CH-11 Cost of Capital – Foundations of Financial Management : Book Guide

Chapter 11 Discussion Questions 11-1. Though an investment financed by low-cost debt might appear acceptable at first glance, the use of debt could increase the overall risk of the firm and eventually make all forms of financing more expensive. Each project must be measured against the overall cost of funds to the firm. 11-2. The cost of a source of financing directly relates to the required rate of return for that means of financing. Of course, the required rate of return is used to establish valuation. 11-3. In computing the cost of capital, we use the current costs for the various sources of financing rather than the historical costs. We must consider what these funds will cost us to finance projects in the future rather than their past costs. 11-4. Even though debt and preferred stock may be both priced to yield 10 percent in the market, the cost of debt is less because the interest on debt is a tax-deductible expense. A 10 percent market rate of interest on debt will only cost a firm in a 40 percent tax bracket an aftertax rate of 6 percent. The answer is the yield multiplied by the difference of (one minus the tax rate). 11-5. The two sources of equity capital are retained earnings and new common stock. 11-6. Retained earnings belong to the existing common shareholders. If the funds are paid out instead of reinvested, the shareholders could earn a return on them. Thus we say retaining funds for reinvestment carries an opportunity cost. 11-7. Because shareholders can earn a return at least equal to their present investment. For this reason, the firm's rate of return (K e ) serves as a means of approximating the opportunities for alternate investments. 11-8. In issuing new common stock, we must earn a slightly higher return than the normal cost of common equity in order to cover the distribution costs of the new security. In the case of the Baker Corporation, the cost of new common stock was six percent higher. 11-9. The weights are determined by examining different capital structures and using that mix which gives the minimum cost of capital. We must solve a multidimensional problem to determine the proper weights. 11-10. The logic of the U-shaped approach to cost of capital can be explained through Figure 11-1. It is assumed that as we initially increase the debt-to-equity mix the cost of capital will go down. After we reach an optimum point, the increase use of debt will increase the overall cost of financing to the firm. Thus we say the weighted average cost of capital curve is U-shaped. 11-11. Other possible ratios influencing the cost of capital might be: • times interest earned • fixed charge coverage and indirectly • net income / sales • net income / total assets • net income / shareholders’ equity 11-12. If the firm cannot earn the overall cost of financing on a given project, the investment will have a negative impact on the firm's operations and will lower the overall wealth of the shareholders. Clearly, it is undesirable to invest in a project yielding 8 percent if the financing cost is 10 percent. 11-13. Inflation can only have a negative impact on a firm's cost of capital-forcing it to go up. This is true because inflation tends to increase interest rates and lower stock prices, thus raising the cost of debt and equity directly and the cost of preferred stock indirectly. Note, however, that a proper cost of capital calculation requires marginal and current market costs. As such the component costs reflect market participants’ inflationary expectations. 11-14. The marginal cost of capital is the cost of incremental funds. After a firm reaches a given level of financing, capital costs will go up because the firm must tap more expensive sources. For example, new common stock may be needed to replace retained earnings as a source of equity capital. 11-15. The dividend valuation model suggests that investors’ required rates of return are based on future dividends. Does this fully reflect investors required returns? Furthermore future dividends that must be projected are difficult to determine, and the growth model assumes growth at a constant rate forever. The growth rate must also be translated into dividends flowing through to shareholders. The model must also assume that the share price is efficiently determined. 