SOLUTION MANUAL FOR Principles Of Corporate Finance 14th Edition By Richard Brealey, Stewart Myers, ALL Chapters (1 - 34)

, TABLE OF CONTENTS
ChapterQ1:QIntroductionQtoQCorporateQFinance
ChapterQ2:QHowQtoQCalculateQPresentQValues
ChapterQ3:QValuingQBonds
ChapterQ4:QValuingQStocks
ChapterQ5:QNetQPresentQValueQandQOtherQInvestmentQCriteria
ChapterQ6:QMakingQInvestmentQDecisionsQwithQtheQNetQPresentQValueQRuleQ

ChapterQ7:QIntroductionQtoQRisk,QDiversification,QandQPortfolioQSelection
ChapterQ8:QTheQCapitalQAssetQPricingQModel
ChapterQ9:QRiskQandQtheQCostQofQCapital

ChapterQ10:QProjectQAnalysis
ChapterQ11:QHowQtoQEnsureQThatQProjectsQTrulyQHaveQPositiveNPVsQ

ChapterQ12:QEfficientQMarketsQandQBehavioralQFinance
ChapterQ13:QAnQOverviewQofQCorporateQFinancing
ChapterQ14:QHowQCorporationsQIssueQSecuritiesQ

ChapterQ15:QPayoutQPolicy
ChapterQ16:QDoesQDebtQPolicyQMatter?
ChapterQ17:QHowQMuchQShouldQaQCorporationQBorrow?
ChapterQ18:QFinancingQandQValuationQ

ChapterQ19:QAgencyQProblemsQandQCorporateQGovernance
ChapterQ20:QStakeholderQCapitalismQandQResponsibleQBusinessQ

ChapterQ21:QUnderstandingQOptions
ChapterQ22:QValuingQOptions
ChapterQ23:QRealQOptionsQ

ChapterQ24:QCreditQRiskQandQtheQValueQofQCorporateQDebt
ChapterQ25:QTheQManyQDifferentQKindsQofQDebt
ChapterQ26:QLeasing

ChapterQ27:QManagingQRisk
ChapterQ28:QInternationalQFinancialQManagementQ

ChapterQ29:QFinancialQAnalysis
ChapterQ30:QFinancialQPlanning
ChapterQ31:QWorkingQCapitalQManagement

ChapterQ32:QMergers
ChapterQ33:QCorporateQRestructuringQ

ChapterQ34:QConclusion:QWhatQWeQDoQandQDoQNotQKnowQaboutQFinance

, CHAPTERQ1
IntroductionQtoQCorporateQFinance


TheQvaluesQshownQinQtheQsolutionsQmayQbeQroundedQforQdisplayQpurposes.QHowever,QtheQan
swersQwereQderivedQusingQaQspreadsheetQwithoutQanyQintermediateQrounding.


AnswersQtoQProblemQSets

1. a. real

b. executiveQairplanes

c. brandQnames

d. financial

e. bonds

*f. investmentQorQcapitalQexpenditure

*g. capitalQbudgetingQorQinvestment

h. financing

*NoteQthatQfQandQgQareQinterchangeableQinQtheQquestion.
EstQtime:Q01-05



2. AQtrademark,QaQfactory,QundevelopedQland,QandQyourQworkQforceQ(c,Qd,Qe,QandQg)Qa
reQallQrealQassets.QRealQassetsQareQidentifiableQasQitemsQwithQintrinsicQvalue.QTheQot
hersQinQtheQlistQareQfinancialQassets,QthatQis,QtheseQassetsQderiveQvalueQbecauseQofQ
aQcontractualQclaim.
EstQtime:Q01-05



3. a.
FinancialQassets,QsuchQasQstocksQorQbankQloans,QareQclaimsQheldQbyQi
nvestors.QCorporationsQsellQfinancialQassetsQtoQraiseQtheQcashQtoQinvestQinQr
ealQassetsQsuchQasQplantQandQequipment.QSomeQrealQassetsQareQintangible.

b. CapitalQexpenditureQmeansQinvestmentQinQrealQassets.QFinancingQmeansQraisin
gQtheQcashQforQthisQinvestment.

