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