公司理财英文版第10版课后习题答案1.docx

1、Solutions ManualFundamentals of Corporate Finance10thedition Ross, Westerfield, and Jordan06-25-2013Prepared by Brad JordanUniversity of KentuckyJoe Smolira Belmont UniversityCHAPTER 1INTRODUCTION TO CORPORATE FINANCEAnswers to Concepts Review and Critical Thinking Questions1. Capital budgeting (dec

2、iding whether to expand a manufacturing plant), capital structure (deciding whether to issue new equity and use the proceeds to retire outstanding debt), and working capital management (modifying the firms credit collection policy with its customers).2. Disadvantages: unlimited liability, limited li

3、fe, difficulty in transferring ownership, difficulty in raising capital funds. Some advantages: simpler, less regulation, the owners are also the managers, sometimes personal tax rates are better than corporate tax rates.3. The primary disadvantage of the corporate form is the double taxation to sha

4、reholders of distributed earnings and dividends. Some advantages include: limited liability, ease of transferability, ability to raise capital, and unlimited life.4. In response to Sarbanes-Oxley, small firms have elected to go dark because of the costs of compliance. The costs to comply with Sarbox

5、 can be several million dollars, which can be a large percentage of a small firms profits. A major cost of going dark is less access to capital. Since the firm is no longer publicly traded, it can no longer raise money in the public market. Although the company will still have access to bank loans a

6、nd the private equity market, the costs associated with raising funds in these markets are usually higher than the costs of raising funds in the public market.5. The treasurers office and the controllers office are the two primary organizational groups that report directly to the chief financial off

7、icer. The controllers office handles cost and financial accounting, tax management, and management information systems, while the treasurers office is responsible for cash and credit management, capital budgeting, and financial planning. Therefore, the study of corporate finance is concentrated wtih

8、in the treasury groups functions.6. To maximize the current market value (share price) of the equity of the firm (whether its publiclytraded or not).7. In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in tur

9、n appoint the firms management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone elses best interests, rather than those of the shareholders. If such events occur, they may contradict the

10、 goal of maximizing the share price of the equity of the firm.8. A primary market transaction.2 SOLUTIONS MANUAL9. In auction markets like the NYSE, brokers and agents meet at a physical location (the exchange) to match buyers and sellers of assets. Dealer markets like NASDAQ consist of dealers oper

11、ating at dispersed locales who buy and sell assets themselves, communicating with other dealers either electronically or literally over-the-counter.10. Such organizations frequently pursue social or political missions, so many different goals are conceivable. One goal that is often cited is revenue

12、minimization; that is, provide whatever goods and services are offered at the lowest possible cost to society. A better approach might be to observe that even a not-for-profit business has equity. Thus, one answer is that the appropriate goal is to maximize the value of the equity.11. Presumably, th

13、e current stock value reflects the risk, timing, and magnitude of all future cash flows, both short-term andlong-term. If this is correct, then the statement is false.12. An argument can be made either way. At the one extreme, we could argue that in a market economy, all of these things are priced.

14、There is thus an optimal level of, for example, ethical and/or illegal behavior, and the framework of stock valuation explicitly includes these. At the other extreme, we could argue that these are noneconomic phenomena and are best handled through the political process. A classic (and highly relevan

15、t) thought question that illustrates this debate goes something like this: A firm has estimated that the cost of improving the safety of one of its products is $30 million. However, the firm believes that improving the safety of the product will only save $20 million in product liability claims. Wha

16、t should the firm do?13. The goal will be the same, but the best course of action toward that goal may be different because of differing social, political, and economic institutions.14. The goal of management should be to maximize the share price for the current shareholders. If management believes that it can improve the profitability of the firm so that the share price wi