Corporate_Finance_RWJ版第7版第五章_答案

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Corporate Finance 第7版答案Ch027

Chapter 27: Cash Management27.1 Firms need to hold cash to:a. Satisfy the transaction needs. For example, cash is collected from sales and newfinancing and disbursed as wages, salaries, trade debts, taxes and dividends.b. Maintain compensating balances. A minimum required compensating balance atbanks providing credit service to the firm may impose a lower limit on the level ofcash a firm holds.27.2 a. Decrease. Examine the Baumol model. As the interest rate (k) increases, the optimalcash balance must also decrease.b. Increase. Examine the Baumol model. As brokerage costs (F, the per transactioncosts) rise, the optimal balance increases.c. Decrease. Clearly, if the bank lowers its compensating balance requirement, a firmwill not be required to hold as much of its assets as cash (assuming that the firm'scash need for the transaction motive is below the compensating balance requirement).d. Decrease. If the cost of borrowing falls, a firm need not hold as much of its assets ascash because the cost of running short (borrowing to fill cash needs) is lower.e. Increase. As a firm’s credit rating falls, its cost to borrow increases. Thus, the firmcannot as easily afford to run short of cash and its cash balance must be higher.f. Increase. Introduction of direct banking fees would increase the fixed costsassociated with holding cash. As fixed costs rise, the optimal balance must also rise.27.3 In order to determine weekly earnings (sometimes the word "return" is used to meandollar amounts) on the cash balances, first find the weekly interest rate.12r==.00230852and apply this to each of the weekly amounts:Week Avg Cash Balance $ Earned1 24,000 55.392 34,000 78.473 10,000 23.084 15,000 34.62Avg monthly 83,000 191.56Average annual earnings = 191.56 x 12 = $2,298.72Note: this assumes interest is not compounded. The question does not specify whatcompounding assumptions should be made.27.4 a.The total amount of cash that will be disbursed during the year is: $345,000 * 12 = $4,140,000 Using the optimal cash balance formula from the Baumol model, 193,243$07.0)000,140,4)(500($2K 2FT *C === $243,193 should be kept as cash. The balance, $556,807 (=$800,000-$243,193), should be invested in marketable securities. b.The number of times marketable securities will be sold during the next twelve months is $4,140,000 / $243,193 = 17 times 27.5Start with the Baumol model and solve for Total Costs, T: ()222C*2FT C*K KC*T 2F .075(20 million)25,000$3,000 million ===⨯=⨯= 3,000 million Average weekly disbursement 52$57.69 million == 27.6 Use the Miller-Orr formula. The target cash balance = Z*3F 4K L 23=+σThe upper limit = H*=3Z*-2LThe daily opportunity cost = K 10.000211==Z*$20,000$34,536=H*3(34,536)2(20,000)63,608=-=The target cash level is $34,536, and the upper limit is $63,608.27.7 a. Since the upper limit, H*, is set by the firms, use that to find Z*: H* = 3Z* - 2L H* - 2L Z* = 3 Then, H 2L 200,0002100,000g g Z *$133,333Gold 33H 2L 300,0002150,000s s Z *$200,000Silver 33++⨯===++⨯=== b.Use the Miller/Orr equation for Z*, and solve for variance, 2σ: ()()()2332332Z*L 3F Z*L 4K 3F Z*L 4K Z*L 4K 3F σσσ==+-=-=Now, find the variance for Gold Star: ()()G 332G G G G G K 10.000261133,333100,00040.000261Z *L 4K /3F 6,444,25132,000σ==-⨯⨯=-=≈⨯and Silver Star: ()()S 332S S S S S K 10.000236200,000150,00040.000236Z *L 4K /3F 15,733,33332,000σ==-⨯⨯=-=≈⨯So, Silver Star Co. has a more volatile daily cash flow. 27.8 Compare the cost and benefit of a lockbox:Benefit of Lockbox:Garden Groves daily float = 150 payments per day x $15,000 avg payment= $2,250,00027.8 (continued)Increase in collected cash balance if a 3 day lockbox is installed= 3 x $2,250,000= $6,750,000Since this is a sustained increase in the cash balance, find the annual earnings fromthis increase if invested in money-market securities:Annual earnings = $6,750,000 x 0.075= $506,250Cost of Lockbox:Variable cost $ 0.5 x 150 x 365 = $27,375Fixed cost = 80,000Total cost =$107,375Net benefit of the lockbox = Benefit - Cost= $506,250 - $107,375= $398,875The lockbox system should be installed.27.9 To make the system profitable, the net earnings of installing the lockbox system mustbe non-negative. The lower limit for acceptability is zero profits.Let N = number of customers per day, and write the benefit and cost of the lock boxin terms of N:Earnings = ($4,500) (N) (2) (0.06) = $540 x NCosts: Total Cost = Variable Cost + Fixed CostVariable cost = N (365) ($0.25) = $91.25 x NFixed cost = $15,000Total cost = 91.25 N + 15,000Then, set Earnings = Total Cost, and solve for N:540 N = 15,000 + 91.25 NN = 33.43Salisbury Stakes needs at least 34 customers per day for the lockbox system to beprofitable.27.10Disbursement float = avg daily pymts x avg days to clear = $12,000 