SOLUTION MANUAL FOR
Principles Of Corporate Finance
14th Edition By Richard Brealey, Stewart Myers,
ALL Chapters (1 - 34)
, TABLE OF CONTENTS ZP ZP
Chapter 1: Introduction to Corporate Finance
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Chapter 2: How to Calculate Present Values
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Chapter 3: Valuing Bonds
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Chapter 4: Valuing Stocks
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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
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Chapter 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
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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
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Chapter 14: How Corporations Issue Securities
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Chapter 15: Payout Policy
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Chapter 16: Does Debt Policy Matter?
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Chapter 17: How Much Should a Corporation Borrow?
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Chapter 18: Financing and Valuation
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Chapter 19: Agency Problems and Corporate Governance
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Chapter 20: Stakeholder Capitalism and Responsible Business
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Chapter 21: Understanding Options
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Chapter 22: Valuing Options
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Chapter 23: Real Options
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Chapter 24: Credit Risk and the Value of Corporate Debt
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Chapter 25: The Many Different Kinds of Debt
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Chapter 26: Leasing
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Chapter 27: Managing Risk
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Chapter 28: International Financial Management
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Chapter 29: Financial Analysis
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Chapter 30: Financial Planning
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Chapter 31: Working Capital Management
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Chapter 32: Mergers
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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 zp
Introduction to Corporate Finance zp zp zp
The values shown in the solutions may be rounded for display purposes. However, the answers werederived usi
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ng a spreadsheet without any intermediate rounding.
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Answers to Problem Sets zp zp zp
1. a. real
b. executive airplanes zp
c. brand names zp
d. financial
e. bonds
*f. investment or capital expenditure zp zp zp
*g. capital budgeting or investment zp zp zp
h. financing
*Note that f and g are interchangeable in the question.
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Est time: 01-05
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2. A trademark, a factory, undeveloped land, and your work force (c, d, e, and g) are all real assets. Real a
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ssets are identifiable as items with intrinsic value. The others in the list are financial assets,that is, thes
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e assets derive value because of a contractual claim.
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Est time: 01-05
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3. a.
Financial assets, such as stocks or bank loans, are claims held by investors. Corporat zp zp zp zp zp zp zp zp zp zp zp zp zp
ions sell financial assets to raise the cash to invest in real assets such as plantand equipmen
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t. Some real assets are intangible.
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b. Capital expenditure means investment in real assets. Financing means raising the cashfor t
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his investment. zp
, c. The shares of public corporations are traded on stock exchanges and can be purchasedby a
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wide range of investors. The shares of closely held corporations are not publicly traded and a
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re held by a small group of private investors.
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d. Unlimited liability: Investors are responsible for all the firm‘s debts. A sole proprietor hasunli
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mited liability. Investors in corporations have limited liability. They can lose their investment,
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but no more.
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Est time: 01-05
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Principles Of Corporate Finance
14th Edition By Richard Brealey, Stewart Myers,
ALL Chapters (1 - 34)
, TABLE OF CONTENTS ZP ZP
Chapter 1: Introduction to Corporate Finance
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Chapter 2: How to Calculate Present Values
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Chapter 3: Valuing Bonds
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Chapter 4: Valuing Stocks
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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
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Chapter 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
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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
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Chapter 14: How Corporations Issue Securities
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Chapter 15: Payout Policy
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Chapter 16: Does Debt Policy Matter?
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Chapter 17: How Much Should a Corporation Borrow?
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Chapter 18: Financing and Valuation
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Chapter 19: Agency Problems and Corporate Governance
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Chapter 20: Stakeholder Capitalism and Responsible Business
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Chapter 21: Understanding Options
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Chapter 22: Valuing Options
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Chapter 23: Real Options
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Chapter 24: Credit Risk and the Value of Corporate Debt
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Chapter 25: The Many Different Kinds of Debt
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Chapter 26: Leasing
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Chapter 27: Managing Risk
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Chapter 28: International Financial Management
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Chapter 29: Financial Analysis
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Chapter 30: Financial Planning
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Chapter 31: Working Capital Management
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Chapter 32: Mergers
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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 zp
Introduction to Corporate Finance zp zp zp
The values shown in the solutions may be rounded for display purposes. However, the answers werederived usi
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ng a spreadsheet without any intermediate rounding.
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Answers to Problem Sets zp zp zp
1. a. real
b. executive airplanes zp
c. brand names zp
d. financial
e. bonds
*f. investment or capital expenditure zp zp zp
*g. capital budgeting or investment zp zp zp
h. financing
*Note that f and g are interchangeable in the question.
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Est time: 01-05
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2. A trademark, a factory, undeveloped land, and your work force (c, d, e, and g) are all real assets. Real a
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ssets are identifiable as items with intrinsic value. The others in the list are financial assets,that is, thes
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z zp zp
e assets derive value because of a contractual claim.
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Est time: 01-05
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3. a.
Financial assets, such as stocks or bank loans, are claims held by investors. Corporat zp zp zp zp zp zp zp zp zp zp zp zp zp
ions sell financial assets to raise the cash to invest in real assets such as plantand equipmen
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t. Some real assets are intangible.
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b. Capital expenditure means investment in real assets. Financing means raising the cashfor t
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his investment. zp
, c. The shares of public corporations are traded on stock exchanges and can be purchasedby a
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z zp zp
wide range of investors. The shares of closely held corporations are not publicly traded and a
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re held by a small group of private investors.
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d. Unlimited liability: Investors are responsible for all the firm‘s debts. A sole proprietor hasunli
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mited liability. Investors in corporations have limited liability. They can lose their investment,
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but no more.
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Est time: 01-05
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