SOLUTION MANUAL FOR
Principles Of Corporate Finance
14th Edition By Richard Brealey, Stewart Myers,
ALL Chapters (1 - 34)
, TABLE OF CONTENTS
Chapter 1: Introduction to Corporate Finance
Chapter 2: How to Calculate Present Values
Chapter 3: Valuing Bonds
Chapter 4: Valuing Stocks
Chapter 5: Net Present Value and Other Investment Criteria
Chapter 6: Making Investment Decisions with the Net Present Value Rule
Chapter 7: Introduction to Risk, Diversification, and Portfolio Selection
Chapter 8: The Capital Asset Pricing Model
Chapter 9: Risk and the Cost of Capital
Chapter 10: Project Analysis
Chapter 11: How to Ensure That Projects Truly Have PositiveNPVs
Chapter 12: Efficient Markets and Behavioral Finance
Chapter 13: An Overview of Corporate Financing
Chapter 14: How Corporations Issue Securities
Chapter 15: Payout Policy
Chapter 16: Does Debt Policy Matter?
Chapter 17: How Much Should a Corporation Borrow?
Chapter 18: Financing and Valuation
Chapter 19: Agency Problems and Corporate Governance
Chapter 20: Stakeholder Capitalism and Responsible Business
Chapter 21: Understanding Options
Chapter 22: Valuing Options
Chapter 23: Real Options
Chapter 24: Credit Risk and the Value of Corporate Debt
Chapter 25: The Many Different Kinds of Debt
Chapter 26: Leasing
Chapter 27: Managing Risk
Chapter 28: International Financial Management
Chapter 29: Financial Analysis
Chapter 30: Financial Planning
Chapter 31: Working Capital Management
Chapter 32: Mergers
Chapter 33: Corporate Restructuring
,Chapter 34: Conclusion: What We Do and Do Not Know about Finance
CHAPTER 1
Introduction to Corporate Finance
The values shown in the solutions may be rounded for display purposes. However, the answers were
derived using a spreadsheet without any intermediate rounding.
Answers to Problem Sets
1. a. real
b. executive airplanes
c. brand names
d. financial
e. bonds
*f. investment or capital expenditure
*g. capital budgeting or investment
h. financing
*Note that f and g are interchangeable in the question.
Est time: 01-05
2. A itrademark, ia ifactory, iundeveloped iland, iand iyour iwork iforce i(c, id, ie, iand ig) iare iall ireal
iassets. iReal iassets iare iidentifiable ias iitems iwith iintrinsic ivalue. iThe iothers iin ithe ilist iare
ifinancial iassets,ithat iis, ithese iassets iderive ivalue ibecause iof ia icontractual iclaim.
Est itime: i01-05
3. a. Financial iassets, isuch ias istocks ior ibank iloans, iare iclaims iheld iby iinvestors.
iCorporations isell ifinancial iassets ito iraise ithe icash ito iinvest iin ireal iassets isuch ias
iplantiand iequipment. iSome ireal iassets iare iintangible.
b. Capital iexpenditure imeans iinvestment iin ireal iassets. iFinancing imeans iraising ithe
icashifor ithis iinvestment.
, c. The ishares iof ipublic icorporations iare itraded ion istock iexchanges iand ican ibe
ipurchasediby ia iwide irange iof iinvestors. iThe ishares iof iclosely iheld icorporations iare
inot ipublicly itraded iand iare iheld iby ia ismall igroup iof iprivate iinvestors.
d. Unlimited iliability: iInvestors iare iresponsible ifor iall ithe ifirm‘s idebts. iA isole iproprietor
ihasiunlimited iliability. iInvestors iin icorporations ihave ilimited iliability. iThey ican ilose
itheir iinvestment, ibut ino imore.
Est itime: i01-05
Principles Of Corporate Finance
14th Edition By Richard Brealey, Stewart Myers,
ALL Chapters (1 - 34)
, TABLE OF CONTENTS
Chapter 1: Introduction to Corporate Finance
Chapter 2: How to Calculate Present Values
Chapter 3: Valuing Bonds
Chapter 4: Valuing Stocks
Chapter 5: Net Present Value and Other Investment Criteria
Chapter 6: Making Investment Decisions with the Net Present Value Rule
Chapter 7: Introduction to Risk, Diversification, and Portfolio Selection
Chapter 8: The Capital Asset Pricing Model
Chapter 9: Risk and the Cost of Capital
Chapter 10: Project Analysis
Chapter 11: How to Ensure That Projects Truly Have PositiveNPVs
Chapter 12: Efficient Markets and Behavioral Finance
Chapter 13: An Overview of Corporate Financing
Chapter 14: How Corporations Issue Securities
Chapter 15: Payout Policy
Chapter 16: Does Debt Policy Matter?
Chapter 17: How Much Should a Corporation Borrow?
Chapter 18: Financing and Valuation
Chapter 19: Agency Problems and Corporate Governance
Chapter 20: Stakeholder Capitalism and Responsible Business
Chapter 21: Understanding Options
Chapter 22: Valuing Options
Chapter 23: Real Options
Chapter 24: Credit Risk and the Value of Corporate Debt
Chapter 25: The Many Different Kinds of Debt
Chapter 26: Leasing
Chapter 27: Managing Risk
Chapter 28: International Financial Management
Chapter 29: Financial Analysis
Chapter 30: Financial Planning
Chapter 31: Working Capital Management
Chapter 32: Mergers
Chapter 33: Corporate Restructuring
,Chapter 34: Conclusion: What We Do and Do Not Know about Finance
CHAPTER 1
Introduction to Corporate Finance
The values shown in the solutions may be rounded for display purposes. However, the answers were
derived using a spreadsheet without any intermediate rounding.
Answers to Problem Sets
1. a. real
b. executive airplanes
c. brand names
d. financial
e. bonds
*f. investment or capital expenditure
*g. capital budgeting or investment
h. financing
*Note that f and g are interchangeable in the question.
Est time: 01-05
2. A itrademark, ia ifactory, iundeveloped iland, iand iyour iwork iforce i(c, id, ie, iand ig) iare iall ireal
iassets. iReal iassets iare iidentifiable ias iitems iwith iintrinsic ivalue. iThe iothers iin ithe ilist iare
ifinancial iassets,ithat iis, ithese iassets iderive ivalue ibecause iof ia icontractual iclaim.
Est itime: i01-05
3. a. Financial iassets, isuch ias istocks ior ibank iloans, iare iclaims iheld iby iinvestors.
iCorporations isell ifinancial iassets ito iraise ithe icash ito iinvest iin ireal iassets isuch ias
iplantiand iequipment. iSome ireal iassets iare iintangible.
b. Capital iexpenditure imeans iinvestment iin ireal iassets. iFinancing imeans iraising ithe
icashifor ithis iinvestment.
, c. The ishares iof ipublic icorporations iare itraded ion istock iexchanges iand ican ibe
ipurchasediby ia iwide irange iof iinvestors. iThe ishares iof iclosely iheld icorporations iare
inot ipublicly itraded iand iare iheld iby ia ismall igroup iof iprivate iinvestors.
d. Unlimited iliability: iInvestors iare iresponsible ifor iall ithe ifirm‘s idebts. iA isole iproprietor
ihasiunlimited iliability. iInvestors iin icorporations ihave ilimited iliability. iThey ican ilose
itheir iinvestment, ibut ino imore.
Est itime: i01-05