x 5 = $60,000 Collection float = avg pymt x availability time = -$15,000 x 3 = -$45,000 Net float = disbursement float - collection float = $60,000 - $45,000 = $15,000 If funds are collected in four days rather than three, disbursement float will not change. Collection float would change to -15,000 x 4 = -$60,000. This change would make the net float equal to zero. 27.11 a.Reduction in outstanding cash balances = $100,000 x 3 days = $300,000 b.Return on savings = $300,000 (0.12) = $36,000 c.Maximum monthly charge = $36,000 / 12 = $3,000 27.12The cash savings are the earnings from the interest bearing account that otherwise would not have been received. The $ Return on the delayed payment is (ignoring compounding) ()$200,000.00043$240R ⎡⎤=⎣⎦= Since the disbursements occur every 2 weeks: Annual savings = 240 x 26 = $6,240 The Walter Company will save $6,240 per year. 27.13 If the Miller Company divides the eastern region, collections will be accelerated byone day freeing up $4 million per day. Compensating balances will be increased by$100,000 [=2($300,000)-$500,000]. The net effect is to have $3,900,000 to invest.If T-bills pay 7% per year, the annual net savings from the division of the easternregion is$3,900,000 x 0.07 = $273,000.Therefore, Miller should divide the Eastern Region.27.14 Lockbox Benefitdaily float = 7,500 x 250= $1,875,000increased cash = 1.5 days x $1,875,000= $2,812,500daily Interest = 2,812,500 x .0003= $843.75annual interest = 843.75 x 365= $307,968.75Lockbox Cost: = 30,000 + .3 x 250 pymts x 365 days= $57,375Net Benefit of Lockbox = Benefit - Cost= 307,986.75 - 57,375= $250,593.75Concentration Banking:daily float = 1,875,000increased cash = 1 day x $1,875,000 = $1,875,000daily interest = 1,875,000 x .0003 = 562.50annual interest = 562.50 x 365 = $205,312.50Since there is no other additional cost for Concentration Banking,compare:205,312.50: net benefit of concentration250,593.75: net benefit of lockboxSo the lockbox system is recommended.27.15 The important characteristics of short-term marketable securities are:i. maturityii. default riskiii. marketabilityiv. taxability。

Corporate Finance 第7版答案Ch031

Chapter 31: International Corporate Finance31.1 a.In direct terms, $1.6317 / Pound In European terms, DM1.8110 / $ b. The Japanese yen is selling at a premium to the U.S. dollar in the forward markets.Today, at the spot rate, U.S.$ 1 buys ¥143, while at the 90-day future rate, U.S.$ 1buys only ¥142.01. Clearly, Yen are getting more expensive in dollar terms.This is even easier to see in direct terms:At the spot rate, the yen cost just under 6 cents, while the 90-day yen costs over 7cents.c. It will be important to Japanese companies that will receive or make payments indollars. It will also be important to other international companies outside Japan thatmust make or receive payments in yen. For these companies, future cash flowsdepend on the exchange rate.d. The 3 month forward exchange rate is $0.6743 / SF. The amount of Swiss francsreceived will be SF148,301.94. = $100,000$0.6743/SF ⎡⎣⎢⎤⎦⎥. We should sell dollars, because at the spot rate, it would be SF 149,454,49.e. Let x yS be the spot rate of currency X for Y Pound/DM Pound/$$/DMS S S Pound 0.6129$0.5522= 1 $DM 1Pound 0.3384DM 1=⨯⎛⎫⎛⎫ ⎪⎪⎝⎭⎝⎭= Yen/SF Yen/$$/SFS S S ?0.6129$0.6691= 1 $SF 1?95.6813SF 1=⨯⎛⎫⎛⎫ ⎪⎪⎝⎭⎝⎭= f. Both banks reduce their exposure to foreign exchange risk. If a bank finds anotherbank with a complimentary mismatch of cash flows in terms of foreign currencies, itshould arrange a swap since both banks’ cash flows would be more closely matched.31.2 a. It is easiest to see this by considering from the point of view of the DM: DM DM 2 and 4$L == and write as the inverse: $L 0.5 and 0.25DM DM == Then write as a ratio: $$0.5DM 2.0L L 0.25DM === For no arbitrage, the quote for $L must be 2.0, but instead it is 1.8. Therefore, an arbitrage opportunity does exist. b.Similarly, 100 / 2 = 50, and the quote is ¥50/DM, so arbitrage does not exist c.and 100/7.812.8=, but the quote is ¥14/HKD, meaning arbitrage does exist 31.3 a.False. On the contrary, according to Relative Purchasing Power Parity, an expectation of higher inflation in Japan should cause the yen to depreciate against the dollar. b.False. Assuming that the forward market is efficient, any expectation of higher inflation in France should be reflected in discounted French francs in the forward market. Therefore, no protection from risk would be available by using forward contracts. c.True. The fact that other participants in the market do not have information regarding the differences in the relative inflation rates in the two countries will make our knowledge of this fact a special factor that will make speculation in the forward market successful. 