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