SOLUTION M
, Solutions to Chapter 1
Goals and Governance of the Firm
1.
a. Investment decision
b. Financial asset
c. Public corporation
d. Corporation
e. Treasurer
f. The cost resulting from conflicts of interest between managers and shareholders
Est time: 01–05
Introduction to corporate finance
2. Investment decisions, typically called capital budgeting, relate to investments in tangible
and intangible assets. Financing decisions relate to the raising of money through debt and
equity. Repayment of that money as well as interest and dividends are also financing
decisions.
a. Investment decision
b. Financing decision
c. Investment decision
d. Investment decision
e. Financing decision
f. Financing decision: On the surface, this may appear similar to a dividend decision,
but in reality retiring debt is a change in capital structure and more closely aligned
with a financing decision.
Est time: 01–05
Financial management decisions
3. Both capital budgeting decisions and capital structure decisions are long-term financial
decisions. However, capital budgeting decisions are long-term investment decisions, while
capital structure decisions are long-term financing decisions. Capital structure decisions
essentially involve selecting between equity financing and long-term debt financing.
Est time: 01–05
Introduction to corporate finance
4.
a. A share of stock financial
b. A personal IOU financial
c. A trademark real
d. A truck real
e. Undeveloped land real
f. The balance in the firm’s checking account financial
g. An experienced and hardworking sales force real
h. A bank loan agreement financial
1-1
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
, Solutions to Chapter 1
Goals and Governance of the Firm
1.
a. Investment decision
b. Financial asset
c. Public corporation
d. Corporation
e. Treasurer
f. The cost resulting from conflicts of interest between managers and shareholders
Est time: 01–05
Introduction to corporate finance
2. Investment decisions, typically called capital budgeting, relate to investments in tangible
and intangible assets. Financing decisions relate to the raising of money through debt and
equity. Repayment of that money as well as interest and dividends are also financing
decisions.
a. Investment decision
b. Financing decision
c. Investment decision
d. Investment decision
e. Financing decision
f. Financing decision: On the surface, this may appear similar to a dividend decision,
but in reality retiring debt is a change in capital structure and more closely aligned
with a financing decision.
Est time: 01–05
Financial management decisions
3. Both capital budgeting decisions and capital structure decisions are long-term financial
decisions. However, capital budgeting decisions are long-term investment decisions, while
capital structure decisions are long-term financing decisions. Capital structure decisions
essentially involve selecting between equity financing and long-term debt financing.
Est time: 01–05
Introduction to corporate finance
4.
a. A share of stock financial
b. A personal IOU financial
c. A trademark real
d. A truck real
e. Undeveloped land real
f. The balance in the firm’s checking account financial
g. An experienced and hardworking sales force real
h. A bank loan agreement financial
1-1
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