31.4 The approximation formula given in the text is:**S whereS rate of change in the BD/WD exchange rate inflation rate in Empire Blackinflation rate in Empire WhiteBD WDBD WD =∏-∏=∏=∏=Then,*S 10%5%5%0.05=-==So, the spot rate at year end is31.4 (continued)()*10S = S 1+S 2.5(1.05)BD 2.625WD=+=31.5 a. The Interest-rate parity theorem specifies:*1(0,1)(0)1i F S i +=+ where:*i domestic interest ratei = foreign interest rate F(0,1) = current price of a 1 month forward contractS(0) = current domestic-currency price of spot foreign exchange= In this case, we have (and solving for the forward rate):US $FF France 1i F(0,3) = S(0)1+i ⎡⎤+⎢⎥⎣⎦Since S(0) is $/FF, we must take the inverse of the quote given in the problem, so1S(0)=0.166676= Since US France i and i are specified in the problem annually and we want the 3-month forward rate, we must find the 3-month interest rates, so:US France 5%i 3 1.25%128%i 32%12⎛⎫== ⎪⎝⎭⎛⎫== ⎪⎝⎭So, now we have:1.0125F(0,3) = 0.166671.02=0.16544⎡⎤⎢⎥⎣⎦Convert this back to FF/$ (1/0.16544)and we get FF 6.04/$b. Enter the buy-side position of a 3 month FF forward contract worth1,000,000 x 6.04 = FF6.04 million. Then, when they buy the cosmetics 3 monthsfrom now, they will have the necessary French Francs, regardless of what happens tothe FX markets during those 3 months.31.6 a. Compare the end-of-period investment value of each country:Investment in the U.K.:The treasurer can obtain 2.5 million Pounds [= $5 million / ($2 / Pound)]. Afterinvesting in the U.K. for three months at 9% he will have 2,556,250 pounds [= 2.5million pounds x (1 + 0.09 / 4)]The forward sale of pounds will provide $5,150,843.75 (= 2,556,250 Pounds x$2.015 / Pound).Investment in the U.S.:After investing in the U.S. for three months at 12%, the treasurer will have$5,150,000 [= $5,000,000 x (1 + 0.12 / 4)].Since investing in the UK yields $843.75 more than investing in the US, the treasuereshould invest in the UK.b. From the equation for interest-rate parity theorem:*1(0,1)(0)1i F S i +=+ where:*i domestic interest ratei = foreign interest rate F(0,1) = current price of a 1 period forward contractS(0) = current domestic-currency price of spot foreign exchange= Instead of interpreting the period as 1 month as before and in the text, we can interpret it as 1 year. Then we haveUS UK 1i F(0,1) = S(0)1i 1.13$1.50/Pound 1.08$1.57/Pound⎛⎫+ ⎪+⎝⎭⎛⎫= ⎪⎝⎭= c. It all depends on whether the forward market expects the same appreciation over theperiod and whether the expectation is accurate. Assuming that the expectation iscorrect and that other traders do not have the same information, there will be value tohedging the currency exposure.31.7 a. One possible reason investment in the foreign subsidiary might be preferred is if thisinvestment provides direct diversification that shareholders could not attain byinvesting on their own. Another reason could be if the political climate in the foreigncountry was more stable than in the home country.Increased political risk can also be a reason you might prefer the home subsidiaryinvestment.Indonesia can serve as a great example of political risk. If it cannot be diversifiedaway, investing in this type of foreign country will increase the systematic risk. As aresult, it will raise the cost of the capital, and could actually decrease the NPV of theinvestment.b.First, we need to forecast the future spot rates for the next 3 years. From interest rate and purchasing power parity, the expected exchange rate isUS $/DM WG 1i E[S(1)]$/DM(0)1i 1.113$0.5/DM 1.06$0.525/DM ⎛⎫+= ⎪+⎝⎭⎛⎫= ⎪⎝⎭= Similarly,()2$/DM 1.113 E[S(2)]$0.5/DM 1.06$0.5513/DM⎛⎫= ⎪⎝⎭=()3$/DM 1.113 E[S(3)]$0.5/DM 1.06$0.5788/DM ⎛⎫= ⎪⎝⎭=Now, use these future spot rates to estimate the future cash flows in dollars, and discount those dollar cash flows:$17,582$1,940,909$1,250,586$1,826,087$5,000,000 1.15$0.5788/DM 0)DM2,100,0000(DM3,000,01.15$0.5513/DM 0DM3,000,00 1.15$0.525/DM 0DM4,000,00$0.5/DM)00DM10,000,0(NPV 32=+++-=⨯++⨯+⨯+⨯-=c. Yes, the firm should undertake the foreign investment. If, after taking intoconsideration all risks, a project in a foreign country has a positive NPV, the firmshould undertake it. Note that in practice, the stated assumption (that the adjustmentto the discount rate has taken into consideration all political and diversification issues)is a huge task. But once that has been addressed, the net present value principleholds for foreign operations, just as for domestic.31.7 (continued)d. If the foreign currency depreciates, the U.S. parent will experience an exchange rateloss when the foreign cash flow is remitted to the U.S. This problem could beovercome by selling forward contracts. Another way of overcoming this problemwould be to borrow in the country where the project is located.31.8 a. Euroyen is yen deposited in a bank outside Japan.b. False. If the financial markets are perfectly competitive, the difference between theEurodollar rate and the U.S. rate will be due to differences in risk and governmentregulation. Therefore, speculating in those markets will not be beneficial.c. The difference between a Eurobond and a foreign bond is that the foreign bond isdenominated in the currency of the country of origin of the issuing company.Eurobonds are more popular than foreign bonds because of registration differences.Eurobonds are unregistered securities.d. A foreign bond. In this particular case, a Yankee bond.。

