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Fundamentals of Financial Management, 16e 16th Edition Eugene F. Brigham - eBook PDF download

The document provides information about the 16th edition of 'Fundamentals of Financial Management' by Eugene F. Brigham and Joel F. Houston, along with various related financial management eBooks available for download. It highlights features of MindTap, a digital learning solution that integrates Excel Online for enhanced learning experiences, offering interactive tools, assessments, and adaptive test preparation. The document emphasizes the importance of engaging students through innovative resources and personalized support to improve their understanding of financial concepts.

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100% found this document useful (8 votes)

308 views54 pages

Fundamentals of Financial Management, 16e 16th Edition Eugene F. Brigham - eBook PDF download

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xrusawathy73

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Fundamentals of
FinanCial
managEmEnt 16e
EugEnE F. Brigham
University of Florida

JoEl F. houston
University of Florida

Australia ● Brazil ● Canada ● Mexico ● Singapore ● United Kingdom ● United States

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text may not be available in the eBook version.

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ALL RIGHTS RESERVED. No part of this work covered by the copyright herein
Erin Joyner
may be reproduced or distributed in any form or by any means, except as
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Print Number: 01 Print Year: 2021

EvErything you nEEd in onE placE.

Cut prep time with MindTap preloaded, organized course materials. Teach more efficiently
with interactive multimedia, assignments, quizzes, and more.

EmpowEr your studEnts to rEach thEir potEntial.

Built-in metrics provide insight into student engagement. Identify topics needing extra
instruction. Instantly communicate with struggling students to speed progress.

your coursE. your contEnt.

MindTap gives you complete control over your course. You can rearrange textbook chapters, add
your own notes, and embed a variety of content—including Open Educational Resources (OER).

a dEdicatEd tEam, whEnEvEr you nEEd it.

MindTap is backed by a personalized team eager to help you every step of the way. We’ll help
set up your course, tailor it to your specific objectives, and stand by to provide support.

iii
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Elevate Critical thinking through a
variety of unique assessment tools

practicE problEms
All of the end-of-chapter problems are available in algorithmic format for either student practice
of applying content presented in the chapter or alternative graded assignment. MindTap is a
highly customizable assessment delivery platform, so you can pick and choose from a large bank
of algorithmic problem sets to assign to your students.

bluEprint practicE problEms

Blueprint Practice Problems combine conceptual and
application-driven problems with a tutorial emphasis.
Students will know with certainty their level of competency
for every chapter, which will improve course outcomes.

iv
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
gradEd homEwork
MindTap offers an assignable, algorithmic
homework tool that is based on our
proven and popular Aplia product for
Finance. These homework problems
include rich explanations and instant
grading, with opportunities to try
another algorithmic version of the
problem to bolster
confidence with
problem solving.

FinancE in action casEs

MindTap offers a series of Finance
in Action analytical cases that assess
students’ ability to perform higher-
level problem solving
and critical thinking/
decision making.

tEsting
Mindtap offers the
ability to modify
existing assignments
and to create new
assignments by
adding questions
from the Test Bank.

v
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Building valuable Excel skills for future
business careers while making data-driven decisions
Cengage Learning and Microsoft have partnered in MindTap to provide students with a
uniform, authentic Excel assignment experience. It provides instant feedback, built-in video
tips, and easily accessible spreadsheet work. These features allow you to spend more time
teaching finance applications and less time teaching and troubleshooting Excel.

These new algorithmic activities offer pre-populated data directly in Microsoft Excel Online,
which runs seamlessly on all major platforms and browsers. Students each receive their own
version of the problem data in order to use Excel Online to perform the necessary financial
analysis calculations. Their work is constantly saved in Cengage cloud storage as part of
homework assignments in MindTap. It’s easily retrievable so students can review their answers
without cumbersome file management and numerous downloads/uploads.

Access to Excel Online

as used in these
activities is completely
free for students as part
of the MindTap course
for Fundamentals of
Financial Management,
16e. It is not in any way
connected to personal
Office 365 accounts/
local versions of Excel,
nor are Microsoft
accounts required to
complete these
activities in MindTap.

Microsoft Excel Online

activities are aimed
at meeting students
where they are with
unparalleled support
and immediate
feedback.

vi
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Microsoft Excel Online activities aimed at meeting
students where they are with unparalleled
support and immediate feedback

ExcEl vidEo tips

Each activity includes a walk-
through video of a similar problem
being worked in Excel Online to
offer suggested formulas to use for
solving the problem. It also offers
tips and strategies, which assist
in understanding the underlying
financial concepts while working
within Excel.

calculation
stEps and
ExcEl solutions
Each activity offers
configurable displays
that include the correct
answers, the manual
calculation steps, and
an Excel solution (with
suggested formulas)
that matches the exact
version of the problem
the student received.
Students can check
their work against the
correct solution to
identify improvement
areas. Instructors always
have access to review the student’s answers and Excel work from the MindTap progress app to
better assist in error analysis and troubleshooting.

vii
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Encouraging those ‘aha!’ moments with all new
Exploring Finance visualizations

All-new in MindTap for Fundamentals of Financial Management, 16e, Exploring Finance

activities offer instructors and students interactive visualizations that engage with
“lean forward” interactivity. Exploring Finance activities provide instructors visual,
interactive tools that can be used to help students “see” the statistical concept being
presented directly within MindTap.

viii
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Exploring Finance visualizations are
found at the chapter level of the
MindTap learning path for easy retrieval
in class to show on projector screens.

Exploring Finance visualizations have a pre-built activity in the learning path within MindTap
that allows students to manipulate the values and then respond to questions that reinforce
their understanding of the concept being
conveyed. These activities can be assigned
as practice or for a grade and often offer an
interactive, conceptual activity immediately
reinforcing student understanding.

ix
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
help students prepare for exam success with
adaptive test Prep, only available in mindtap

adaptivE whErE
it counts
The new Adaptive
Test Prep App helps
students prepare
for test success by
allowing them to
generate multiple
practice tests across
chapters until they
have confidence
they have mastered
the material.

The adaptive test program grades

practice tests and indicates the areas
that have or have not been mastered.
Students are presented with an
Adaptive Study
Plan that takes
them directly
to the pertinent
pages in the text
where the practice
question materials
are referenced.

x
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
FEEdback is kEy
Students also receive robust explanations of the problems to assist in further understanding.
Many of the quantitative test questions feature video feedback that offers students step-by-
step instruction to reinforce their understanding and bolster their confidence.

xi
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
getting Down the Basics
is important

In order for you to take students further into the applications of finance, it’s important
that they have a firm handle on the basic concepts and methods used. In MindTap for
Fundamentals of Financial Management, we provide students with just-in-time tools
that—coupled with your guidance—ensure that
they build a solid foundation.

prEparing For FinancE

Students are more confident and prepared when they
have the opportunity to brush up on their knowledge
of the prerequisite concepts required to be successful
in finance. Tutorials/problems to review prerequisite
concepts that students should know. Topics covered
include Accounting, Economics, Mathematics, and
Statistics, as well as coverage of various Financial
Calculators and Excel.

WHY IS THIS
IMPORTANT TO ME?
For many students, the idea of taking
finance is intimidating. Beyond that, students
report that they become more engaged
with the course material when they see
its relevance in business. The “Why is this
important to me?” activity asks the student
to complete a short self-assessment activity
to demonstrate how they may already have
personal knowledge about the important
finance concepts they will learn in the
chapter material. It is intended to help the
student, especially the non-finance major,
better understand the relevance in the
financial concepts they will learn.

xii
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
concEpt clips
Embedded throughout
the new interactive
MindTap Reader,
Concept Clips present
key finance topics
to students in an
entertaining and
memorable way
via short animated
video clips. These
video animations
provide students with
auditory and visual
representation of the
important terminology
for the course.

problEm walk-through vidEos

Embedded in the interactive MindTap
Reader and linked to select problems
in MindTap, Problem Walk-Through
Videos provide step-by-step instructions
designed to walk students through
solving a problem from start to finish.
Students can play and replay the
tutorials as they work through homework
assignments or prepare for quizzes and
tests—almost as though they had you
by their side the whole time. Ideal for
homework, study outside the classroom,
or distance learning, Problem Walk-
Through Videos extend your reach to
give students extra instructional help
whenever and wherever it’s most useful.

xiii
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Customizable Course and
mobile on-the-go study tools
based on Your needs
MindTap for Fundamentals of Financial Management, 16e offers features that allow you to
customize your course based on the topics you cover.

lEarning path
customization
The learning path is structured
by chapter so you can easily
hide activities you wish to not
cover, or change the order
to better align with your
course syllabus. RSS feeds and
YouTube links can easily be
added to the learning path or
embedded directly within the
MindTap Reader.

MindTap
Mobile
Empower
students to mindtap ErEadEr
eir
learn on th Provides Convenience
Students can read their full course eBook on their
time,
terms—any smartphone. This means they can complete reading
assignments anyplace, anytime. They can take notes,
anywhere, highlight important passages, and have their text
e.
on- or off-lin read aloud, whether they are on- or off-line.

xiv
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Flashcards and Quizzing
Cultivate Confidence and Elevate Outcomes
Students have instant access to readymade flashcards specific to their course. They can also create
flashcards tailored to their own learning needs. Study games present a fun and engaging way to
encourage recall of key concepts. Students can use pre-built quizzes or generate a self-quiz from
any flashcard deck.

thE gradEbook
Keep Students Motivated
Students can instantly see their grades
and how they are doing in the course.
If they didn’t do well on an assignment,
they can implement the flashcards and
practice quizzes for that chapter.

notiFications
Keep Students Connected
Students want their smartphones to help them
remember important dates and milestones—
for both the social and academic parts of their
lives. The MindTap Mobile App pushes course
notifications directly to them, making them
more aware of what’s ahead with:
Due date reminders
Changes to activity due dates, score
updates, and instructor comments
Messages from their instructor
Technical announcements about
the platform

xv
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
LMS
Integration
Cengage’s LMS
Integration is designed
to help you seamlessly
integrate our digital
resources within your
institution’s Learning
Management System.