11-16. Investors base their expected returns on their market value investment, not on how much they had invested at some time in the past. The costs of financing in an efficient market are based on the market value capital structure and not on how the books report that structure. Internet Resources and Questions 1. www.sedar.com 2. www.pfin.ca/canadianfixedincome/Default.aspx www.dbrs.com www.standardandpoors.com 3. www.nasdaq-canada.com www.reuters.com/finance/stocks Discussion Questions: Appendix 11-A 11A-1. The capital asset pricing model explains the relationship between risk and return, and the price adjustment of capital assets to changes in risk and return. As investors react to their economic environment and their willingness to take risk, they change the prices of financial assets like common stock, bonds, and preferred stock. As the prices of these securities adjust to investors' required returns, the company's cost of capital is adjusted accordingly. 11A-2. K e = D 1 / P 0 + g, while K j = R f + β j (R m – R f ) K j and K e are equal when the market is in equilibrium because the expected return K e will be equal to the required return K j . K e is the return expected by investors based on dividends and dividend growth, which will cause the stock price to grow accordingly. K j is the return required to be received, but K j is related to the minimum required return on a risk free security plus a risk premium relative to the market return. The beta in the K j equation expresses the individual company’s return relationship to the risk premium required. 11A-3. The SML, Security Market Line, reflects the risk-return tradeoffs of securities. As interest rates increase, the SML moves up parallel to the old SML. Now investors require a higher minimum return on risk free assets and an equally higher rate for all levels of risk. A change in the rate of inflation has a similar impact. The risk free rate goes up to provide the appropriate inflation premium and there is an upward shift in the SML. In regard to changing investor expectations, as investors become more risk averse, the SML increases its slope. The more risk taken, the greater the return premium that is desired (see figure 11A-4). 11A-4. If an individual security lies above the SML, this could suggest market inefficiency. The expected return from investing in that security is higher than one should expect given the risk assumed. Therefore it is a good investment. As other investors realize the same abnormally high return they will invest causing the security’s price to rise. This is good for the investor. As the security’s price rises its return will drop until it reaches the SML. 11A-5. An efficient market assumes that all pertinent information is quickly and continuously impounded into asset prices. The result is that abnormal profits cannot be achieved consistently, and investors are properly compensated for the risk they assume from investment. The CAPM assumes a relationship that properly describes return as a function of market related risk. All securities lie on a linear line, the SML. If the market is inefficient because information is not included in prices, it is likely that securities will not lie along the SML. 11A-6. The CAPM is a good theoretical framework for describing a relationship between risk and return. Nevertheless several aspects of the model may not be appropriate for the financial manager. The parameters of the model are historical and difficult to determine in practice. The model is based on diversified holdings whereas a financial manager is likely not diversified and therefore the manager’s concept of risk is somewhat broader. The CAPM is based on a one period time frame, but the financial manager should have a longer focus in decision making. The CAPM assumes an efficient market as well. While that may be close to true in the capital markets, the financial manager operates in the markets