投资学第7版TestBank答案05

Multiple Choice Questions1. Over the past year you earned a nominal rate of interest of 10 percent on your money.The inflation rate was 5 percent over the same period. The exact actual growth rate ofyour purchasing power wasA) 15.5%.B) 10.0%.C) 5.0%.D) 4.8%.E) 15.0%Answer: D Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.10% / 1.5% - 1 = 4.8%.2. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of7%. What is your approximate annual real rate of return if the rate of inflation was 3%over the year?A) 4%.B) 10%.C) 7%.D) 3%.E) none of the above.Answer: A Difficulty: EasyRationale: 7% - 3% = 4%.3. If the annual real rate of interest is 5% and the expected inflation rate is 4%, the nominalrate of interest would be approximatelyA) 1%.B) 9%.C) 20%.D) 15%.E) none of the above.Answer: B Difficulty: EasyRationale: 5% + 4% = 9%.4. You purchased a share of stock for $20. One year later you received $1 as dividend andsold the share for $29. What was your holding period return?A) 45%B) 50%C) 5%D) 40%E) none of the aboveAnswer: B Difficulty: ModerateRationale: ($1 + $29 - $20)/$20 = 0.5000, or 50%.5. Which of the following determine(s) the level of real interest rates?I)the supply of savings by households and business firmsII)the demand for investment fundsIII)the government's net supply and/or demand for fundsA) I onlyB) II onlyC) I and II onlyD) I, II, and IIIE) none of the aboveAnswer: D Difficulty: ModerateRationale: The value of savings by households is the major supply of funds; the demand for investment funds is a portion of the total demand for funds; the government'sposition can be one of either net supplier, or net demander of funds. The above factors constitute the total supply and demand for funds, which determine real interest rates.6. Which of the following statement(s) is (are) true?I)The real rate of interest is determined by the supply and demand for funds.II)The real rate of interest is determined by the expected rate of inflation.III)The real rate of interest can be affected by actions of the Fed.IV)The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.A) I and II only.B) I and III only.C) III and IV only.D) II and III only.E) I, II, III, and IV onlyAnswer: B Difficulty: ModerateRationale: The expected rate of inflation is a determinant of nominal, not real, interest rates. Real rates are determined by the supply and demand for funds, which can be affected by the Fed.7. Which of the following statements is true?A) Inflation has no effect on the nominal rate of interest.B) The realized nominal rate of interest is always greater than the real rate of interest.C) Certificates of deposit offer a guaranteed real rate of interest.D) None of the above is true.E) A, B and CAnswer: D Difficulty: ModerateRationale: Expected inflation rates are a determinant of nominal interest rates. The realized nominal rate of interest would be negative if the difference between actual and anticipated inflation rates exceeded the real rate. The realized nominal rate of interest would be less than the real rate if the unexpected inflation were greater than the real rate of interest. Certificates of deposit contain a real rate based on an estimate of inflation that is not guaranteed.8. Other things equal, an increase in the government budget deficitA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rates.D) increases business prospects.E) none of the above.Answer: B Difficulty: ModerateRationale: An increase in the government budget deficit, other things equal, causes the government to increase its borrowing, which increases the demand for funds and drivesinterest rates up.9. Ceteris paribus, a decrease in the demand for loanable fundsA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rate.D) results from an increase in business prospects and a decrease in the level of savings.E) none of the above.Answer: A Difficulty: ModerateRationale: A decrease in demand, ceteris paribus, always drives interest rates down. An increase in business prospects would increase the demand for funds. The savings level affects the supply of, not the demand for, funds.10. The holding period return (HPR) on a share of stock is equal toA) the capital gain yield during the period, plus the inflation rate.B) the capital gain yield during the period, plus the dividend yield.C) the current yield, plus the dividend yield.D) the dividend yield, plus the risk premium.E) the change