LMS integration is available with the Learning

Management Systems instructors use most. Our integrations work with
any LMS that supports IMS Basic LTI Open Standards. Enhanced features,
including grade synchronization, are the result of active collaborations
with our LMS partners.

crEatE a sEamlEss usEr ExpEriEncE

With LMS Integration, your students are ready to learn on the first day of class. In just a few
simple steps, both you and your students can access Cengage resources using a LMS login.

contEnt customization with dEEp linking

Focus student attention on what matters most. Use our Content Selector to create a unique
learning path that blends your content with links to learning activities, assignments, and more.

automatic gradE synchronization*

Need to have your course grades recorded in your LMS gradebook? No problem. Simply
select the activities you want synched, and grades will automatically be recorded in your
LMS gradebook.

* Grade synchronization is currently available with Blackboard, BrightSpace (powered by D2L), Canvas, and Angel 8.

xvi
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Brief Contents
Preface xxviii
About the Authors xxxix

Part 1 Introduction to Financial Management 1

Chapter 1 An Overview of Financial Management 2
Chapter 2 Financial Markets and Institutions 29

Part 2 Fundamental Concepts in Financial Management 63

Chapter 3 Financial Statements, Cash Flow,
and Taxes 64
Chapter 4 Analysis of Financial Statements 108
Chapter 5 Time Value of Money 151

Part 3 Financial Assets 195

Chapter 6 Interest Rates 196
Chapter 7 Bonds and Their Valuation 231
Chapter 8 Risk and Rates of Return 273
Chapter 9 Stocks and Their Valuation 319

Part 4 Investing in Long-Term Assets: Capital Budgeting 359

Chapter 10 The Cost of Capital 360
Chapter 11 The Basics of Capital Budgeting 389
Chapter 12 Cash Flow Estimation and Risk Analysis 421
Chapter 13 Real Options and Other Topics in Capital
Budgeting 454

Part 5 Capital Structure and Dividend Policy 477

Chapter 14 Capital Structure and Leverage 478
Chapter 15 Distributions to Shareholders: Dividends
and Share Repurchases 521

Part 6 Working Capital Management, Financial

Forecasting, and Multinational Financial
Management 557
Chapter 16 Working Capital Management 558
Chapter 17 Financial Planning and Forecasting 598
Chapter 18 Multinational Financial Management 625

Part 7 Special Topics in Financial Management 663

Chapter 19 Derivatives and Risk Management 664

xvii

Chapter 20 Hybrid Financing: Preferred Stock,

Leasing, Warrants, and Convertibles 708
Chapter 21 Mergers and Acquisitions 740

Appendixes
APPENDIX A Solutions to Self-Test Questions
and Problems A-1
APPENDIX B Answers to Selected
End-of-Chapter Problems B-1
APPENDIX C Selected Equations and Tables C-1

Index I-1

3-4 Statement of Cash Flows 77 Economic Value Added (EVA) versus Net
3-5 Statement of Stockholders’ Equity 80 Income 129
3-6 Uses and Limitations of Financial 4-9 Using Financial Ratios to Assess
Statements 81 Performance 130
4-9A Comparison to Industry Average 131
3-7 Free Cash Flow 82 4-9B Benchmarking 132
Free Cash Flow Is Important for Businesses 4-9C Trend Analysis 133
Both Small and Large 85 4-10 Uses and Limitations of Ratios 134
3-8 MVA and EVA 85 Looking for Warning Signs Within
3-9 Income Taxes 87 the Financial Statements 136
Congress Passes Sweeping Tax Reform Act in 4-11 Looking Beyond the Numbers 136
2017 87
3-9A Individual Taxes 89
TYING IT ALL TOGETHER 138
3-9B Corporate Taxes 92
intEgratED CasE D’leon inc., Part ii 147
Corporate Tax Rates Around the World 92
TYING IT ALL TOGETHER 96 taking a Closer look
Conducting A Financial Ratio Analysis on HP Inc. 150
intEgratED CasE D’leon inc., Part i 103
WEB aPPEnDiX 4a
taking a Closer look
Common Size and Percent Change Analyses
Exploring Dunkin’ Brands Group’s Financial
Statements 107
ChaPtEr 5
time Value of money 151
ChaPtEr 4 Will You Be Able to Retire? 151
analysis of Financial statements 108 PUTTING THINGS IN PERSPECTIVE 152
Can You Make Money Analyzing Stocks? 108 5-1 Time Lines 153
PUTTING THINGS IN PERSPECTIVE 109 5-2 Future Values 154
5-2A Step-By-Step Approach 154
4-1 Ratio Analysis 110 5-2B Formula Approach 155
4-2 Liquidity Ratios 111 5-2C Financial Calculators 155
4-2A Current Ratio 111 Simple versus Compound Interest 155
Financial Analysis on the Internet 112 5-2D Spreadsheets 156
4-2B Quick, or Acid Test, Ratio 113 Hints on Using Calculators 158
4-3 Asset Management Ratios 114 5-2E Graphic View of the Compounding
4-3A Inventory Turnover Ratio 114 Process 158
4-3B Days Sales Outstanding 115 5-3 Present Values 160
4-3C Fixed Assets Turnover Ratio 116 5-3A Graphic View of the Discounting
4-3D Total Assets Turnover Ratio 116 Process 162
4-4 Debt Management Ratios 117 5-4 Finding the Interest Rate, I 163
4-4A Total Debt to Total Capital 119 5-5 Finding the Number of Years, N 164
4-4B Times-Interest-Earned Ratio 119
5-6 Annuities 164
4-5 Profitability Ratios 120
4-5A Operating Margin 120 5-7 Future Value of an Ordinary Annuity 165
4-5B Profit Margin 121 5-8 Future Value of an Annuity Due 168
4-5C Return on Total Assets 121 5-9 Present Value of an Ordinary Annuity 169
4-5D Return on Common Equity 122
4-5E Return on Invested Capital 122 5-10 Finding Annuity Payments, Periods,
4-5F Basic Earning Power (BEP) Ratio 123 and Interest Rates 171
4-6 Market Value Ratios 123 5-10A Finding Annuity Payments, PMT 171
4-6A Price/Earnings Ratio 124 5-10B Finding the Number of Periods, N 172
4-6B Market/Book Ratio 124 5-10C Finding the Interest Rate, I 173
4-6C Enterprise Value/EBITDA Ratio 125 5-11 Perpetuities 174
4-7 Tying the Ratios Together: 5-12 Uneven Cash Flows 174
The DuPont Equation 126 5-13 Future Value of an Uneven Cash
Microsoft Excel: A Truly EssentIal Tool 128 Flow Stream 176
4-8 Potential Misuses of ROE 128 5-14 Solving for I with Uneven Cash Flows 177

5-15 Semiannual and Other Compounding intEgratED CasE morton handley

Periods 178 & Company 229
5-16 Comparing Interest Rates 180
taking a Closer look
5-17 Fractional Time Periods 183 Using The New York Times Bond Market Page
5-18 Amortized Loans 183 and FINRA Bond Center Websites to Understand
TYING IT ALL TOGETHER 185 Interest Rates 230

intEgratED CasE First national Bank 193 ChaPtEr 7

WEB aPPEnDiX 5a Bonds and their Valuation 231
Continuous Compounding and Discounting Sizing Up Risk in the Bond Market 231

WEB aPPEnDiX 5B PUTTING THINGS IN PERSPECTIVE 232

Growing Annuities 7-1 Who Issues Bonds? 233
7-2 Key Characteristics of Bonds 234
7-2A Par Value 234
Part 3 7-2B Coupon Interest Rate 234
7-2C Maturity Date 235
Financial Assets 195 7-2D Call Provisions 235
7-2E Sinking Funds 236
7-2F Other Features 237
ChaPtEr 6 7-3 Bond Valuation 237
interest rates 196 7-4 Bond Yields 241
Interest Rates Fall to Historic Lows 196 7-4A Yield to Maturity 242
7-4B Yield to Call 243
PUTTING THINGS IN PERSPECTIVE 197 7-5 Changes in Bond Values over
6-1 The Cost of Money 198 Time 245
6-2 Interest Rate Levels 199 7-6 Bonds with Semiannual Coupons 248
6-3 The Determinants of Market Interest 7-7 Assessing a Bond’s Riskiness 250
Rates 203 7-7A Price Risk 251
6-3A The Real Risk-Free Rate of Interest, r* 203 7-7B Reinvestment Risk 252
6-3B The Nominal, or Quoted, Risk-Free Rate 7-7C Comparing Price Risk and Reinvestment
of Interest, rRF 5 r* 1 IP 204 Risk 253
6-3C Inflation Premium (IP) 204 7-8 Default Risk 255
6-3D Default Risk Premium (DRP) 205 7-8A Various Types of Corporate Bonds 255
6-3E Liquidity Premium (LP) 206 7-8B Bond Ratings 256
6-3F Interest Rate Risk and the Maturity 7-8C Bankruptcy and Reorganization 261
Risk Premium (MRP) 206 7-9 Bond Markets 262
An Almost Riskless Treasury Bond 207
Accrued Interest and the Pricing of Coupon
6-4 The Term Structure of Interest Rates 209 Bonds 263
6-5 What Determines the Shape TYING IT ALL TOGETHER 265
of the Yield Curve? 211
The Links between Expected Inflation intEgratED CasE Western money
and Interest Rates: A Closer Look 213 management inc. 271
6-6 Using the Yield Curve to Estimate Future
taking a Closer look
Interest Rates 215
Using Online Resources to Understand the Impact of
6-7 Macroeconomic Factors That Influence Interest Rates on Bond Valuation 272
Interest Rate Levels 218
6-7A Federal Reserve Policy 218 WEB aPPEnDiX 7a
6-7B Federal Budget Deficits or Surpluses 219 Zero Coupon Bonds
6-7C International Factors 219
6-7D Business Activity 220
Does An Inverted Yield Curve Signal
WEB aPPEnDiX 7B
That a Recession Is Coming? 221 Bond Risk and Duration
6-8 Interest Rates and Business Decisions 222
WEB aPPEnDiX 7C
TYING IT ALL TOGETHER 224 Bankruptcy and Reorganization

