公司理财英文版第10版课后习题答案1.docx

公司理财英文版第10版课后习题答案1.docx

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SolutionsManual

FundamentalsofCorporateFinance10theditionRoss,Westerfield,andJordan

06-25-2013

PreparedbyBradJordan

UniversityofKentucky

JoeSmoliraBelmontUniversity

CHAPTER1

INTRODUCTIONTOCORPORATEFINANCE

AnswerstoConceptsReviewandCriticalThinkingQuestions

1.Capitalbudgeting（decidingwhethertoexpandamanufacturingplant）,capitalstructure（decidingwhethertoissuenewequityandusetheproceedstoretireoutstandingdebt）,andworkingcapitalmanagement（modifyingthefirm‘screditcollectionpolicywithitscustomers）.

2.Disadvantages:

unlimitedliability,limitedlife,difficultyintransferringownership,difficultyinraisingcapitalfunds.Someadvantages:

simpler,lessregulation,theownersarealsothemanagers,sometimespersonaltaxratesarebetterthancorporatetaxrates.

3.Theprimarydisadvantageofthecorporateformisthedoubletaxationtoshareholdersofdistributedearningsanddividends.Someadvantagesinclude:

limitedliability,easeoftransferability,abilitytoraisecapital,andunlimitedlife.

4.InresponsetoSarbanes-Oxley,smallfirmshaveelectedtogodarkbecauseofthecostsofcompliance.ThecoststocomplywithSarboxcanbeseveralmilliondollars,whichcanbealargepercentageofasmallfirm‘sprofits.Amajorcostofgoingdarkislessaccesstocapital.Sincethefirmisnolongerpubliclytraded,itcannolongerraisemoneyinthepublicmarket.Althoughthecompanywillstillhaveaccesstobankloansandtheprivateequitymarket,thecostsassociatedwithraisingfundsinthesemarketsareusuallyhigherthanthecostsofraisingfundsinthepublicmarket.

5.Thetreasurer‘sofficeandthecontroller‘sofficearethetwoprimaryorganizationalgroupsthatreportdirectlytothechieffinancialofficer.Thecontroller‘sofficehandlescostandfinancialaccounting,taxmanagement,andmanagementinformationsystems,whilethetreasurer‘sofficeisresponsibleforcashandcreditmanagement,capitalbudgeting,andfinancialplanning.Therefore,thestudyofcorporatefinanceisconcentratedwtihinthetreasurygroup‘sfunctions.

6.Tomaximizethecurrentmarketvalue（shareprice）oftheequityofthefirm（whetherit‘spubliclytradedornot）.

7.Inthecorporateformofownership,theshareholdersaretheownersofthefirm.Theshareholderselectthedirectorsofthecorporation,whointurnappointthefirm‘smanagement.Thisseparationofownershipfromcontrolinthecorporateformoforganizationiswhatcausesagencyproblemstoexist.Managementmayactinitsownorsomeoneelse‘sbestinterests,ratherthanthoseoftheshareholders.Ifsucheventsoccur,theymaycontradictthegoalofmaximizingthesharepriceoftheequityofthefirm.

8.Aprimarymarkettransaction.

2SOLUTIONSMANUAL

9.InauctionmarketsliketheNYSE,brokersandagentsmeetataphysicallocation（theexchange）tomatchbuyersandsellersofassets.DealermarketslikeNASDAQconsistofdealersoperatingatdispersedlocaleswhobuyandsellassetsthemselves,communicatingwithotherdealerseitherelectronicallyorliterallyover-the-counter.

10.Suchorganizationsfrequentlypursuesocialorpoliticalmissions,somanydifferentgoalsareconceivable.Onegoalthatisoftencitedisrevenueminimization;thatis,providewhatevergoodsandservicesareofferedatthelowestpossiblecosttosociety.Abetterapproachmightbetoobservethatevenanot-for-profitbusinesshasequity.Thus,oneansweristhattheappropriategoalistomaximizethevalueoftheequity.

11.Presumably,thecurrentstockvaluereflectstherisk,timing,andmagnitudeofallfuturecashflows,bothshort-termandlong-term.Ifthisiscorrect,thenthestatementisfalse.

12.Anargumentcanbemadeeitherway.Attheoneextreme,wecouldarguethatinamarketeconomy,allofthesethingsarepriced.Thereisthusanoptimallevelof,forexample,ethicaland/orillegalbehavior,andtheframeworkofstockvaluationexplicitlyincludesthese.Attheotherextreme,wecouldarguethatthesearenoneconomicphenomenaandarebesthandledthroughthepoliticalprocess.Aclassic（andhighlyrelevant）thoughtquestionthatillustratesthisdebategoessomethinglikethis:

―Afirmhasestimatedthatthecostofimprovingthesafetyofoneofitsproductsis$30million.However,thefirmbelievesthatimprovingthesafetyoftheproductwillonlysave$20millioninproductliabilityclaims.Whatshouldthefirmdo?

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13.Thegoalwillbethesame,butthebestcourseofactiontowardthatgoalmaybedifferentbecauseofdifferingsocial,political,andeconomicinstitutions.

14.Thegoalofmanagementshouldbetomaximizethesharepriceforthecurrentshareholders.Ifmanagementbelievesthatitcanimprovetheprofitabilityofthefirmsothatthesharepricewi