in stock price.Answer: B Difficulty: ModerateRationale: The HPR of any investment is the sum of the capital gain and the cash flowover the period, which for common stock is B.11. Historical records regarding return on stocks, Treasury bonds, and Treasury billsbetween 1926 and 2005 show thatA) stocks offered investors greater rates of return than bonds and bills.B) stock returns were less volatile than those of bonds and bills.C) bonds offered investors greater rates of return than stocks and bills.D) bills outperformed stocks and bonds.E) treasury bills always offered a rate of return greater than inflation.Answer: A Difficulty: ModerateRationale: The historical data show that, as expected, stocks offer a greater return andgreater volatility than the other investment alternatives. Inflation sometimes exceededthe T-bill return.12. If the interest rate paid by borrowers and the interest rate received by savers accuratelyreflects the realized rate of inflation:A) borrowers gain and savers lose.B) savers gain and borrowers lose.C) both borrowers and savers lose.D) neither borrowers nor savers gain or lose.E) both borrowers and savers gain.Answer: D Difficulty: ModerateRationale: If the described interest rate accurately reflects the rate of inflation, bothborrowers and lenders are paying and receiving, respectively, the real rate of interest;thus, neither group gains.Use the following to answer questions 13-15:You have been given this probability distribution for the holding period return for KMP stock:13. What is the expected holding period return for KMP stock?A) 10.40%B) 9.32%C) 11.63%D) 11.54%E) 10.88%Answer: A Difficulty: ModerateRationale: HPR = .30 (18%) + .50 (12%) + .20 (-5%) = 10.4%14. What is the expected standard deviation for KMP stock?A) 6.91%B) 8.13%C) 7.79%D) 7.25%E) 8.85%Answer: B Difficulty: DifficultRationale: s = [.30 (18 - 10.4)2 + .50 (12 - 10.4)2 + .20 (-5 - 10.4)2]1/2 = 8.13%15. What is the expected variance for KMP stock?A) 66.04%B) 69.96%C) 77.04%D) 63.72%E) 78.45%Answer: A Difficulty: DifficultRationale: s = [.30 (18 - 10.4)2 + .50 (12 - 10.4)2 + .20 (-5 - 10.4)2] = 66.04%16. If the nominal return is constant, the after-tax real rate of returnA) declines as the inflation rate increases.B) increases as the inflation rate increases.C) declines as the inflation rate declines.D) increases as the inflation rate decreases.E) A and D.Answer: E Difficulty: ModerateRationale: Inflation rates have an inverse effect on after-tax real rates of return.17. The risk premium for common stocksA) cannot be zero, for investors would be unwilling to invest in common stocks.B) must always be positive, in theory.C) is negative, as common stocks are risky.D) A and B.E) A and C.Answer: D Difficulty: ModerateRationale: If the risk premium for common stocks were zero or negative, investorswould be unwilling to accept the lower returns for the increased risk.18. A risk-free intermediate or long-term investmentA) is free of all types of risk.B) does not guarantee the future purchasing power of its cash flows.C) does guarantee the future purchasing power of its cash flows as it is insured by the U.S. Treasury.D) A and B.E) B and C.Answer: B Difficulty: ModerateRationale: A risk-free U. S. Treasury bond is a fixed income instrument, and thus does not guarantee the future purchasing power of its cash flows. As a result, purchasing power risk is present.19. You purchase a share of Boeing stock for $90. One year later, after receiving a dividendof $3, you sell the stock for $92. What was your holding period return?A) 4.44%B) 2.22%C) 3.33%D) 5.56%E) none of the aboveAnswer: D Difficulty: ModerateRationale: HPR = (92 - 90 + 3) / 90 = 5.56%20. Toyota stock has the following probability distribution of expected prices one year fromnow:If you buy Toyota today for $55 and it will pay a dividend during the year of $4 pershare, what is your expected holding period return on Toyota?A) 17.72%B) 18.89%C) 17.91%D) 18.18%E) None of the aboveAnswer: D Difficulty: DifficultRationale: E(P1) = .25 (54/55 - 1) + .40 (64/55 - 1) + .35 (74/55 - 1) = 18.18%.21. Which of the following factors would not be expected to affect the nominal interestrate?A) the supply of loanable fundsB) the demand for loanable fundsC) the coupon rate on previously issued government bondsD) the expected rate of inflationE) government spending and borrowingAnswer: C Difficulty: EasyRationale: The nominal interest rate is affected by supply, demand, government actions and inflation. Coupon rates on previously issued government bonds reflect historical interest rates but should not affect the current level of interest rates.22. Your Certificate of Deposit will mature in one week and you are considering how toinvest the proceeds. If you invest in a 30-day CD the bank will pay you 4%. If youinvest in a 2-year CD the bank will pay you 