ChaPtEr 8 9-1A Control of the Firm 320

9-1B The Preemptive Right 322
risk and rates of return 273 Are “Smart Beta” Funds a Smart Idea? 323
Managing Risk in Difficult Times 273 9-2 Types of Common Stock 323
PUTTING THINGS IN PERSPECTIVE 274 9-3 Stock Price versus Intrinsic Value 324
9-3A Why Do Investors and Companies
8-1 The Risk-Return Trade-Off 275 Care About Intrinsic Value? 325
8-2 Stand-Alone Risk 277 9-4 The Discounted Dividend Model 326
8-2A Statistical Measures of Stand-Alone 9-4A Expected Dividends as the Basis
Risk 278 for Stock Values 328
8-2B Measuring Stand-Alone Risk:
the Standard Deviation 280
9-5 Constant Growth Stocks 329
8-2C Using Historical Data to Measure 9-5A Illustration of a Constant Growth
Risk 281 Stock 330
8-2D Other Measures of Stand-Alone Risk: The 9-5B Dividends versus Growth 331
Coefficient of Variation and The Sharpe 9-5C Which is Better: Current Dividends or
Ratio 282 Growth? 333
8-2E Risk Aversion and Required Returns 284 9-5D Required Conditions for the Constant
The Historical Trade-Off between Risk and Growth Model 333
Return 285 9-6 Valuing Nonconstant Growth Stocks 334
8-3 Risk in a Portfolio Context: The CAPM 286 The Coronavirus and the Stock Market 336
8-3A Expected Portfolio Returns, rp 287 ⁄ Evaluating Stocks that Don’t Pay Dividends 339
8-3B Portfolio Risk 288 9-7 Enterprise-Based Approach to
Adding More Stocks Doesn’t Always Reduce Valuation 340
the Risk of Your Portfolio 292 9-7A The Corporate Valuation Model 340
8-3C Risk in a Portfolio Context: The Beta 9-7B Comparing the Corporate Valuation
Coefficient 292 and Discounted Dividend Models 343
Global Perspectives: The Benefits of Diversifying Other Approaches to Valuing Common Stocks 344
Overseas 297
9-8 Preferred Stock 345
Recent Study Highlights the Importance
of Diversification 298 TYING IT ALL TOGETHER 346
8-4 The Relationship between Risk
and Rates of Return 298 intEgratED CasE mutual of Chicago insurance
Company 352
Estimating the Market Risk Premium 301
8-4A The Impact of Expected Inflation 303
taking a Closer look
8-4B Changes in Risk Aversion 304
8-4C Changes in a Stock’s Beta Coefficient 305 Estimating ExxonMobil Corporation’s Intrinsic Stock
8-5 Some Concerns about Beta and the Value 353
CAPM 306
aPPEnDiX 9a
8-6 Some Concluding Thoughts: Implications Stock Market Equilibrium 355
for Corporate Managers and Investors 307
TYING IT ALL TOGETHER 308
Part 4
intEgratED CasE merrill Finch inc. 316
Investing in Long-Term Assets:
taking a Closer look Capital Budgeting 359
Using Past Information to Estimate Required Returns 318

WEB aPPEnDiX 8a ChaPtEr 10

Calculating Beta Coefficients the Cost of Capital 360
Creating Value at Disney 360
ChaPtEr 9
PUTTING THINGS IN PERSPECTIVE 361
stocks and their Valuation 319
10-1 An Overview of the Weighted Average
Searching for the Right Stock 319
Cost of Capital (WACC) 362
PUTTING THINGS IN PERSPECTIVE 320 10-2 Basic Definitions 363
9-1 Legal Rights and Privileges 10-3 Cost of Debt, rd(12T) 365
of Common Stockholders 320 10-4 Cost of Preferred Stock, rp 366

10-5 Cost of Retained Earnings, rs 367 TYING IT ALL TOGETHER 413

10-5A CAPM Approach 368
10-5B Bond-Yield-Plus-Risk-Premium intEgratED CasE allied Components
Approach 369 Company 419
10-5C Dividend-Yield-Plus-Growth-Rate,
or Discounted Cash Flow (DCF),
Approach 370 ChaPtEr 12
10-5D Averaging the Alternative Cash Flow Estimation and risk
Estimates 371
analysis 421
10-6 Cost of New Common Stock, re 372
Home Depot Carefully Evaluates New Investments 421
10-6A Add Flotation Costs to a Project’s
Cost 372 PUTTING THINGS IN PERSPECTIVE 422
10-6B Increase the Cost of Capital 373
10-6C When Must External Equity Be 12-1 Conceptual Issues in Cash
Used? 374 Flow Estimation 423
10-7 Composite, or Weighted Average, 12-1A Free Cash Flow versus Accounting
Cost of Capital, WACC 375 Income 423
12-1B Timing of Cash Flows 424
10-8 Factors That Affect the WACC 375 12-1C Incremental Cash Flows 424
10-8A Factors the Firm Cannot Control 375 12-1D Replacement Projects 424
Some Real-World Estimates of the WACC 376 12-1E Sunk Costs 425
10-8B Factors the Firm Can Control 377 12-1F Opportunity Costs Associated
10-9 Adjusting the Cost of Capital for with Assets the Firm Owns 425
Risk 377 12-1G Externalities 426
12-2 Analysis of an Expansion Project 427
10-10 Some Other Problems with Cost
12-2A Effect of Different Depreciation Rates 430
of Capital Estimates 379 12-2B Cannibalization 430
TYING IT ALL TOGETHER 380 12-2C Opportunity Costs 430
12-2D Sunk Costs 430
intEgratED CasE Coleman technologies inc. 386 12-2E Other Changes to the Inputs 430
12-3 Replacement Analysis 431
taking a Closer look 12-4 Risk Analysis in Capital Budgeting 433
Calculating 3M’s Cost of Capital 387 12-5 Measuring Stand-Alone Risk 434
12-5A Sensitivity Analysis 435
WEB aPPEnDiX 10a 12-5B Scenario Analysis 436
The Cost of New Common Stock and WACC 12-5C Monte Carlo Simulation 438
12-6 Within-Firm and Beta Risk 439
12-7 Unequal Project Lives 440
ChaPtEr 11 12-7A Replacement Chains 440
the Basics of Capital Budgeting 389 12-7B Equivalent Annual Annuities
Companies Struggle to Make Investments in the Face of (EAA) 440
Changing Technology and Market Conditions 389 12-7C Conclusions about Unequal
Lives 442
PUTTING THINGS IN PERSPECTIVE 390 TYING IT ALL TOGETHER 442
11-1 An Overview of Capital Budgeting 391
intEgratED CasE allied Food
11-2 Net Present Value (NPV) 393 Products 451
11-3 Internal Rate of Return (IRR) 396
Why NPV Is Better than IRR 399 WEB aPPEnDiX 12a
11-4 Multiple Internal Rates of Return 399 Tax Depreciation
11-5 Reinvestment Rate Assumptions 401 WEB aPPEnDiX 12B
11-6 Modified Internal Rate of Return Refunding Operations
(MIRR) 402
11-7 NPV Profiles 406 WEB aPPEnDiX 12C
Using the CAPM to Estimate the Risk-Adjusted
11-8 Payback Period 409
Cost of Capital
11-9 Conclusions on Capital Budgeting
Methods 411 WEB aPPEnDiX 12D
11-10 Decision Criteria Used in Practice 412 Techniques for Measuring Beta Risk

ChaPtEr 13 14-4G Windows of Opportunity 506

14-5 Checklist for Capital Structure
real options and other topics in Capital
Decisions 506
Budgeting 454 14-6 Variations in Capital Structures 509
Anheuser-Busch Used Real Options to Enhance Its
Value 454 TYING IT ALL TOGETHER 510

PUTTING THINGS IN PERSPECTIVE 455 intEgratED CasE Campus Deli inc. 517
13-1 Introduction to Real Options 455 taking a Closer look
13-2 Growth (Expansion) Options 456 Exploring the Capital Structures for Four Restaurant
Companies 520
13-3 Abandonment/Shutdown
Options 459 WEB aPPEnDiX 14a
13-4 Investment Timing Options 461 Degree of Leverage
13-5 Flexibility Options 463
13-6 The Optimal Capital Budget 464 ChaPtEr 15
13-7 The Post-Audit 468 Distributions to shareholders:
TYING IT ALL TOGETHER 469 Dividends and share repurchases 521
Apple Continues to Unload Part of Its Vast Cash
intEgratED CasE 21st Century Education Hoard 521
Products 474
PUTTING THINGS IN PERSPECTIVE 522
15-1 Dividends versus Capital Gains: What Do
Part 5 Investors Prefer? 523
15-1A Dividend Irrelevance Theory 523
Capital Structure 15-1B Reasons Some Investors Prefer
and Dividend Policy 477 Dividends 524
15-1C Reasons Some Investors Prefer Capital
Gains 524
ChaPtEr 14 15-2 Other Dividend Policy Issues 525
Capital structure and leverage 478 15-2A Information Content, or Signaling,
Debt: Rocket Booster or Anchor? Caterpillar Inc. 478 Hypothesis 525
15-2B Clientele Effect 526
PUTTING THINGS IN PERSPECTIVE 479 15-3 Establishing the Dividend Policy
14-1 Book, Market, or “Target” Weights? 479 in Practice 527
14-1A Measuring the Capital Structure 480 15-3A Setting the Target Payout Ratio: The
14-1B Capital Structure Changes Over Residual Dividend Model 527
Time 482 Coronavirus Concerns Spur Many Companies to
14-2 Business and Financial Risk 483 Reduce or Suspend Their Dividends 529
14-2A Business Risk 483 15-3B Earnings, Cash Flows, and
14-2B Factors That Affect Business Risk 485 Dividends 533
14-2C Operating Leverage 485 Global Perspectives: Dividend Yields around
14-2D Financial Risk 489 the World 535
14-3 Determining the Optimal Capital 15-3C Payment Procedures 536
Structure 494 15-4 Dividend Reinvestment Plans 538
14-3A WACC and Capital Structure 15-5 Summary of Factors Influencing
Changes 494 Dividend Policy 539
14-3B The Hamada Equation 495 15-5A Constraints 539
14-3C The Optimal Capital Structure 498 15-5B Investment Opportunities 540
Yogi Berra on the MM Proposition 500 15-5C Alternative Sources of Capital 540
14-4 Capital Structure Theory 500 15-5D Effects of Dividend Policy on rs 541
14-4A The Effect of Taxes 501 15-6 Stock Dividends and Stock Splits 541
14-4B The Effect of Potential Bankruptcy 502 15-6A Stock Splits 541
14-4C Trade-off Theory 502 15-6B Stock Dividends 542
14-4D Signaling Theory 503 15-6C Effect on Stock Prices 542
14-4E Using Debt Financing to Constrain 15-7 Stock Repurchases 543
Managers 504
14-4F Pecking Order Hypothesis 505 15-7A The Effects of Stock Repurchases 544
15-7B Advantages of Repurchases 546

