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