for technology, machinery, and so on, which are far from efficient. The relationship between risk and return under these circumstances becomes less than clear. Additionally beta is not very stable for individual stocks. The ultimate test is if the model can predict well. Discussion Questions: Appendix 11-B 11B-1. Under the net income (NI) approach, it is assumed that the firm can raise all the funds it desires at a constant cost of equity and debt. Since debt tends to have a lower cost than equity, the more debt utilized the lower the overall cost of capital and the higher the valuation of the firm. Under the net operating income (NOI) approach, the cost of capital and valuation do not change with the increased utilization of debt. Under this proposition, the low cost of debt is assumed to remain constant with greater debt utilization, but the cost of equity increases to such an extent that the cost of capital remains unchanged. The traditional approach falls somewhere between the net income (NI) approach and the net operating income (NOI) approach in which there are benefits from increased debt utilization, but only up to a point. After that point, the cost of capital begins to turn up and the valuation of the firm begins to turn down. 11B-2. Under the initial Modigliani and Miller approach, the use of debt does not change the cost of capital. This is because the added risk premium associated with the use of debt cancels out any lower cost benefits. Also, investors could use homemade leverage to arbitrage the difference between undervalued and overvalued securities. 11B-3. Corporate tax considerations tend to make the tax deductibility of interest on debt highly attractive and to lower the cost of capital at all levels. However, the potential threat of bankruptcy has the opposite effect and tends to make the cost of capital more expensive with greater debt utilization. The net effect is that these influences tend to offset each other and lead us back to the traditional, U-shaped approach. Problems 11-1. Rambo Exterminator Company No, each individual project should not be measured against the specific means of financing that project, but against the weighted average cost of financing all projects of the firm. This principle recognizes that the availability of one source of financing is dependent on other sources. Once the weighted average cost of capital is determined, the “colony destroying device” yielding 12% is much more likely to be accepted and add to firm value, than the “bug eradicator” which only yields 7%. 11-2. Royal Petroleum Co. a. Cost Debt Common equity Weighted average cost of capital 6% 18% Weighted Weights Cost 50% 50% 3.0% 9.0% 12% b. Only the new machine with a return of 16 percent. The return exceeds the weighted average cost of capital of 12.0 percent. 11-3. Pogo Petroleum Company Kd = Yield (1 – T) = 9% (1 – .25) = 9% (.75) = 6.75% 11-4. Kd = Aftertax Debt Cost Yield (1 – T) Yield a. 8.0% b. 14.0% c. 11.5% 11-5. Kd = = = (1 – T) (1 – .22) (1 – .36) (1 – .42) Yield (1 – T) 6.24% 8.96% 6.67% Aftertax Debt Cost [Yield / (1 – F)] (1 – T) [7% × (1 – .30)]/ (1 – 0.01) 4.95% 11-6. . Waste Disposal Systems Kd = Yield (1 – T) Kd .06 .06 Y= = = = 0.0895 = 8.95% (1 - T ) 1 − 0.33 0.67 11-7. a. Octopus Transit Principal payment - Price of the bond Number of years to maturity Y1 = 0.6 (Price of the bond ) + 0.4 (Principal payment ) $1,000 − $1,092 $75 + $75 − $9.20 10 = = = 0.0624 = 6.24% 0.6 ($1,092 ) + 0.4 ($1,000) $655.20 + $400 Annual interest payment + Calculator: PV = $1,092 FV = $1,000 PMT = 75/2 = $37.50 Compute: b. N = 10 × 2 = 20 %I/Y =? %I/Y = 3.124 × 2 = 6.25% Kd = = = = 11-8. a. Yield (1 – T) 6.25% (1 – .35) 6.25% (.65) 4.063% Russell Container Company Principal payment - Price of the bond Number of years to maturity Y1 = 0.6 (Price of the bond ) + 0.4 (Principal payment ) $1,000 − $920 $95 + $95 + $4 20 = = = 0.1040 = 10.40% 0.6 ($920 ) + 0.4 ($1,000 ) $552 + $400 Annual interest payment + Calculator: Compute: b. PV = $920 FV = $1,000 PMT = $95 N = 20 %I/Y =? %I/Y = 10.47% K d (approx) = 10.40% (1 – T) K d = 10.40% (1 – .25) = 10.40% (.75) = 7.80% = = = = Yield (1 – T) 10.47% (1 – .25) 10.47% (.75) 7.85% 11-9. Russell Container Company (Continued) a. Kd = = = = Yield (1 – T) 11.47% (1 –.34) 11.47% (.66) 7.57% b. It has gone down. Although the before-tax yield is higher, the larger tax deduction (34 percent versus 25 percent) more than offsets the higher rate. 11-10. Bell Canada a. 5.87% b. 5.87% + 0.15% = 6.02% c. K d = = = = Yield (1 – T) 6.02% (1 – .30) 6.02% (.70) 4.21% 11-11. a. K p = Schuss Inc. Dp Pp − F = $7 $7 = = 0.1228 = 12.28% $60 − $3 $57 b. No tax adjustment is required. Preferred stock dividends are not a tax deductible expense for the issuing firm. 11-12. Meredith Corporation Kp = Dp Pp = $8 = 0.1067 = 10.67% $75 11-13. Sutton Security Systems Aftertax cost of debt Kd = Yield (1 – T) = 10.5% (1 – .34) = 10.5% (.66) = 6.93% Aftertax cost of preferred stock Dp $4.40 $4.40 = = = 0.0917 = 9.17% Kp = $48 Pp $50 − $2 Yes, the treasurer is correct. The difference is 2.24% (6.93% versus 9.17%). 11-14. a. K e = Ellington Electronics D1 $1.50 +g= + 0.08 = 0.05 + 0.08 = 0.1300 = 13.00% P0 $30 D  P   $30  b. K n =  1 + g  0  = 0.1300  = 0.1393 = 13.93% $ 30 − $ 2 P P    0  n  11-15. Cost of Equity a. K e = D1 $4.60 +g= + 0.06 = 0.0767 + 0.06 = 0.1367 = 13.67% P0 $60  P  D  $60  K n =  1 + g  0  = 0.1367  = 0.1465 = 14.65% $ 60 − $ 4 P P    n   0 b. K e = D1 $0.25 +g= + 0.10 = 0.0125 + 0.10 = 0.1125 = 11.25% P0 $20 D  P  $20   K n =  1 + g  0  = 0.1125  = 0.1216 = 12.16% $ 20 $ 1 . 50 − P P    0  n  c. D 1 = Ke = 30% × E 1 = 30% × $6.00 = $1.80 D1 $1.80 +g= + 0.045 = 0.072 + 0.045 = 0.1170 = 11.70% P0 $25  P  D $25   K n =  1 + g  0  = 0.1170  = 0.1272 = 12.72% $ 25 − $ 2 . 00 P P    n   0 d. D 1 = Ke = D o (1 + g) = $3.00 × (1.07) = $3.21 D1 $3.21 +g= + 0.07 = 0.0764 + 0.07 = 0.1464 = 14.64% P0 $42  P  D $42   K n =  1 + g  0  = 0.1464  = 0.1577 = 15.77% $ 42 − $ 3 . 00 P P    n   0 11-16. Sam’s Fine Garments a. FVIF ( Appendix A) = Calculator: Compute: b. E 1 PV $1.87 = = 1.87 @ n = 6 : %i = 11% FV $1.00 PV = $1.00 FV = $1.87 N=6 %I/Y =? %I/Y = 10.996% = = = E o (1 + g) $1.87 (1.11) $2.08 c. D 1 = = = E 1 × 40% $2.08 × 40% $0.83 d. K e = PMT = 0 D1 $0.83 +g= + 0.1100 = 0.0553 + 0.1100 = 0.1653 = 16.53% P0 $15 D  P  $15   e. K n =  1 + g  0  = 0.1653  = 0.1871 = 18.71% $ 15 − $ 1 . 75 P P    0  n  11-17. Tyler Oil Company Cost (after tax) Debt (K d ).................................. 7.0% Preferred stock (K p )................. 10.0 Common equity (K e ) (retained earnings)............. 13.0 Weighted average cost of capital (K a ) Weighted Weights Cost 15% 15 50 100 1.05% 1.50 6.50 9.05% Note: Printing error – debt should be 35% 9assume 20% accounts payable) 11-18. Tyler Oil Company (Continued) Cost (after tax) Debt (K d ).................................. 8.8% Preferred stock (K p )................. 10.5 Common equity (K e ) (retained earnings)............. 15.5 Weighted average cost of capital (K a ) Weighted Weights Cost 60% 5 35 100 5.28% 0.53 5.43 11.24% The plan presented in the previous problem is the better alternative. Even though the second plan has more relatively cheap debt, the increased costs of all forms of financing more than offset this factor. 11-19. Genex Corporation Kd = = = = Yield (1 – T) 11% (1 – 0.30) 11% (.70) 7.7% The bond yield of 11% is used rather than the coupon rate of 13% because bonds are priced in the market according to competitive yields to maturity. The new bond is sold to reflect yield to maturity. Kp = Ke = Dp Pp − F = $10.00 $10.00 = = 0.1081 = 10.81% $98 − $5.50 $92.50 D1 $3 +g= + 0.08 = 0.06 + 0.08 = 0.1400 = 14.00% P0 $50 Cost (after tax) Debt (K d ).................................. 7.70% Preferred stock (K p )................. 10.81 Common equity (K e ) (retained earnings)............. 14.0 Weighted average cost of capital (K a ) Weighted Weights Cost 35% 10 55 100 2.70% 1.08 7.70 11.48% 11-20. Hadley Corporation Kd = = = = Kp = Ke = Yield (1 – T) 7% (1 – .34) 7% (.66) 4.62% Dp Pp − F = $9.00 $9.00 = = 0.0911 = 9.11% $102 − $3.20 $98.80 D1 $3.50 +g= + 0.06 = 0.05 + 0.06 = 0.1100 = 11.00% P0 $70 Cost (after tax) Debt (K d ).................................. 4.62% Preferred stock (K p )................. 