15-7C Disadvantages of Repurchases 546 16-9 Accounts Payable

Stock Repurchases Come Under Attack 547 (Trade Credit) 581
15-7D Conclusions on Stock A Difficult Balancing Act 583
Repurchases 548
16-10 Bank Loans 584
TYING IT ALL TOGETHER 548 16-10A Promissory Note 584
16-10B Line of Credit 585
intEgratED CasE southeastern steel 16-10C Revolving Credit Agreement 586
Company 554 16-10D Costs of Bank Loans 586
16-11 Commercial Paper 588
taking a Closer look
16-12 Accruals (Accrued Liabilities) 589
Apple’s Dividend Policy 555
16-13 Use of Security in Short-Term
WEB aPPEnDiX 15a Financing 589
The Residual Dividend Model: An Example TYING IT ALL TOGETHER 590

intEgratED CasE ski Equipment inc. 595

Part 6 WEB aPPEnDiX 16a
Working Capital Management, Inventory Management
Financial Forecasting, and WEB aPPEnDiX 16B
Multinational Financial Short-Term Loans and Bank Financing
Management 557
ChaPtEr 17
ChaPtEr 16 Financial Planning and Forecasting 598
Effective Forecasting Is an Important Component
Working Capital management 558 of Strong Performance 598
Successful Firms Efficiently Manage Their Working
Capital 558 PUTTING THINGS IN PERSPECTIVE 599
17-1 Strategic Planning 600
PUTTING THINGS IN PERSPECTIVE 559
16-1 Background on Working Capital 559 17-2 The Sales Forecast 602
16-2 Current Assets Investment Policies 560 17-3 The AFN Equation 603
17-3A Excess Capacity Adjustments 607
16-3 Current Assets Financing Policies 562
17-4 Forecasted Financial Statements 608
16-3A Maturity Matching, or “Self-
17-4A Part I. Inputs 608
Liquidating,” Approach 562
17-4B Part II. Forecasted Income
16-3B Aggressive Approach 562
Statement 611
16-3C Conservative Approach 564
17-4C Part III. Forecasted Balance Sheet 611
16-3D Choosing between The
17-4D Part IV. Ratios and EPS 612
Approaches 564
17-4E Using the Forecast to Improve
16-4 The Cash Conversion Cycle 565 Operations 612
16-4A Calculating the Targeted CCC 565 17-5 Using Regression to Improve
16-4B Calculating the CCC From Financial
Statements 566 Forecasts 613
Some Real-World Examples of the Cash 17-6 Analyzing the Effects of Changing
Conversion Cycle 567 Ratios 614
16-5 The Cash Budget 570 17-6A Modifying Accounts Receivable 614
16-6 Cash and Marketable Securities 573 17-6B Modifying Inventories 615
17-6C Other “Special Studies” 615
16-6A Currency 574
16-6B Demand Deposits 574 TYING IT ALL TOGETHER 615
16-6C Marketable Securities 575
16-7 Inventories 577 intEgratED CasE new World
Chemicals inc. 621
16-8 Accounts Receivable 578
16-8A Credit Policy 578
16-8B Setting And Implementing the Credit
taking a Closer look
Policy 579 Forecasting the Future Performance of Abercrombie
16-8C Monitoring Accounts Receivable 580 & Fitch 624

WEB aPPEnDiX 17a

Forecasting Financial Requirements When Financial
Part 7
Ratios Change Special Topics in Financial
Management 663
ChaPtEr 18
multinational Financial ChaPtEr 19
management 625 Derivatives and risk management 664
U.S. Firms Look Overseas to Enhance Shareholder Using Derivatives to Manage Risk 664
Value 625
PUTTING THINGS IN PERSPECTIVE 665
PUTTING THINGS IN PERSPECTIVE 626 19-1 Reasons to Manage Risk 666
18-1 Multinational, or Global, CFOs Assess the Costs and Benefits
Corporations 626 of Risk Management 668
President Trump Imposes 19-2 Background on Derivatives 669
New Tariffs 629 19-3 Options 671
18-2 Multinational versus Domestic Financial 19-3A Option Types and Markets 671
Management 630 19-3B Factors That Affect the Value of a Call
A New Era of Deglobalization? 632 Option 673
19-3C Exercise Value versus Option Price 673
18-3 The International Monetary System 632
18-3A International Monetary Terminology 633
19-4 Introduction to Option Pricing
18-3B Current Monetary Arrangements 634 Models 676
Brexit Shakes Europe 635 Expensing Executive Stock Options 679
18-4 Foreign Exchange Rate Quotations 636 19-5 The Black-Scholes Option Pricing Model
18-4A Cross Rates 636 (OPM) 679
18-4B Interbank Foreign Currency 19-5A OPM Assumptions and Equations 679
Quotations 637 19-5B OPM Illustration 681
18-5 Trading in Foreign Exchange 638 Using the VIX As a Measure of Investors’ Fears 682
18-5A Spot Rates and Forward Rates 638 19-6 Forward and Futures Contracts 684
18-6 Interest Rate Parity 640 19-7 Other Types of Derivatives 688
18-7 Purchasing Power Parity 642 19-7A Swaps 688
Hungry For a Big Mac? Go to South Africa 644 Credit Instruments Create New Opportunities
and Risks 689
18-8 Inflation, Interest Rates,
19-7B Structured Notes 689
and Exchange Rates 646 19-7C Inverse Floaters 691
18-9 International Money 19-8 Using Derivatives to Reduce Risks 691
and Capital Markets 647 19-8A Security Price Exposure 691
18-9A International Credit Markets 647 19-8B Futures 692
Stock Market Indexes around the World 648 19-8C Swaps 693
18-9B International Stock Markets 649 19-8D Commodity Price Exposure 694
18-10 Investing Overseas 649 19-8E The Use and Misuse of
Global Perspectives: Measuring Country Derivatives 694
Risk 650 19-9 Risk Management 695
Global Perspectives: Investing in International 19-9A An Approach to Risk
Stocks 650 Management 696
PWC’s Guide for Assessing and Managing Risk 697
18-11 International Capital Budgeting 652
18-12 International Capital Structures 654 TYING IT ALL TOGETHER 699
TYING IT ALL TOGETHER 656 intEgratED CasE tropical sweets inc. 703
intEgratED CasE Citrus Products taking a Closer look
inc. 660
Facebook, Inc.: Call and Put Option Pricing and Interest
taking a Closer look Rate Futures 704
Using the Internet to Follow Exchange Rates and aPPEnDiX 19a
International Indexes 661 Valuation of Put Options 706

ChaPtEr 20 21-1B Tax Considerations 742

21-1C Purchase of Assets Below Their
hybrid Financing: Preferred stock, Replacement Cost 743
leasing, Warrants, and Convertibles 708 21-1D Diversification 743
Tesla’s Investors Love the Convertible 708 21-1E Managers’ Personal Incentives 743
21-1F Breakup Value 744
PUTTING THINGS IN PERSPECTIVE 709 21-2 Types of Mergers 744
20-1 Preferred Stock 709 21-3 Level of Merger Activity 744
20-1A Basic Features 710 21-4 Hostile versus Friendly Takeovers 746
Preferred Stock: Does It Make Sense 21-5 Merger Analysis 748
for Individual Investors? 711
21-5A Valuing the Target Firm 748
20-1B Adjustable-Rate Preferred Stock 712 21-5B Setting the Bid Price 751
20-1C Advantages and Disadvantages
More Than Just Financial Statements 753
of Preferred Stock 712
21-5C Post-Merger Control 754
20-2 Leasing 713
21-6 The Role of Investment Bankers 755
20-2A Financial Statement Effects 713
New Lease Guidance: ASC 842 714 21-6A Arranging Mergers 755
21-6B Developing Defensive Tactics 756
20-2B Evaluation By the Lessee 715
21-6C Establishing a Fair Value 756
20-2C Other Factors That Affect Leasing
21-6D Financing Mergers 757
Decisions 718
21-6E Arbitrage Operations 757
20-3 Warrants 719 21-7 Do Mergers Create Value?
20-3A Initial Market Price of a Bond with
Warrants 720
The Empirical Evidence 757
20-3B Use of Warrants in Financing 721 The Track Record of Large Mergers 759
20-3C The Component Cost of Bonds with 21-8 Corporate Alliances 759
Warrants 722 21-9 Private Equity Investments 760
20-3D Problems with Warrant Issues 722
20-4 Convertibles 723 21-10 Divestitures 760
21-10A Types of Divestitures 761
20-4A Conversion Ratio and Conversion
21-10B Divestiture Illustrations 761
Price 724
20-4B The Component Cost of TYING IT ALL TOGETHER 763
Convertibles 725
20-4C Use of Convertibles in Financing 728 intEgratED CasE smitty’s home repair
20-4D Convertibles Can Reduce Agency Company 766
Costs 729
20-5 A Final Comparison of Warrants WEB aPPEnDiX 21a
and Convertibles 729 Merger Regulation
20-6 Reporting Earnings When Warrants
WEB aPPEnDiX 21B
or Convertibles Are Outstanding 730
Holding Companies
TYING IT ALL TOGETHER 731

intEgratED CasE Fish & Chips inc., Part i 736 Appendixes

APPENDIX A Solutions to Self-Test
intEgratED CasE Fish & Chips inc., Part ii 737
Questions and Problems A-1
taking a Closer look APPENDIX B Answers to Selected
Using the Internet to Follow Hybrid Securities 738 End-of-Chapter Problems B-1
APPENDIX C Selected Equations
ChaPtEr 21 and Tables C-1
mergers and acquisitions 740
Disney Expands Its Media Empire 740 Index I-1
PUTTING THINGS IN PERSPECTIVE 741
21-1 Rationale for Mergers 742
21-1A Synergy 742