6% interest. Which option would youchoose?A) the 30-day CD, no matter what you expect interest rates to do in the futureB) the 2-year CD, no matter what you expect interest rates to do in the futureC) the 30-day CD if you expect that interest rates will fall in the futureD) the 2-year CD if you expect that interest rates will fall in the futureE) You would be indifferent between the 30-day and the 2-year CDs.Answer: D Difficulty: ModerateRationale: You would prefer to lock in the higher rate on the 2-year CD rather thansubject yourself to reinvestment rate risk. If you expected interest rates to rise in the future the opposite choice would be better.23. In words, the real rate of interest is approximately equal toA) the nominal rate minus the inflation rate.B) the inflation rate minus the nominal rate.C) the nominal rate times the inflation rate.D) the inflation rate divided by the nominal rate.E) the nominal rate plus the inflation rate.Answer: A Difficulty: EasyRationale: The actual relationship is (1 + real rate) = (1 + nominal rate) / (1 + inflation rate). This can be approximated by the equation: real rate = nominal rate - inflation rate.24. If the Federal Reserve lowers the discount rate, ceteris paribus, the equilibrium levels offunds lent will __________ and the equilibrium level of real interest rates will___________A) increase; increaseB) increase; decreaseC) decrease; increaseD) decrease; decreaseE) reverse direction from their previous trendsAnswer: B Difficulty: ModerateRationale: A lower discount rate would encourage banks to make more loans, whichwould increase the money supply. The supply curve would shift to the right and theequilibrium level of funds would increase while the equilibrium interest rate would fall.25. What has been the relationship between T-Bill rates and inflation rates since the 1980s?A) The T-Bill rate was sometimes higher than and sometimes lower than the inflationrate.B) The T-Bill rate has equaled the inflation rate plus a constant percentage.C) The inflation rate has equaled the T-Bill rate plus a constant percentage.D) The T-Bill rate has been higher than the inflation rate almost the entire period.E) The T-Bill rate has been lower than the inflation rate almost the entire period.Answer: D Difficulty: ModerateRationale: The T-Bill rate was higher than the inflation rate for over two decades.26. “Bracket Creep” happens whenA) tax liabilities are based on real income and there is a negative inflation rate.B) tax liabilities are based on real income and there is a positive inflation rate.C) tax liabilities are based on nominal income and there is a negative inflation rate.D) tax liabilities are based on nominal income and there is a positive inflation rate.E) too many peculiar people make their way into the highest tax bracket.Answer: D Difficulty: ModerateRationale: A positive inflation rate typically leads to higher nominal income. Highernominal income means people will have higher tax liabilities and in some cases will put them in higher tax brackets. This can happen even when real income has declined.27. The holding-period return (HPR) for a stock is equal toA) the real yield minus the inflation rate.B) the nominal yield minus the real yield.C) the capital gains yield minus the tax rate.D) the capital gains yield minus the dividend yield.E) the dividend yield plus the capital gains yield.Answer: E Difficulty: EasyRationale: HPR consists of an income component and a price change component. The income component on a stock is the dividend yield. The price change component is the capital gains yield.28. The historical arithmetic rate of return on small stocks over the 1926-2005 period hasbeen _______. The standard deviation of small stocks' returns has been ________ than the standard deviation of large stocks' returns.A) 12.43%, lowerB) 13.11%, lowerC) 16.24%, higherD) 17.95%, higherE) 21.53%, higherAnswer: D Difficulty: ModerateRationale: See Table 5-5.Use the following to answer question 29:You have been given this probability distribution for the holding period return for Cheese, Inc stock:29. Assuming that the expected return on Cheese's stock is 14.35%, what is the standarddeviation of these returns?A) 4.72%B) 6.30%C) 4.38%D) 5.74%E) None of the aboveAnswer: D Difficulty: ModerateRationale: Variance = .20*(24-14.35)2 + .45*(15-14.35)2 + .35*(8-14.35)2 = 32.9275.Standard deviation = = 5.74.30. An investor purchased a bond 45 days ago for $985. He received $15 in interest andsold the bond for $980. What is the holding period return on his investment?A) 1.52%B) 0.50%C) 1.92%D) 0.01%E) None of the aboveAnswer: E Difficulty: EasyRationale: HPR = ($15+980-985)/$985 = .0 = approximately 1.02%.31. Over the past year you earned a nominal rate of interest of 8 percent on your money.The inflation rate was 3.5 percent over the same period. The exact actual growth