate, and the number of periods. In calculating the present value, we need to know the future value or cash flow, the interest or discount rate, and the number of periods. Thus, there is only a switch of two of the four variables.
Fundamentals of Financial Management, 12e 26 The Time Value of Money 7. Otherwise, it is necessary to raise 1 plus the discount rate to the nth power and divide. Prior to electronic calculators, the latter was quite laborious. With the advent of calculators, it is much easier and the advantage of present-value tables is lessened.
Interest compounded as few times as possible during the five years. Realistically, it is likely to be at least annually.
Compounding more times will result in a lower present value. For interest rates likely to be encountered in normal business situations the "Rule of 72" is a pretty accurate money doubling rule.Fundamentals of Financial Management, 12e 55 With sustainable growth modeling, one can determine whether the sales growth objectives of the firm are consistent with its operating characteristics and its financial objectives. Fundamentals of Financial Management, 12e However, if the 73 The market price serves as a barometer for business performance; it indicates how well management is doing on behalf of its shareholders.
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