Structure of the Book

Our target audience is a student taking his or her first, and perhaps only, finance
course. Some of these students will decide to major in finance and go on to take
courses in investments, money and capital markets, and advanced corporate
finance. Others will choose marketing, management, or some other nonfinance
business major. Still others will major in areas other than business and take fi-
nance plus a few other business courses to gain information that will help them
in law, real estate, or other fields.
Our challenge has been to provide a book that serves all of these audiences
well. We focus on the core principles of finance, including the basic topics of time
value of money, risk analysis, and valuation. In each case, we address these topics
from two points of view: (1) that of an investor who is seeking to make intelligent
investment choices and (2) that of a business manager trying to maximize the
value of his or her firm’s stock. Both investors and managers need to understand
the same set of principles, so the core topics are important to students regardless
of what they choose to do after they finish the course.
In planning the book’s structure, we first listed the core topics in finance
that are important to virtually everyone. Included were an overview of financial
markets, methods used to estimate the cash flows that determine asset values, the
time value of money, the determinants of interest rates, the basics of risk analysis,
and the basics of bond and stock valuation procedures. We cover these core topics
in the first nine chapters. Next, because most students in the course will probably
work for a business firm, we want to show them how the core ideas are imple-
mented in practice. Therefore, we go on to discuss cost of capital, capital budget-
ing, capital structure, dividend policy, working capital management, financial
forecasting, international operations, risk management, hybrids, and mergers and
acquisitions.
Non-finance majors sometimes wonder why they need to learn finance. As
we have structured the book, it quickly becomes obvious to everyone why they
need to understand time value, risk, markets, and valuation. Virtually all stu-
dents enrolled in the basic course expect at some point to have money to invest,
and they quickly realize that the knowledge gained from Chapters 1 through 9
will help them make better investment decisions. Moreover, students who plan