c. TheQsharesQofQpublicQcorporationsQareQtradedQonQstockQexchangesQandQcanQ

, beQpurchasedQbyQaQwideQrangeQofQinvestors.QTheQsharesQofQcloselyQheldQco
rporationsQareQnotQpubliclyQtradedQandQareQheldQbyQaQsmallQgroupQofQprivat
eQinvestors.

d. UnlimitedQliability:QInvestorsQareQresponsibleQforQallQtheQfirm‘sQdebts.QAQsoleQ
proprietorQhasQunlimitedQliability.QInvestorsQinQcorporationsQhaveQlimitedQliability.
QTheyQcanQloseQtheirQinvestment,QbutQnoQmore.
EstQtime:Q01-05
4. ItemsQcQandQdQapplyQtoQcorporations.QBecauseQcorporationsQhaveQperpetualQlife,Qown
ershipQcanQbeQtransferredQwithoutQaffectingQoperations,QandQmanagersQcanQbeQfiredQw
ithQnoQeffectQonQownership.QOtherQformsQofQbusinessQmayQhaveQunlimitedQliabilityQan
dQlimitedQlife.
EstQtime:Q01-05



5. SeparationQofQownershipQfacilitatesQtheQkeyQattributesQofQaQcorporation,QincludingQlimit
edQliabilityQforQinvestors,QtransferabilityQofQownership,QaQseparateQlegalQpersonalityQofQ
theQcorporation,QandQdelegatedQcentralizedQmanagement.QTheseQfourQattributesQprovide
QsubstantialQbenefitQforQinvestors,QincludingQtheQabilityQtoQdiversifyQtheirQinvestmentQa
mongQmanyQuncorrelatedQreturns—
aQveryQvaluableQtoolQexploredQinQlaterQchapters.QAlso,QtheseQattributesQallowQinvestor
sQtoQquicklyQexit,Qenter,QorQshortQsellQanQinvestment,QtherebyQgeneratingQanQactiveQli
quidQmarketQforQcorporations.

However,QtheseQpositiveQaspectsQalsoQintroduceQsubstantialQnegativeQexternalitiesQasQw
ell.Q TheQseparationQofQownershipQfromQmanagementQtypicallyQleadsQtoQagencyQproble
ms,QwhereQmanagersQpreferQtoQconsumeQprivateQperksQorQmakeQotherQdecisionsQforQt
heirQprivateQbenefit—
ratherQthanQmaximizeQshareholderQwealth.QShareholdersQtendQtoQexerciseQlessQoversigh
tQofQeachQindividualQinvestmentQasQtheirQdiversificationQincreases.QFinally,QtheQcorporati
on‘sQseparateQlegalQpersonalityQmakesQitQdifficultQtoQenforceQaccountabilityQifQtheyQexte
rnalizeQcostsQontoQsociety.
EstQtime:Q01-05



6. ShareholdersQwillQonlyQvoteQtoQmaximizeQshareholderQwealth.QShareholdersQcanQm
odifyQtheirQpatternQofQconsumptionQthroughQborrowingQandQlending,QmatchQriskQpre
ferences,QandQhopefullyQbalanceQtheirQownQcheckbooksQ(orQhireQaQqualifiedQprofess
ionalQtoQhelpQthemQwithQtheseQtasks).
EstQtime:Q01-05



7. IfQtheQinvestmentQincreasesQtheQfirm‘sQwealth,QitQincreasesQtheQfirm‘sQshareQvalue.
QMs.QEspinozaQcouldQthenQsellQsomeQorQallQtheseQmoreQvaluableQsharesQtoQprovi
deQforQherQretirementQincome.
EstQtime:Q01-05



8. a.
AssumingQthatQtheQencabulatorQmarketQisQrisky,QanQ8%Qex
pectedQreturnQonQtheQF&HQencabulatorQinvestmentsQmayQbeQinfe
riorQtoQaQ4%QreturnQonQU.S.
governmentQsecurities,QdependingQonQtheQrelativeQriskQbetweenQtheQtwoQassets.

b.