9.11 Common equity (K e ) (retained earnings)............. 11.00 Weighted average cost of capital (K a ) Weighted Weights Cost 30% 10 60 100 1.39% 0.91 6.60 8.90% 11-21. . Puppet Corporation a. Internally Generated funds Kd = Y (1 − T ) .07(1 − .35) .0455 = = = 0.0464 = 4.64% 1− F 1 − 0.02 0.98 Kp = D p / Pp Ke = D1 $1.50 +g= + 0.06 = 0.05 + 0.06 = 0.1100 = 11.00% P0 $30 1− F = .05 .05 = = 0.0515 = 5.15% 1 − .03 0.97 Cost (after tax) Debt (K d ).................................. 4.64% Preferred stock (K p )................. 5.15 Common equity (K e ) (retained earnings)............. 11.00 Weighted average cost of capital (K a ) Weighted Weights Cost 55% 5 40 100 2.55% 0.26 4.40 7.21% b. Externally generated funds D1 +g P0 0.11 0.11 Kn = = = = 0.1146 = 11.46% 1− F 1 − 0.04 0.96 Cost (after tax) Debt (K d ).................................. 4.64% Preferred stock (K p )................. 5.15 Common equity (K e ) (new share issue)................ 11.46 Weighted average cost of capital (K a ) Weighted Weights Cost 55% 5 40 100 2.55% 0.26 4.58 7.39% c. A new share issue incurs flotation costs (use of investment dealer, lawyers, etc.). Internally generated funds only come from shareholders claim on earnings (and amortization). All new funding for debt and preferred requires access to capital markets and thus flotation costs are incurred. 11-22. Valvano Publishing Company Kd = = = = Kp = Yield (1 – T) 13% (1 – .34) 13% (.66) 8.58% Dp Pp − F = $5.50 $5.50 = = 0.1134 = 11.34% $50 − $1.50 $48.50 Dp $5.50 Pp 0.1100 or : = $50 = = 0.1134 = 11.34% (1 − F ) (1 − 0.03) 0.97 $50 × 0.03= $1.50 Ke = D1 $2.52 +g= + 0.11 = 0.056 + 0.11 = 0.1660 = 16.60% P0 $45 Cost (after tax) Debt (K d ).................................. 8.58% Preferred stock (K p )................. 11.34 Common equity (K e ) (retained earnings)............. 16.60 Weighted average cost of capital (K a ) Weighted Weights Cost 35% 10 55 100 3.00% 1.13 9.13 13.26% 11-23. McNabb Construction Company Kd = = Kp = = Ke = D1 = P0 = g= Yield (1 – T 10.5% (1 – 30) = 10.5% (.70) = 7.355% D p /P p – F ($8.50/$90.00) / (1-.02)= .0944/.98 = .0964 = 9.64% (D 1 /P 0 )+ g $3.15 $98.44 10% (see below) $.24/2.00 = 12.0% .27/2.24 = 12.1% .30/2.51 = 12.0% g = Calculator: PV =$2.00 FV = $3.15 PMT = 0 N=4 %I/Y or g =? Compute: %I/Y = 12.02% K e = (D 1 /P 0 )+ g $3.15/$98.44 + 12.02% = 3.2% + 12.02% = 15.22% Bring the above values together to compute the weighted average cost of capital Cost Weighted (after tax) Weights Cost 7.355% 30% 2.21% 9.64 10% 0.96 Debt (K d )......................... Preferred stock (K p ) ........ Common equity (K e ) (retained earnings) ........ 15.22 60% 9.13 Weighted average cost of capital (K a ) ..........................................................1 12.30% 11-24. Western Electric Utility Company a. Realize that the cost of debt is related to the cost of debt for other debt issues of the same risk class. Although, in actuality, the rate Western Electric might pay will not be exactly equal to TransCanada, it should be close enough to serve as an approximation. Both are utilities that are rated A. Kd = = = = b. K p = c. K e = d. Yield (1 – T) 6.60% (1 – .39) 6.60% (.61) 4.03% Dp Pp − F = $9.00 $9.00 = = 0.0914 = 9.14% $100 − $1.50 $98.50 D1 $4.50 +g = + 0.06 = 0.075 + 0.06 = 0.1350 = 13.50% P0 $60 Cost (after tax) Debt (K d ).................................. 4.03% Preferred stock (K p )................. 9.14 Common equity (K e ) (retained earnings)............. 13.50 Weighted average cost of capital (K a ) Weighted Weights Cost 40% 10 50 100 1.61% 0.91 6.75 9.27% 11-25. a. Eaton International Corporation X= Retained Earnings % of retained earnings in the capital structure = $19.5 million/.65 = $30 million b. Z = Amount of lower cost debt % of debt in the capital structure = $14 million/.25 = $56 million 11-26. Nolan Corporation a. Cost (after tax) Weights Debt (K d ).................................. 5.60% Preferred stock (K p )................. 9.00 Common equity (K e ) (retained earnings)............. 12.00 Weighted average cost of capital (K a ) b. X = X = c. 45% 15 40 100 WACC 2.52% 1.35 4.80 8.67% Retained earnings % of retained earnings in capital structure $12 million = $30 million .40 Cost (after tax) Weights Debt (K d ).................................. 