xxviii

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
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“I have no doubt that the brother feels just as he says he does,
and I have no doubt that I do not feel a bit so. When I consider the
interests of God’s advancing kingdom of justice, and judgment, and
mercy, and purity, and truth, and liberty, I think that all the things in
the earth are of no value at all in the comparison, and that the earth
might melt with fervent heat, the elements dissolve, and the globe
vanish away rather than that this kingdom should not prevail. ‘Let
God be true, but every man a liar.’ Let the nations perish, let
everything go, but let the eternal treasures of God—truth, liberty,
mercy, judgment, and purity—be preserved. I feel lifted up to a
sovereign height of inspiration when I conceive of the majesty of
these treasures, effluent from the heart of God, which He is seeking
to embody in our time, in our earth, in this nation. Therefore, when I
see justice put down I feel like a lion. When I see a great moral
principle overborne there are no bounds to my indignation. When I
see a great humanity trodden under foot I long to be a champion for
it. And when I look on the face of an ignorant, erring, wicked
multitude, I think of a great many things besides....
“For the sake of these great principles I would give my life as
quick as I would pour out a glass of water; or I will do what is
harder than that—I will keep it and use it for forty years, if God
spares it, increasing its toil every year. I will make any sacrifice or
perform any labor for the sake of a moral principle. But when I look
at the South, other feelings besides those of vengeance are excited
in me. Every one of those traitors is as wicked as you think, and
more. The Floyds, the Davises, the Toombses, the Rhetts, and all
such as they, are more wicked than we know; and yet the Lord
Jesus Christ is the Saviour held up for every such one. They are all
immortal, they are all, like myself, pilgrims toward the bourne of the
eternal. And when I think how many ignorant creatures are led by
those base men to do wicked things, half of the wickedness of which
they do not know, I feel compassion for them and am sorry for
them. If they array themselves against justice it is necessary that
they should be overborne; but not one blow more than is necessary
for the defence of the principle assailed should be struck. We are not
authorized to inflict vengeance. ‘Vengeance is mine, I will repay,
saith the Lord. Therefore, if thine enemy hunger, feed him; if he
thirst, give him drink; for in so doing thou shalt heap coals of fire on
his head.’ About the use of every single sword and spear and ball
needful to assert a divine principle there should be no
squeamishness. I am for war just so far as it is necessary to
vindicate a great moral truth. But one particle of violence beyond
that is a flagrant treason against the law of love. And I can say to-
night that I would go to war with every State in the Southern
Confederacy, if called of God to join the army, and would hold them
to the conflict till the cause of right was vindicated; and that I could,
at the same time, pray for those misguided men as easily as to-night
I can pray for my own babes. I am as sorry for them as for any set
of men in the world. I do not think I utter a prayer on any morning
that I do not pray for them, and that God does not see my feeling of
tenderness and sorrow toward them. And that is not all. I regard
them as citizens yet. I love this whole country. I love its past and its
prospective history. God do so to me, and more also, if I ever cease
to feel for them all, misguided though they be, as anxiously as for
my own kin and brethren. We cannot afford to be very critical with
wickedness.
“However, there are some difficulties involved in this question.
Colonel Ellsworth, who has just been murdered by one of these
‘miscreants’ of whom you speak, I knew well. I was thinking of my
own sensations when I walked over from New York after hearing the
sad news. Why, I was forty feet high! I was scared, I grew so fast. I
walked so lordly that every step seemed to have the weight of a
mountain; yet I did not feel the touch of the earth. For one hour I
think I had enough volume of feeling to have swept away a
continent. I was almost frightened at the turbulent and swelling tide
within me, and I said: ‘Suppose my Master should come and say: My
child, what are you doing with such feelings? Where is My teaching?
What are you taking on yourself My supreme attribute for?
“Vengeance is mine, I will repay, saith the Lord.”’ Is it not charming
how these texts will exorcise the devil? I put that passage on my
head as a crown, and I have felt as peaceful as a lamb ever since.
And although it was very base and wicked for that man to murder
Colonel Ellsworth as he did, I can say that had he not expiated his
crime, and had the victim been my brother, I could still have forgiven
him and prayed for him.
“Now, my brethren, I am going to fight this battle right straight
through from beginning to end, and not lose my Christian feelings
either. I am going to stick close to my Saviour. And, with regard to
the past, I am not sorry for one sermon that I have preached among
you, or that I have preached during the last twenty years of my life.
If the question were put to me to-night, ‘When you look back upon
your public life and see what you have done to bring about the
present issue, are you not sorry for the ground you have taken?’ I
would say, No. I bless God for every word I have spoken and every
influence I have exerted in that direction. Knowing all that was to
be, I would do over again all that I have done if the same state of
things existed, only my little finger should be as heavy as my loins
have been.
“Now that the time of conflict has come, we must accept it. I
mean to go through it, and you shall; and I pray God that the whole
anointed Church at the North may, bearing the banner of Christ
along with the banner of our country. The stars over us shall not be
brighter and purer than those that we carry into this very conflict.
We have had examples enough to know that even in such a
desperate case as civil war a man may be a Christian. I thank God
that praying men have gone into the army from this church. Every
day and night there is a prayer-meeting in our camp, and there will
be to the end. And I believe that among our soldiers are those who,
if they saw the bitterest and most blasphemous of the enemy
suffering and dying, would relieve their sufferings by kind offices and
soothe their last moments by comforting words. God grant that it
may be so, and that, both in the service of the country and in the
service of the Lord Jesus Christ, they may be true soldiers!”
It is impossible to describe, or even, in our time, to conceive, the
fervor of patriotism that followed the firing upon Fort Sumter.
Patriotic meetings were held in nearly every village of the North, and
the raising of flag-poles with their accompanying exercises was the
order of the day. A monster mass-meeting was held in Union Square,
New York, over which John A. Dix presided, and where the flag
which had been lowered at Sumter was displayed. The attack on the
Massachusetts regiment in Baltimore as it hastened to the defence
of Washington deepened and increased the excitement. The ranks of
military companies already organized were speedily filled, and the
young men met, in most of our Northern cities, week by week for
military drill. A squad of these was formed in Brooklyn. Some fifteen
of us wanted to go to the front, and offered ourselves to one of the
New York regiments, but the offer was refused with thanks. Their
ranks were full and they had no place for us. Hearing of this, Mr.
Beecher, who took a deep interest in this whole matter and used to
attend our drills, proposed that two of us, his own son and one who
expected to belong to his family, should join a cavalry regiment then
being enlisted in New York. He gave us each a horse, brought us
home our equipment of pistols, bowie-knives, etc., and, the next
day, went with us to New York to see us enlist; but the enlisting
officer had received notice from Washington the day before to
accept no more recruits—cavalry regiments were not thought to be
necessary for the ninety days’ struggle; and so we were refused.
One of us went to Riker’s Island, and, after a month of waiting, was
able to get into service; the other, having just finished his theological
course, and having for weeks been importuned by a church to
become its pastor, concluded that it was God’s will that he should
preach, left the city, and went to work.
There was great variety of work to be done. No need now of
efforts to arouse the public mind—the firing upon Fort Sumter had
done that; no need now of urging men to the front—the young men
of the nation had formed into companies and regiments faster than
the government was willing to accept them. Illinois asked permission
to furnish all the men that were required. But another work pressed
upon heart and hand. Homes at the North were being made
desolate, not only by the absence but by the death of their loved
ones. Tidings began to reach us of what afterwards seemed
skirmishes, but were important battles in those days—Big Bethel,
Newport News, and others; and the list of the dead, small to what it
afterwards became, carried with it then, as always, sorrow and
heart-break. The bodies of fallen sons and brothers, picked up on
the battle-field or gathered from the hospitals, covered with the
stars and stripes, were being borne through the streets of our cities
on the way to bereaved homes, and the people needed comforting.
Then it was that the words of one perfectly assured of the justice of
the cause, that it was of God, and that those who upheld their
country’s flag were doing His work, and who viewed life and death
as only and equally desirable when they accomplished His will, rang
out like the resurrection challenge of St. Paul: “O death! where is thy
sting? O grave! where is thy victory?”
In a sermon preached May 26, 1861, when but the first
mutterings of the storm had been heard and the first splashes of
rain were felt, he says: “He whose remains are to pass to-day, amid
many tears, through yonder city, lived long though he died early.
Why? Because he lived to a moral purpose. Because he has given his
name to patriotism. Millions of men shall live four-score years and
shall not leave any such memorial as he has left. He had lived long
enough. Any man that can give the whole weight of his being and
his heart-life to a great truth or cause has lived long enough.
Measure him by the higher and not by the lower standard. Do not
say that he has lost days, that he has lost coming honors, that he
lost pleasure. He lost nothing. He gained everything. He gained
glory, and paid his life for it in such a way as to take on immortality.”
One very intimate with him in those days says: “I do not think that
he spent a moment in solicitude for the fate of those who were at
the front, not even of his own flesh and blood. Everything seemed
swallowed up in his zeal for his country, and for her he was ready to
sacrifice everything without complaint or hesitation.”
“My oldest son is in the army, and shall I read with trembling
anxiety the account of every battle to see if he is slain? I gave him
to the Lord, and I shall not take him back and I will not worry and
fret myself about him. I will trust in God though He slay not only him
but me also; and all I have I put on the same ground—I try to,
sometimes not succeeding and sometimes succeeding a little. My
God, this Christ Emmanuel—God with me—has sustained and
comforted me in care and trouble, and taken away my fear and put
hope in its place, and I will look to Him still; and if there are any
here that have carried burdens, and whose faces are wrinkled with
care, I beseech of you to try living by faith in a present Saviour that
loves you and ordains all things, and says that everything shall work
for your good if you love God.”
Among the things that occupied his time and called forth all his
energies was the equipment of the Fourteenth Long Island
Regiment. His home at 124 Columbia Heights became a store-house
of military goods and a place of consultation for men interested in
the events that were taking place; Plymouth Church became a
rendezvous for regiments passing to the front, and the church
parlors a workshop where the women and maidens of the church,
under the direction of Mrs. Beecher, met daily to sew and knit and
pack for the soldiers. He told Mrs. Beecher to use all his salary in this
direction, except such as was absolutely necessary for running the
household. She did this, and added to the amount by personal
solicitation from families and merchants, until an immense sum was
raised and expended.
While many men sent single substitutes, Mr. Beecher determined
to be represented in the war by a whole regiment; and so, after
helping to fit out two regiments, he took upon himself the entire
burden of equipping a new one, called “The Long Island Volunteers,”
afterwards the Sixty-seventh New York. This regiment would never
have had any existence but for the labors of Mr. and Mrs. Beecher,
and the members of the church whom they interested in it. Their
eldest son, Henry Barton Beecher, joined it and was made a
lieutenant. In those days the government had plenty of men and
very little money, and therefore declined to accept this regiment for
many weeks after it was organized, during which time the entire
expense of feeding and clothing the men was borne by subscriptions
raised by Mr. Beecher. It was not until after the battle of Bull Run, at
the end of July, 1861, that the regiment was even in form accepted,
and not until much later that it was actually mustered into the
national service.
In those days of multiplied and harassing labors Mr. Beecher did
not lose his hope, his cheerfulness, nor even his mirthfulness. He
had a refuge to which he constantly fled when the pressure became
too heavy. He had also the power of seeing the humorous side of
many common or even tragic events, and drawing from them
laughter as well as tears. The flowers, too, and the clouds had their
message for him. He kept the channels of his soul wide open on
every side to receive, and became a fountain of perpetual inspiration
to others.
At this time, while the route through Baltimore was closed against
our troops on their way to Washington, he preached to the “Brooklyn
Fourteenth,” on the eve of their departure to the front, upon “Our
National Flag.” After giving the history of our banner he more
particularly addressed the soldiers before him:
“And now God speaks by the voice of His providence, saying, ‘Lift
again that banner! Advance it full and high!’ To your hands God and
your country commit that imperishable trust. You go forth self-called,
or rather called by the trust of your countrymen and by the Spirit of
your God, to take that trailing banner out of the dust and out of the
mire, and lift it again where God’s rains can cleanse it, and where
God’s free air can cause it to unfold and stream as it has always
floated before the wind. God bless the men that go forth to save
from disgrace the American flag!
“Accept it, then, in all its fulness of meaning. It is not a painted
