, TABLE OF CONTENTS D D
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 mf mf mf
Chapter 4: Valuing Stocks mf mf mf
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 Chapt
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er 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 mf mf mf
Chapter 11: How to Ensure That Projects Truly Have PositiveNPVs
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Chapter 12: Efficient Markets and Behavioral Finance C
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hapter 13: An Overview of Corporate Financing Chapter
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14: How Corporations Issue Securities
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Chapter 15: Payout Policy mf mf mf
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 Cha
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pter 20: Stakeholder Capitalism and Responsible Business
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Chapter 21: Understanding Options
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Chapter 22: Valuing Options Chapt
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er 23: Real Options
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Chapter 24: Credit Risk and the Value of Corporate Debt Chapt
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er 25: The Many Different Kinds of Debt
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Chapter 26: Leasing mf mf
Chapter 27: Managing Risk mf mf mf
Chapter 28: International Financial Management
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Chapter 29: Financial Analysis Cha
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pter 30: Financial Planning
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Chapter 31: Working Capital Management
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Chapter 32: Mergers mf mf
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 mf
Introduction to Corporate Finance mf mf mf
The values shown in the solutions may be rounded forDdisplayDpurposes. However, the answers
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were derived using a spreadsheet without any intermediate rounding.
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Answers to Problem Sets
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1. a. real
b. executive airplanes mf
c. brand names m f
d. financial
e. bonds
*f. investment or capital expenditure m f m f m f
*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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2. A trademark, a factory, undeveloped land, and your work force (c, d, e, and g) are all real
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a ssets. Real assets are identifiable as items with intrinsic value. The others in the list
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are fina ncial assets, that is, these assets derive value because of a contractual clai
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m.
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3. a.
Financial assets, such as stocks or bank loans, are claims held by investors. C
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orporations sell financial assets to raise the cash to invest in real assets s
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uch a s plant and equipment. Some real assets are intangible.
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b. Capital expenditure means investment in real assets. Financing means raising
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the cash for this investment.
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, c. The shares ofDpublic corporations are traded on stock exchanges and can be
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purch ased by a wide range of investors. The shares of closely held corporat
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ions are not publicly traded and are held by a small group of private invest
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ors.
d. Unlimited liability: Investors are responsible for all the firm‘s debts. ADsole pro
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prieto r has unlimited liability. Investors in corporations have limited liability. They can
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lose their investment, but no more.
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Est time: 01-05
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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 mf mf mf
Chapter 4: Valuing Stocks mf mf mf
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 Chapt
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er 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 mf mf mf
Chapter 11: How to Ensure That Projects Truly Have PositiveNPVs
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Chapter 12: Efficient Markets and Behavioral Finance C
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hapter 13: An Overview of Corporate Financing Chapter
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14: How Corporations Issue Securities
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Chapter 15: Payout Policy mf mf mf
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 Cha
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pter 20: Stakeholder Capitalism and Responsible Business
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Chapter 21: Understanding Options
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Chapter 22: Valuing Options Chapt
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er 23: Real Options
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Chapter 24: Credit Risk and the Value of Corporate Debt Chapt
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er 25: The Many Different Kinds of Debt
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Chapter 26: Leasing mf mf
Chapter 27: Managing Risk mf mf mf
Chapter 28: International Financial Management
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Chapter 29: Financial Analysis Cha
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pter 30: Financial Planning
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Chapter 31: Working Capital Management
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Chapter 32: Mergers mf mf
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 mf
Introduction to Corporate Finance mf mf mf
The values shown in the solutions may be rounded forDdisplayDpurposes. However, the answers
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were derived using a spreadsheet without any intermediate rounding.
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Answers to Problem Sets
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1. a. real
b. executive airplanes mf
c. brand names m f
d. financial
e. bonds
*f. investment or capital expenditure m f m f m f
*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
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a ssets. Real assets are identifiable as items with intrinsic value. The others in the list
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are fina ncial assets, that is, these assets derive value because of a contractual clai
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m.
Est time: 01-05
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3. a.
Financial assets, such as stocks or bank loans, are claims held by investors. C
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orporations sell financial assets to raise the cash to invest in real assets s
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uch a s plant and equipment. Some real assets are intangible.
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b. Capital expenditure means investment in real assets. Financing means raising
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the cash for this investment.
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, c. The shares ofDpublic corporations are traded on stock exchanges and can be
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purch ased by a wide range of investors. The shares of closely held corporat
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ions are not publicly traded and are held by a small group of private invest
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ors.
d. Unlimited liability: Investors are responsible for all the firm‘s debts. ADsole pro
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prieto r has unlimited liability. Investors in corporations have limited liability. They can
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lose their investment, but no more.
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Est time: 01-05
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