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Solutions Manual for Analysis for Financial Management 13th Edition by Robert Higgins Complete Chapter are included (Ch 1 to 9)

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Solutions Manual Analysis for Financial Management 13th Edition by Robert Higgins Complete Chapter are included (Ch 1 to 9) Chapter 1 2. Management is either foolish or thinks its board is. Earning $100 million on a $5 billion equity investment is a return of 2 percent, which is below any reasonable cost of equity. As a board member, I would vote to cut management’s compensation, not raise it. I would also criticize them for apparently attempting to deceive the board. 4. a. Cash rises $500,000; plant and equipment falls $300,000; equity rises $200,000. b. Net plant and equipment rises $80 million; Cash falls $32 million; Bank debt rises $48 million. c. Net plant and equipment rises $60 million; cash falls $60 million. d. Cash falls $40,000; Accounts payable falls $40,000. e. Cash falls $240,000; Owners’ equity falls by $240,000 (via an increase in Treasury stock). f. Cash rises $80,000; Inventory falls; Accrued taxes, Owners’ equity, and possibly other cost categories rise such that the algebraic sum equals $80,000. g. Accounts receivable rise $120,000. Other categories change as described in part f. h. Cash falls $50,000. Owners’ equity falls by $50,000 (via Retained earnings). 6. a. R&E Supplies, Inc. Sources and Uses Statement 2018–2021 ($ thousands) Sources of cash: Decrease in cash and securities $259 Increase in accounts payable 2,205 Increase in current portion long-term debt 40 Increase in accrued wages 13 Increase in retained earnings 537 Total $3,054 Uses of cash: Increase in accounts receivable $1,543 Increase in inventories 1,148 Increase in prepaid expenses 4 Increase in net fixed assets 159 Decrease in long-term debt 200 Total $3,054 2 b. Insights: i. R&E is making extensive use of trade credit to finance a buildup in current assets. The increase in accounts payable equals almost three fourths of total sources of cash. Increasing accounts receivable and inventories account for almost 90 percent of the uses of cash. ii. External long-term debt financing is a use of cash for R&E, meaning that it is repaying its loans. A restructuring involving less reliance on accounts payable and more bank debt appears appropriate. 8. Accounting income will be the value of the parcels sold, less their original purchase price. So if all parcels are sold, the income is 5 × $16 million + 5 × $8 million – $100 million = $20 million. Economic income will be the increase in the market value of the land, whether sold or not, over the period. At the end of the first year, this will be $20 million. Answers to each part of the question appear below. Question Accounting Income Economic Income a. $20 million $20 million b. $0 $20 million c. –$10 million $20 million d. $30 million $20 million

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