rag. It is a whole national history. It is the Constitution. It is the
government. It is the free people that stand in the government on
the Constitution. Forget not what it means; and, for the sake of its
ideas rather than its mere emblazonry, be true to your country’s flag.
By your hands lift it; but let your lifting it be no holiday display. It
must be advanced ‘because of the truth.’
“That flag must go to the capital of this nation; and it must not go
hidden, not secreted, not in a case or covering, but full high
displayed, bright as the sun, clear as the moon, terrible as an army
with banners! For a single week that disgraceful work, that shameful
circuit, may be needful; but the way from New England, the way
from New York, the way from New Jersey and Pennsylvania, to
Washington, lies right through Baltimore, and that is the way the
flag must and shall go! [Enthusiastic cheers.] But that flag, borne by
ten thousand and thrice ten thousand hands, from Connecticut, from
Massachusetts (God bless the State and all her men!), from
shipbuilding Maine, from old granite New Hampshire, from Vermont
of Bennington and Green-Mountain-Boy patriotism, from Rhode
Island, not behind any in zeal and patriotism, from New York, from
Ohio, from Pennsylvania and New Jersey and Delaware, and the
other loyal States—that flag must be carried, bearing every one of
its insignia, to the sound of the drum and the fife, into our national
capital, until Washington shall seem to be a forest in which every
tree supports the American banner!
“And it must not stop there. The country does not belong to us
from the Lakes only to Washington, but from the Lakes to the Gulf of
Mexico. The flag must go on. The land of Washington shall see
Washington’s flag again. The land that sits in darkness, and in which
the people see no light, shall yet see light dawn and liberty flash
from the old American banner! It must see Charleston again, and
float again over every fort in Charleston harbor. It must go further, to
the Alligator State, and stand there again. And sweeping up through
all plantations and over all fields of sugar and rice and tobacco, and
every other thing, it must be found in every State till you touch the
Mississippi; and, bathing in its waters, it must go across and fill
Texas with its sacred light. Nor must it stop when it floats over every
one of the States. That flag must stand, bearing its whole historic
spirit and original meaning, in every Territory of this nation!”
Other sermons of similar character followed. “The Camp, its
Dangers and Duties,” was one:
“For any one that is going forth to meet the temptations of camp
life I had almost said I would sum up in one single word of
remembrance a talisman of safety—temperance, absolute
temperance.... The men that are dangerous in camps are not
bloated drunkards, shameless gamblers, and such as they. But an
accomplished officer, a brilliant fellow, who knows the world, who is
gentle in language, who understands all the etiquettes of society,
who is fearless of God, who believes nothing in religion, who does
not hesitate, with wit and humor, to jeer at sacred things, who takes
an infernal pleasure in winding around his finger the young about
him, who is polished and wicked, and walks as an angel of light to
tempt his fellow-men, as Satan did to tempt our first parents—if
there be in camp such a one, he is the dangerous man.
“There ought to be a bold stand taken in favor of virtue by the
good in each one of the various companies. If there is not such a
stand taken in Company C of the Fourteenth Regiment, I shall be
ashamed of my preaching.”
He was constantly invited to lecture, and almost any sum was
offered to secure his services. These, as we may well conceive, were
mostly patriotic addresses upon the great subjects that were then
burning in the minds of the American people.
We remember well his having a course at Providence, Rhode
Island, the third of which was delivered Monday, after the heavy
work of the day previous, and when he took the train he had not
touched pen to paper nor given it a moment’s thought; but his mind
and heart were fully awake, and the resources of a lifetime of
thought and labor were at his command.
The battle of Bull Run, which was fought in July, as is well known,
was the first battle of the war of really national importance. The
result was sobering and humiliating to the North. On the following
Sunday evening Mr. Beecher preached a sermon upon “God in
National Affairs.” After tracing His way in the history of the nation,
he says:
“The battle is well begun. If I consult my pride, if I consult my
vanity, I fain would never have seen our banners dip; and yet, if I
consult a larger wisdom, I know not but that the best thing that can
befall us is that humiliation which shall teach us not to rely so much
on words and cheers and newspaper campaigns. A defeat just
sufficient to make us feel that we must fall upon the interior stores
of manhood, that we must have faith in God, that we must set aside
everything but a solemn purpose and an earnest consecration of
ourselves to this work which God has given us to do—such a defeat
cannot but be beneficial.”
And so it proved. The battle of Bull Run awoke the North from its
dream of easy conquest, and thenceforth she took up the war in
earnest.
In his Thanksgiving sermon in November of that year, upon
“Modes and Duties of Emancipation,” he shows the conservatism of
his belief and his confidence in the national authority if rightly used
—“This conflict must be carried on through our institutions, not over
them”—and his view of the great forces engaged—“While
preparations for this conflict have been going on God has poured
money into our coffers and taken it away from those who might use
it to our harm. He is holding back France and England, and saying to
all nations, ‘Appoint the bounds! Let none enter the lists to interfere
while those gigantic warriors battle for victory! Liberty and God, and
slavery and the devil, stand over against each other, and let no man
put hand or foot into the ring till they have done battle unto death!’
Amen! Even so, Lord Almighty. It is Thy decree, and it shall stand!
And when the victory shall come, not unto us, not unto us, but—in
the voice of thrice ten thousand, and thousands of thousands, of
ransomed ones, mingled with Thine earthly children’s gladness—
unto Thee shall be the praise and the glory, for ever and ever.
Amen.”
During all these years, almost from the time he came to Brooklyn,
Mr. Beecher had been fortunate in having a channel of
communication with the public, in general so in harmony with his
own views and spirit as the New York Independent. In its second
number appears an extract from a sermon of his, followed by
frequent contributions from his pen called “Star Papers,” and for the
last three years a sermon in full upon the second page. He is now
called to its head. In the issue of December 19, 1861, appears his
“Salutatory.” Since in this he gives, in brief, his conception of the
office and importance of the religious newspaper, it is given in full:
“The undersigned has to-day assumed the editorial management
of the Independent. This will not involve any change in the
principles, the purposes, or general spirit of the paper. The
Independent was founded to illustrate and to defend the truths and
doctrines of the Christian religion; to employ them as the
authoritative standards by which to estimate and influence events,
measures, and men; to infuse a spirit of truth and humanity into the
affairs of this nation; to give aid and encouragement to every
judicious scheme of Christian benevolence. It has sought to leaven
with the Christian spirit all the great elements of our civilization.
These were the aims. The results are upon record.
“For the future, studying a catholic sympathy with all who love our
Lord Jesus Christ, and seeking to promote concord among all
Christians of every name, the Independent will still continue
explicitly and firmly to hold and to teach those great cardinal
doctrines of religion that are substantially held in common by the
Congregational orthodox churches of New England and by the
Presbyterian churches of our whole land. But, as heretofore, this will
be done for the promotion of vital godliness rather than for
sectarianism.
“The Independent will not deviate from that application of
Christian truth to all public questions which has thus far
characterized its course. While seeking to promote religious feeling,
as such, and to incite and supply devotional wants, it will not forget
that there is an ethical as well as an emotive life in true religion. We
shall therefore assume the liberty of meddling with every question
which agitates the civil or Christian community, according to our own
best discretion.
“The editorial profession, with the progress of popular intelligence,
has assumed an importance second to no other. It may unite in it
the elements of power hitherto distributed in the several professions,
and add, besides, many that have belonged to no other calling. He
who knows the scope and power of the press need desire no higher
office than the editorial.
“In that silent realm of influences out of which proceed the actions
of men and the events of history, the editor is the invisible leader.
Votes cannot raise him higher. His pen is more than a sceptre.
Profoundly impressed with such a responsibility, desiring to honor
God in the welfare of men, we ask the sympathy of good men and
the remembrance of all who pray.
“Henry Ward Beecher.”
At this time the excitement growing out of the capture of Mason
and Slidell on board the British steamer Trent, by Commodore Wilkes
on the San Jacinto, was at its height. News had just reached this
country of the bitter feeling awakened by “the outrage,” of the
shipment of troops to Canada, and other hasty preparations by Great
Britain to avenge the insult to her flag. And Mr. Beecher’s first
editorial bears the somewhat ominous title of “War with England.”
As we might expect, it is both temperate and defiant in language
and tone:
“We have no idea that there will be any war with that power.
England has a peculiar practical wisdom in affairs which touch her
own material interests. Her folly will be expended in words; her
wisdom reserved for actions. It is not her interest to go to war with
the Northern States in the interest of the Southern States. There is
no probability that she will allow herself, whatever she has done in
other days, to be found fighting for slavery against freedom....
“There is no desire on our part for so unnatural a war. To avert it
we shall be willing to yield anything but honor. Our hands are
sufficiently full. To have a British fleet thundering at our sea-doors,
while the volcano was yet pouring lava through our Southern States,
would be a little more business on hand than could be attended to
with that thoroughness which our people desire in all warlike
enterprises.
“Yet should England force us into war, terrible and atrocious as
that would be, America is determined to put her in the wrong before
the world. If we have transgressed any law of nations; if we have,
indeed, violated any right of England; if we have, to the width of a
hair, passed beyond the line of our own proper duty and right, we
shall, upon suitable showing, need no menace to make ample
reparation. We shall do it for the satisfaction of our own sense of
justice. But if we are right, if we have done right, all the
threatenings in the world will not move this people from their
steadfastness....
“Our wish is to unite with England in a race of civilization. But if
she will fight, we must.”
Some idea of the variety and character of the work he did at this
time may be gained by a look at his editorials found in the
Independent of January 16, 1862, the third week of his
administration as editor. The first is “Our Help from Above,” in which
he directs all burdened hearts to the great sources and divine
methods of consolation. “The nearer our thoughts come to the
infinite and the divine the more power have we over our troubles.
The act of consolation is, to a great degree, the act of inspiration.”
The raising, equipping, and feeding such vast armies as, it was
now seen, would be required for the prosecution of the war,
awakened in the minds of thoughtful men a question scarcely
second in importance to any. By what plan or on what system shall
the money required for these large and expensive enterprises be
secured? His second editorial upon this page takes up this matter
under the head of “A Word from the People to Congress,” in which
he urges the fearless imposition of taxes sufficient to carry on the
war, and justifies such a course upon the simple basis of honesty.
The article opens with this sentence, “Taxation and national honesty
are now synonymous,” and closes with this, “Every honest man in
America ought to send to Washington one message in two words,
Fight, Tax.”
How to treat the black men that came into our lines, or were
liberated by the advance of our armies, was another of the pressing
questions at this time, and one concerning which there was a great
difference of opinion. He treated this subject in a column article on
this page, entitled “Men, not Slaves.” The position which he held,
and advocated with great force and clearness, is given in this
sentence: “One thing is plain—one thing as a starting-point admits
of no doubt, needs no hesitation: let us forget that these blacks ever
were slaves, and remember only that they are men. With this as our
first principle we cannot go far wrong.”
This money-raising was a matter of so great importance that he
devoted another column to it on this same page, on the “Duty of the
Hour.” In the first article he sent a message to Congress; in this he
speaks to the Christian public: “Whether the great impending
patriotic tax shall be a moral triumph and a testimony to the
religious life of this people will depend largely upon the conduct of
Christian men and the action of Christian teachers.... There seems to
have been very little education of the consciences of Christian men
to the duty of a cheerful support of government by their property.
Even Christian men are tempted to give grudgingly, selfishly, meanly.
The nobler sentiments of the heart have been allowed but little
scope in this part of citizen duty.
“Is the Gospel worn out? Are ministers of the Gospel less manly
and Christian than in the days of the fathers? Has the American
pulpit forgotten that its place is in the van—that it leads, not follows,
the camp?
“Every church should have a public sentiment developed within it
which shall make this national tax almost a free-will offering. Let
Christian laymen take counsel together. Let the leading men of
towns and neighborhoods not only set a good example, but make it
their duty to cheer and inspirit the slow and reluctant. Let Christian
men everywhere, and in all things, seek to inspire the public mind
with an earnest willingness to discharge this great debt which we
are called to pay for national unity, national safety, and national
glory.”
In those days of dress-parades in our largest army, and “all quiet
on the Potomac,” men chafed continually over what appeared to be
inaction and timidity on the part of the government at Washington.
This found expression in still another article by this same pen upon
this same page, “Courage and Enterprise”:
“There was never a time when timidity was so nearly allied to
rashness, and courage to the highest prudence, as now. We have
every element of national prosperity except the courage to use our
power. Standing on a centre and whirling around with sound and
celerity may make a top, but never an administration. Courage to
see and accept the whole national danger; courage to see and to
accept the thoroughest remedy; courage to ask the people for all
that is needed, without a thought of refusal; courage to use the
means, willingly afforded, so as to put the whole strength of this
nation into every blow; courage to dash in pieces every enemy,
without stopping to consider just how we shall mend the pieces
afterward—this is the very critical prudence of good administration.
“Since war is upon us, let us have courage to make war.
“There is no money needed, there are no men wanted, there is no
enthusiasm that the North will not give with eager gladness, if only
SOMEBODY will speak to the nation such words as the fathers spoke!
Then men LOVED liberty! The nation suffered for a principle! What are
we doing now? Are we raising moss on cannon-wheels, or are we
fighting? Is it husbandry or war that is going on? Are we to starve
Southern armies or conquer them? Do we mean to put down
rebellion by soldiers or ferrets?”
These editorials showed certain features which were as
characteristic of his work in the editor’s chair as they were in the
pulpit and upon the platform; the first of these was this: he chose
his subjects from among the things which at that time affected and
interested the people. This he did, not simply because he could then
get the ear of the public, nor because these were in themselves the
largest or most important matters, but from a deep religious
conviction that these present questions and present interests were a
part of God’s providence, by which and through which He was
accomplishing His purposes; and that in treating these matters he
was working together with Him. He believed thoroughly in God’s
action in common affairs and through the impulses given to common
men. This conviction made him a leader of the people without
bringing him into bondage to them. It gave him the kind of
leadership to which he attained: not of the abstract thinker in the
movements of a hundred years hence, but of the practical man of
affairs in the battles of to-day. This gave him the boldness that he
never failed to display. Confident that he was moving in harmony
with God’s purpose and at His own appointed time, he waited for no
gathering of numbers, but pushed on alone, if necessary, with an
assurance born of faith. Storms and confusion did not daunt him,
because he recognized in these but the necessary methods by which
the Almighty carries out His designs in the moral and spiritual as in
the material world.
Another characteristic feature was seen in his treatment of the
subject in hand. He uniformly regarded it from the standpoint of the
law of Christ’s kingdom on the earth—“Bear ye one another’s
burdens.” This insured harmony in his policy through all changes of
events around him, and ultimately secured success. All the forces of
the universe, because created and administered by the Saviour of
mankind, were on the side not only of justice and truth but of
kindness, forbearance, and helpfulness, and must in time prevail. So
deep was his conviction of the direct and universal application of the
law of this kingdom that he instinctively took this side, and linked his
action and his destiny with its fortunes, when prudence and policy
would seem to dictate a different course, with a sublime confidence
in its final victory.
A third characteristic was this: He wrote so as to awaken
inspiration, to stir men’s hearts to feel. It was not enough that men
believed a truth; that was nothing unless they felt it. His words must
take hold, they must excite the emotions and move men to action,
or they were a failure.
Besides the editorial articles referred to on this one page, there
was his sermon in this same issue occupying more than four
columns of the second page of the paper. It was upon the Divine
Government, and moved along on these lofty heights: “We believe
that God is in His own world and that He governs it by His personal
will; that this government includes nations, families, and individuals;
that it aims at the highest good and the everlasting good of sentient
and intelligent creatures; that it is one which admits the action of
our minds upon God’s and the action of God’s upon ours; that it has
in it a place for all human yearnings and strivings and longings.” “I
bring you a Gospel that will never wear out, a Gospel which is for
ever fresh, and that is, Emmanuel—God with us: God with you, in
you, around you, loving you, bearing with you, forgiving you, helping
you, watching over you, taking you up and carrying you as the
parent takes up and carries the little child.”
The first anniversary Sunday of the attack on Fort Sumter was
marked by a sermon on the “Success of American Democracy,” the
tone of which may be judged by the following passage:
“‘We will give every dollar that we are worth, every child that we
have, and our own selves; we will bring all that we are and all that
we have, and offer them up freely—but this country shall be one and
undivided. We will have one Constitution and one liberty, and that
universal.’ The Atlantic shall sound it and the Pacific shall echo it
back, deep answering to deep, and it shall reverberate from the
Lakes on the North to the unfrozen Gulf on the South—‘One nation,
one Constitution, one starry banner!’ Hear it, England!—one country,
and indivisible. Hear it, Europe!—one people, and inseparable. One
God; one hope; one baptism; one Constitution; one government;
one nation; one country; one people—cost what it may, we will have
it!”
The summer of 1862 was, perhaps, a period of as great
discouragement to the North as any during the war. After months of
preparation and wearisome delays, with the grandest army that had
ever been gathered on this continent, McClellan had made his
advance against Richmond, only to entrench, retreat, and at last to
be hurled back defeated and shattered. It was when these terrible
disasters were beginning to be understood and their true
significance appreciated that Mr. Beecher’s editorials in the
Independent rose to their highest point of power and influence.
They were directed to the people and to the government as occasion
demanded, but always with such a grouping of facts, with so clear
an appreciation of the situation, and with so great earnestness of
appeal and power of denunciation that they must be reckoned
among the loyal forces. We give the titles and a few sentences from
several of that time, that their general character may be understood.
On July 3, 1862, we have one upon “The Great Duty”:
“In another column will be found the President’s call for 300,000
more soldiers. These, and as many more if needed, can be raised.
The North has not changed her mind. The integrity of this nation,
the authority of its Constitution over all its original territory, will be
maintained at every hazard and at whatever expense.
“It is our duty to the nation and to the family of nations to make a
slaveholders’ rebellion so odious and disastrous that it shall stand to
all ages like Sodom and Gomorrah. Whatever it may cost in men and
money, the North is fully assured that for nothing else can money be
so well spent, and for nothing nobler can men live, or, if need be, lay
down their lives!
“The great duty now is to maintain a united North. No event can
be more sure than the victory of this government over the
slaveholders’ conspiracy, if the loyal States are united. But if secret
feuds or open factions shall divide and paralyze the popular feeling,
the cause will fail, or succeed only after long, wasting, and useless
expenditures.”
In the next issue, July 10, he has an equally strong editorial upon
“The Country’s Need.” The suppression of news, the failure to trust
the people, the political intrigues at the capital, moved him to
righteous and sorrowful indignation:
“Did the government frankly say to this nation, We are defeated?
To this hour it has not trusted the people. It held back the news for
days. Nor was the truth honestly told when outside information
compelled it to say something. It is even to this hour permitting
McClellan’s disaster to be represented as a piece of skilfully planned
strategy! After the labor of two months, the horrible sickness of
thousands of men poisoned in the swamps of the Chickahominy, the
loss of probably more than ten thousand as noble fellows as ever
lifted a hand to defend their country, McClellan, who was four miles
from Richmond, finds himself twenty-five miles from the city, wagons
burned, ammunition-trains blown up, parks of artillery captured, no
entrenchments, and with an army so small that it is not pretended
that he can reach Richmond! The public are infatuated. The papers
that regaled us two weeks ago with visions of a Fourth of July in
Richmond are now asking us to rejoice and acclaim—not at victory—
but that we have just saved the army! McClellan is safe!—and
Richmond too!
“The government, upon this disaster, procures the governors of
the States to ask it to call for 300,000 more men. Why did not the
President take the responsibility, plainly confess our disaster, say that
we were within a hand-breadth of ruin, throw himself on the people?
No. The people pay taxes, give their sons and brothers—but that is
all. We are sick and weary of this conduct. We have a sacred cause,
a noble army, good officers, and a heroic common people. But we
are like to be ruined by an administration that will not tell the truth;
that spends precious time in playing at President-making; that is
cutting and shuffling the cards for the next great political campaign.
Unless good men awake, unless the accursed silence is broken that
has fallen on the people, unless the government is held sternly to its
responsibility to the people, we shall dally through the summer,
make brigadier-generals until autumn, build huge entrenchments,
but fight no battles till they are forced upon us, and then we shall be
called upon to celebrate our defeats or retreats as masterly
strategies!
“We have a country. We have a cause. We have a people. Let all
good men pray that God would give us a government!”
This is followed by one, July 17, on the “Patriotism of the People.”
Its tone will be understood by these few sentences:
“There is no need of rousing the patriotism of the people. It is an
inexhaustible quality. It underlies their very life. The government
itself is buoyed up by it, and rides upon it, like a ship upon the
fathomless ocean.
“No. It is the government that needs rousing. We do not need
meetings on the Hudson, but motion on the Potomac. It is not in
Boston, or Buffalo, or Cincinnati, or New York that this case is to be
settled, but in Washington. There is no use of concealing it. The
people are beginning to distrust their rulers—not their good nature,
their patriotism, their honesty, but their capacity for the exigency of
military affairs. They know that in war an hour often carries a
campaign in its hand. A day is a year. The President seems to be a
man without any sense of the value of time. The people admire his
disinterestedness. They believe him firm when he reaches decisions.
But they perceive how long a period he requires to form judgments;
how wide a circuit he takes of uncertainty and vacillation before he
determines. In civil affairs, that can bear to wait, the people deem
him among the best of our long line of Presidents. But it is war!
Armies are perishing. Months are wasting. We are in the second year
of rebellion. We have been just on the eve of doing something for
sixteen months!
“The nation rose up in its majesty to punish rebellion. It put a
magnificent army into the President’s hand. For one year that army
was besieged in the capital!
“At length, this past spring, began the campaign in Virginia. The
people gloried in the belief that the majesty of the government
would be asserted. After four months’ campaign the armies of the
United States are on the defensive! Not less than a hundred
thousand men have been lost by death, wounds, sickness, and
captivity; McClellan is cooped up on James River; Pope is collecting
an army; and the country is to-day actually debating whether the
enemy cannot strike a blow at Washington! Is this such a
management as will confirm the confidence of the country in Mr.
Lincoln’s conduct of the war? Do we need to ask why men are slow
to volunteer? Does any man need to be told what the end of such
things must be? This is not punishing rebellion; it is helping it....
“We speak plainly, sorrowfully, earnestly. An enemy of the
Administration would have no right to speak so. We are friends—all
the more because we speak out what millions think but do not utter,
lest it might hinder the cause. But, unless some one speaks, there
will soon be little cause left to hinder or to help.”
In the next issue, that of July 24, he has another two-column
editorial upon “The Duty of To-day”:
“In the beginning of this great struggle the question among loyal
men was, How shall we save this nation? One year of fighting and
the question is, Whether we can save it? That is the question of to-
day....
“The South has simplicity and unity of purpose. The North is
uncertain which she wishes most—to subdue the rebellion, to leave
slavery unharmed, or to have the right President at the next
election!
“The South adjourns every question and postpones every interest
in favor of arms. The North is busy with conflicting schemes and
interests—and is also mildly carrying on war.
“Does anybody doubt the result of such a course? It is so certain
that it is not worth our while to waste another man or another
dollar! Either the Administration policy should instantly change or the
war cease! It is not more vigor so much as a different internal idea.
If the Administration cannot be disenchanted of the traditional policy
that has grown up during the heartless, timid, compromising era of
the last half-century, and adopt the simple and straightforward policy
that becomes a people striving for liberty and free institutions upon
the American continent, then we are doomed! It is war that we are

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Part 1 Introduction to Financial Management 1

Part 2 Fundamental Concepts in Financial Management 63

Part 3 Financial Assets 195

Part 4 Investing in Long-Term Assets: Capital Budgeting 359

Part 5 Capital Structure and Dividend Policy 477

Part 6 Working Capital Management, Financial

Part 7 Special Topics in Financial Management 663

Chapter 20 Hybrid Financing: Preferred Stock,

5-15 Semiannual and Other Compounding intEgratED CasE morton handley

intEgratED CasE First national Bank 193 ChaPtEr 7

WEB aPPEnDiX 5B PUTTING THINGS IN PERSPECTIVE 232

ChaPtEr 8 9-1A Control of the Firm 320

WEB aPPEnDiX 8a ChaPtEr 10

10-5 Cost of Retained Earnings, rs 367 TYING IT ALL TOGETHER 413

ChaPtEr 13 14-4G Windows of Opportunity 506

15-7C Disadvantages of Repurchases 546 16-9 Accounts Payable

intEgratED CasE ski Equipment inc. 595

WEB aPPEnDiX 17a

ChaPtEr 20 21-1B Tax Considerations 742

intEgratED CasE Fish & Chips inc., Part i 736 Appendixes

Structure of the Book

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