SOLUTION MANUAL FOR
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Principles Of Corporate Finance 14
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th Edition By Richard Brealey, Stewart Myers,
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ALL Chapters (1 - 34)
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, TABLE OF CONTENTS D D
Chapter 1: Introduction to Corporate Finance
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Chapter 2: How to Calculate Present Value
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s Chapter 3: Valuing Bonds
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Chapter 4: Valuing Stocks v$ v$ v$
Chapter 5: Net Present Value and Other Investment Criteria
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Chapter 6: Making Investment Decisions with the Net Present Value Rule
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Chapter 7: Introduction to Risk, Diversification, and Portfolio Selection Cha
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pter 8: The Capital Asset Pricing Model
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Chapter 9: Risk and the Cost of Capital
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Chapter 10: Project Analysis v$ v$ v$
Chapter 11: How to Ensure That Projects Truly Have PositiveNPVs
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Chapter 12: Efficient Markets and Behavioral Finance
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Chapter 13: An Overview of Corporate Financing Chap
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ter 14: How Corporations Issue Securities
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Chapter v$ 15: Payout Policy
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Chapter v$ 16: Does Debt Policy Matter?
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Chapter v$ 17: How Much Should a Corporation Borrow?
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Chapter v$ 18: Financing and Valuation
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Chapter 19: Agency Problems and Corporate Governance Ch
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apter 20: Stakeholder Capitalism and Responsible Business
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Chapter 21: Understanding Options
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Chapter 22: Valuing Options Chap
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ter 23: Real Options
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Chapter 24: Credit Risk and the Value of Corporate Debt Cha
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pter 25: The Many Different Kinds of Debt
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Chapter 26: Leasing v$ v$
Chapter 27: Managing Risk v$ v$ v$
Chapter 28: International Financial Management
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Chapter 29: Financial Analysis Cha
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pter 30: Financial Planning
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Chapter 31: Working Capital Management
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Chapter 32: Mergers v$ v$
Chapter 33: Corporate Restructuring
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,Chapter 34: Conclusion: What We Do and Do Not Know about Finance
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CHAPTER 1 v$
Introduction to Corporate Finance v$ v$ v$
The values shown in the solutions may be rounded forDdisplayDpurposes. However, the answer
v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$
s were derived using a spreadsheet without any intermediate rounding.
v$ v$ v $ v $ v$ v $ v$ v $ v $
Answers to Problem Sets
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1. a. real
b. executive airplanes v$
c. brand names v$
d. financial
e. bonds
*f. investment or capital expenditure v$ v$ v$
*g. capital budgeting or investment
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h. financing
*Note that f and g are interchangeable in the question.
v $ v$ v$ v$ v $ v$ v$ v $ v $
Est time: 01-05
v$ v$
2. A trademark, a factory, undeveloped land, and your work force (c, d, e, and g) are all r
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eal a ssets. Real assets are identifiable as items with intrinsic value. The others in t
v$ v$ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v$
he list are fina ncial assets, that is, these assets derive value because of a contra
v$ v $ v $ v$ v $ v$ v $ v $ v $ v $ v $ v $ v $ v $ v $
ctual claim. v $
Est time: 01-05
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3. a.
Financial assets, such as stocks or bank loans, are claims held by investors.
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Corporations sell financial assets to raise the cash to invest in real asset
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s such a s plant and equipment. Some real assets are intangible.
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b. Capital expenditure means investment in real assets. Financing means raisi
v$ v $ v$ v$ v$ v$ v $ v $ v$
ng the cash for this investment.
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, c. The shares ofDpublic corporations are traded on stock exchanges and can b
v$ v $ v $ v $ v $ v $ v $ v $ v $ v$ v$
e purch ased by a wide range of investors. The shares of closely held cor
v $ v$ v$ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $
porations are not publicly traded and are held by a small group of private
v $ v $ v$ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $
investors.
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d. Unlimited liability: Investors are responsible for all the firm‘s debts. ADsole p
v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $
roprieto r has unlimited liability. Investors in corporations have limited liability. They
v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$
can lose their investment, but no more.