5.60% Preferred stock (K p )................. 9.00 Common equity (K n )................ 13.20 Marginal cost of capital (K mc ) 45% 15 40 100 WACC 2.52% 1.35 5.28 9.15% d. Z = Z= e. Amount of lower cost debt % of debt within the capital structure $18 million = $40 million .45 Cost (after tax) Weights Debt (K d ).................................. 7.20% Preferred stock (K p )................. 9.00 Common equity (K n )................ 13.20 Marginal cost of capital (K mc ) 11-27. 45% 15 40 100 3.24% 1.35 5.28 9.87% Cost (after tax) Weights WACC Evans Corporation a. Debt (K d ).................................. 6.20% Preferred stock (K p )................. 9.40 Common equity (K e ) (retained earnings)............. 12.00 Weighted average cost of capital (K a ) b. X = X= c. WACC 30% 10 60 100 1.86% 0.94 7.20 10.00% Retained earnings % of retained earnings in capital structure $20 million = $33.33 million .60 Cost (after tax) Weights Debt (K d ).................................. 6.20% Preferred stock (K p )................. 9.40 Common equity (K n )................ 13.40 Marginal cost of capital (K mc ) 30% 10 60 100 WACC 1.86% 0.94 8.04 10.84% d. Z = Z= Amount of lower cost debt % of debt within the capital structure $36 million = $120 million .30 e. Cost (after tax) Weights Debt (K d ).................................. 7.80% Preferred stock (K p )................. 9.40 Common equity (K n )................ 13.40 Marginal cost of capital (K mc ) 30% 10 60 100 WACC 2.34% 0.94 8.04 11.32% Comprehensive Problems 11-28. Hailey Mills Corporation Marginal Cost of Capital and Investment Returns a. K d = = = = Ke = Yield (1 – T) 11% (1 – .34) 11% (.66) 7.26% D1 $1.50 +g= + 0.09 = 0.05 + 0.09 = 0.1400 = 14.00% P0 $30 Cost (after tax) Weights Debt (K d ).................................. 7.26% Common equity (K e ) (retained earnings)............. 14.00 Weighted average cost of capital (K a ) b. X = 40% 60 100 Retained earnings % of retained earnings in capital structure WACC 2.90% 8.40 11.30% X = $15 million = $25 million .60 D  P   $30  c. K n =  1 + g  0  = 0.1400  = 0.1555 = 15.55% $ 30 $ 3 − P P    0  n  Cost (after tax) Weights Debt (K d ).................................. 7.26% Common equity (K n )................ 15.55 Marginal cost of capital (K mc ) d. Z = Z= WACC 40% 60 100 2.90% 9.33 12.23% Cost (after tax) Weights WACC Amount of lower cost debt % of debt within the capital structure $20 million = $50 million .40 e. First compute the new value for K d Kd = Yield (1 - T) = 13% (1 – .34) = 13% (.66) = 8.58% Debt (K d ).................................. 8.58% Common equity (K n )................ 15.55 Marginal cost of capital (K mc ) 40% 60 100 3.43% 9.33 12.76% f. The answer is $ 50 million. Return on Investment Marginal Cost of Capital 1st $25 million $25 million – $50 million $50 million – $75 million $75 million – $100 million 15.0% 13.5% 11.2% 10.5% > > < 0) should maintain generated cash flow in the corporation. Based on projects which exceed investor expectations the corporation is likely to do better with the cash flow than the shareholder who would have to invest dividends elsewhere. A growth company will attract shareholders (clientele) expecting capital appreciation not dividends. Dividends might change their perceptions of the company. c. Use more debt. Almost 90 percent of Orbit Corp. is financed with equity. This forces the cost of capital higher requiring investments to surpass the high cost of capital to be acceptable. Debt is cheaper and also has the advantage of tax savings because the interest can be expensed for tax purposes. Initial levels of lower priced debt will not greatly increase the corporation’s risk or the costs of the components of the capital structure. Therefore through averaging, the cost of capital will be lowered which will prove beneficial to shareholders. Solution Manual for Foundations of Financial Management Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen, Doug Short, Michael Perretta 9780071320566, 9781259268892, 9781259261015