v$ v$ v $ v $ v $ v $
Est time: 01-05
v$ v$
v$ v$
Principles Of Corporate Finance 14
v$ v$ v$ v$
th Edition By Richard Brealey, Stewart Myers,
v$ v$ v$ v$ v$ v$
ALL Chapters (1 - 34)
v$ v$ v$ v$
, TABLE OF CONTENTS D D
Chapter 1: Introduction to Corporate Finance
v$ v$ v$ v$ v$
Chapter 2: How to Calculate Present Value
v$ v$ v$ v$ v$ v$ v$
s Chapter 3: Valuing Bonds
v$ v$ v$ v$
Chapter 4: Valuing Stocks v$ v$ v$
Chapter 5: Net Present Value and Other Investment Criteria
v$ v$ v$ v$ v$ v$ v$ v$
Chapter 6: Making Investment Decisions with the Net Present Value Rule
v$ v$ v$ v$ v$ v$ v$ v$ v$ v$
Chapter 7: Introduction to Risk, Diversification, and Portfolio Selection Cha
v$ v$ v$ v$ v$ v$ v$ v$ v$
pter 8: The Capital Asset Pricing Model
v$ v$ v$ v$ v$ v$
Chapter 9: Risk and the Cost of Capital
v$ v$ v$ v$ v$ v$ v$
Chapter 10: Project Analysis v$ v$ v$
Chapter 11: How to Ensure That Projects Truly Have PositiveNPVs
v$ v$ v$ v$ v$ v$ v$ v$ v$
Chapter 12: Efficient Markets and Behavioral Finance
v$ v$ v$ v$ v$ v$ v$
Chapter 13: An Overview of Corporate Financing Chap
v$ v$ v$ v$ v$ v$ v$
ter 14: How Corporations Issue Securities
v$ v$ v$ v$ v$
Chapter v$ 15: Payout Policy
v$ v$
Chapter v$ 16: Does Debt Policy Matter?
v$ v$ v$ v$
Chapter v$ 17: How Much Should a Corporation Borrow?
v$ v$ v$ v$ v$ v$ v$
Chapter v$ 18: Financing and Valuation
v$ v$ v$
Chapter 19: Agency Problems and Corporate Governance Ch
v$ v$ v$ v$ v$ v$ v$
apter 20: Stakeholder Capitalism and Responsible Business
v$ v$ v$ v$ v$ v$
Chapter 21: Understanding Options
v$ v$ v$
Chapter 22: Valuing Options Chap
v$ v$ v$ v$ v$
ter 23: Real Options
v$ v$ v$
Chapter 24: Credit Risk and the Value of Corporate Debt Cha
v$ v$ v$ v$ v$ v$ v$ v$ v$ v$
pter 25: The Many Different Kinds of Debt
v$ v$ v$ v$ v$ v$ v$
Chapter 26: Leasing v$ v$
Chapter 27: Managing Risk v$ v$ v$
Chapter 28: International Financial Management
v$ v$ v$ v$
Chapter 29: Financial Analysis Cha
v$ v$ v$ v$
pter 30: Financial Planning
v$ v$ v$
Chapter 31: Working Capital Management
v$ v$ v$ v$
Chapter 32: Mergers v$ v$
Chapter 33: Corporate Restructuring
v$ v$ v$
,Chapter 34: Conclusion: What We Do and Do Not Know about Finance
v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$
CHAPTER 1 v$
Introduction to Corporate Finance v$ v$ v$
The values shown in the solutions may be rounded forDdisplayDpurposes. However, the answer
v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$
s were derived using a spreadsheet without any intermediate rounding.
v$ v$ v $ v $ v$ v $ v$ v $ v $
Answers to Problem Sets
v$ v$ v$
1. a. real
b. executive airplanes v$
c. brand names v$
d. financial
e. bonds
*f. investment or capital expenditure v$ v$ v$
*g. capital budgeting or investment
v$ v$ v$
h. financing
*Note that f and g are interchangeable in the question.
v $ v$ v$ v$ v $ v$ v$ v $ v $
Est time: 01-05
v$ v$
2. A trademark, a factory, undeveloped land, and your work force (c, d, e, and g) are all r
v$ v$ v$ v$ v$ v $ v $ v $ v $ v$ v$ v$ v$ v $ v$ v $ v $
eal a ssets. Real assets are identifiable as items with intrinsic value. The others in t
v$ v$ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v$
he list are fina ncial assets, that is, these assets derive value because of a contra
v$ v $ v $ v$ v $ v$ v $ v $ v $ v $ v $ v $ v $ v $ v $
ctual claim. v $
Est time: 01-05
v$ v$
3. a.
Financial assets, such as stocks or bank loans, are claims held by investors.
v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v
Corporations sell financial assets to raise the cash to invest in real asset
$ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $
s such a s plant and equipment. Some real assets are intangible.
v $ v $ v$ v $ v$ v $ v $ v $ v $ v $ v $
b. Capital expenditure means investment in real assets. Financing means raisi
v$ v $ v$ v$ v$ v$ v $ v $ v$
ng the cash for this investment.
v $ v$ v$ v $ v $
, c. The shares ofDpublic corporations are traded on stock exchanges and can b
v$ v $ v $ v $ v $ v $ v $ v $ v $ v$ v$
e purch ased by a wide range of investors. The shares of closely held cor
v $ v$ v$ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $
porations are not publicly traded and are held by a small group of private
v $ v $ v$ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $
investors.
v $
d. Unlimited liability: Investors are responsible for all the firm‘s debts. ADsole p
v $ v $ v $ v $ v $ v $ v $ v $ v $ v $ v $
roprieto r has unlimited liability. Investors in corporations have limited liability. They
v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$ v$
can lose their investment, but no more.
v$ v$ v $ v $ v $ v $
Est time: 01-05
v$ v$