rate of your purchasing power wasA) 15.55%.B) 4.35%.C) 5.02%.D) 4.81%.E) 15.04%Answer: B Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.08 / 1.035 - 1 = 4.35%.32. Over the past year you earned a nominal rate of interest of 14 percent on your money.The inflation rate was 2 percent over the same period. The exact actual growth rate of your purchasing power wasA) 11.76%.B) 16.00%.C) 15.02%.D) 14.32%.E) none of the above.Answer: A Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.14 / 1.02 - 1 = 11.76%.33. Over the past year you earned a nominal rate of interest of 12.5 percent on your money.The inflation rate was 2.6 percent over the same period. The exact actual growth rate of your purchasing power wasA) 9.15%.B) 9.90%.C) 9.65%.D) 10.52%.E) none of the above.Answer: C Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.125 / 1.026 - 1 = 9.65%.34. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of4%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year?A) 4%.B) 2%.C) 6%.D) 3%.E) none of the above.Answer: B Difficulty: EasyRationale: 4% - 2% = 2%.35. A year ago, you invested $2,500 in a savings account that pays an annual interest rate of2.5%. What is your approximate annual real rate of return if the rate of inflation was1.6% over the year?A) 4.1%.B) 2.5%.C) 2.9%.D) 1.6%.E) none of the above.Answer: E Difficulty: EasyRationale: 2.5% - 1.6% = 0.9%.36. A year ago, you invested $12,000 in an investment that produced a return of 16%. Whatis your approximate annual real rate of return if the rate of inflation was 2% over theyear?A) 18%.B) 2%.C) 16%.D) 15%.E) none of the above.Answer: E Difficulty: EasyRationale: 16% - 2% = 14%.37. If the annual real rate of interest is 3.5% and the expected inflation rate is 2.5%, thenominal rate of interest would be approximatelyA) 3.5%.B) 2.5%.C) 1%.D) 6.8%.E) none of the above.Answer: E Difficulty: EasyRationale: 3.5% + 2.5% = 6%.38. If the annual real rate of interest is 2.5% and the expected inflation rate is 3.4%, thenominal rate of interest would be approximatelyA) 4.9%.B) 0.9%.C) -0.9%.D) 7%.E) none of the above.Answer: E Difficulty: EasyRationale: 2.5% + 3.4% = 5.9%.39. If the annual real rate of interest is 4% and the expected inflation rate is 3%, the nominalrate of interest would be approximatelyA) 4%.B) 3%.C) 1%.D) 5%.E) none of the above.Answer: E Difficulty: EasyRationale: 4% + 3% = 7%.40. You purchased a share of stock for $12. One year later you received $0.25 as dividendand sold the share for $12.92. What was your holding period return?A) 9.75%B) 10.65%C) 11.75%D) 11.25%E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($0.25 + $12.92 - $12)/$12 = 0.975, or 9.75%.41. You purchased a share of stock for $120. One year later you received $1.82 as dividendand sold the share for $136. What was your holding period return?A) 15.67%B) 22.12%C) 15.67%D) 13.24%E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($1.82 + $136 - $120)/$120 = 0.1485, or 14.85%.42. You purchased a share of stock for $65. One year later you received $2.37 as dividendand sold the share for $63. What was your holding period return?A) 0.57%B) -0.2550%C) -0.89%D) 1.63%E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($2.37 + $63 - $65)/$65 = 0.0056, or 0.57%.Use the following to answer questions 43-45:You have been given this probability distribution for the holding period return for a stock:43. What is the expected holding period return for the stock?A) 11.67%B) 8.33%C) 9.56%D) 12.4%E) None of the aboveAnswer: E Difficulty: ModerateRationale: HPR = .40 (22%) + .35 (11%) + .25 (-9%) = 10.4%44. What is the expected standard deviation for the stock?A) 2.07%B) 9.96%C) 7.04%D) 1.44%E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [.40 (22 - 10.4)2 + .35 (11 - 10.4)2 + .25 (-9 - 10.4)2]1/2 = 12.167%45. What is the expected variance for the stock?A) 142.07%B) 189.96%C) 177.04%D) 128.17%E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [ .40 (22 - 10.4)2 + .35 (11 - 10.4)2 + .25 (-9 - 10.4)2] = 148.04%46. Which of the following measures of risk best highlights the potential loss from extremenegative returns?A) Standard deviationB) VarianceC) Upper partial standard deviationD) Value at Risk (VaR)E) None of the aboveAnswer: D Difficulty: Moderate47. Over the past year you earned a nominal rate of interest of 3.6 percent on your money.The inflation rate was 3.1 percent over the same period. The exact actual growth rate of your purchasing power wasA) 3.6%.B) 3.1%.C) 0.5%.D) 6.7%.E) none of the aboveAnswer: E Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.036/ 1.031% - 1 = 0.328%.48. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of4.3%. What is your approximate annual real rate of return if the rate of inflation was 3%over the year?A) 4.3%.B) -1.3%.C) 7.3%.D) 3%.E) none of the above.Answer: E Difficulty: EasyRationale: 4.3% - 3% = 1.3%.49. If the annual real rate of interest is 3.5% and the expected inflation rate is 3.5%, thenominal rate of interest would be approximatelyA) 0%.B) 3.5%.C) 12.25%.D) 7%.E) none of the above.Answer: D Difficulty: EasyRationale: 3.5% + 3.5% = 7%.50. You purchased a share of CSCO stock for $20. One year later you received $2 asdividend and sold the share for $31. What was your holding period return?A) 45%B) 50%C) 60%D) 40%E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($2 + $31 - $20)/$20 = 0.65, or 65%.Use the following to answer questions 51-53:You have been given this probability distribution for the holding period return for GM stock:51. What is the expected holding period return for GM stock?A) 10.4%B) 11.4%C) 12.4%D) 13.4%E) 14.4%Answer: E Difficulty: ModerateRationale: HPR = .40 (30%) + .40 (11%) + .20 (-10%) = 14.4%52. What is the expected standard deviation for GM stock?A) 16.91%B) 16.13%C) 13.79%D) 15.25%E) 14.87%Answer: E Difficulty: DifficultRationale: s = [.40 (30 - 14.4)2 + .40 (11 - 14.4)2 + .20 (-10 - 14.4)2]1/2 = 14.87%53. What is the expected variance for GM stock?A) 200.00%B) 221.04%C) 246.37%D) 14.87%E) 16.13%Answer: B Difficulty: DifficultRationale: s = [.40 (30 - 14.4)2 + .40 (11 - 14.4)2 + .20 (-10 - 14.4)2] = 221.04%54. You purchase a share of CAT stock for $90. One year later, after receiving a dividendof $4, you sell the stock for $97. What was your holding period return?A) 14.44%B) 12.22%C) 13.33%D) 5.56%E) none of the aboveAnswer: B Difficulty: ModerateRationale: HPR = ([97 - 90] + 4) / 90 = 12.22%55. When comparing investments with different horizons the ____________ provides themore accurate comparison.A) arithmetic averageB) effective annual rateC) average annual returnD) historical annual averageE) none of the aboveAnswer: B Difficulty: Easy56. Annual Percentage Rates (APRs) are computed usingA) simple interest.B) compound interest.C) either A or B can be used.D) best estimates of expected real costs.E) none of the above.Answer: B Difficulty: Easy57. An investment provides a 2% return semi-annually, its effective annual rate isA) 2%.B) 4%.C) 4.02%D) 4.04%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.02)2 -1 = 4.04%58. An investment provides a 3% return semi-annually, its effective annual rate isA) 3%.B) 6%.C) 6.06%D) 6.09%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.03)2 -1 = 6.09%59. An investment provides a 2.1% return quarterly, its effective annual rate isA) 2.1%.B) 8.4%.C) 8.56%D) 8.67%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.021)4 -1 = 8.67%60. Skewnes is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) None of the aboveAnswer: C Difficulty: Moderate61. Kurtosis is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) A and CAnswer: C Difficulty: Moderate62. When a distribution is positively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: A Difficulty: Moderate63. When a distribution is negatively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: C Difficulty: Moderatet exhibits64. If a distribution has “fat tails” iA) positive skewnessB) negative skewnessC) a kurtosis of zeroD) kutrosisE) A and DAnswer: D Difficulty: ModerateEssay Questions65. Discuss the relationships between interest rates (both real and nominal), expectedinflation rates, and tax rates on investment returns.Difficulty: ModerateAnswer:The nominal interest rate is the quoted interest rate; however this rate is approximately equal to the real rate of interest plus the expected rate of inflation. Thus, an investor is expecting to earn the real rate in terms of the increased purchasing power resulting from the investment. In addition, the investor should consider the after-tax returns on theinvestment. The higher the inflation rate, the lower the real after-tax rate of return.Investors suffer an inflation penalty equal to the tax rate times the inflation rate.The rationale for this question is to ascertain that the student understands therelationships among these basic determinants of the after-tax real rate of return.66. Discuss why common stocks must earn a risk premium.Difficulty: EasyAnswer:Most investors are risk averse; that is, in order to accept the risk involved in investing in common stocks, the investors expect a return from the stocks over and above the return the investors could earn from a risk-free investment, such as U. S. Treasury issues. This excess return (the return in excess of the risk-free rate) is the risk premium required by the investors to invest in common stocks.The purpose of this question is to ascertain that the students understanding the basicrisk-return relationship, as the relationship applies to investing in common stocks vs. arisk-free asset (i.e., why would investors be willing to assume the risk of common stock as investment vehicles)?67. Discuss the law of one price and how this concept relates to the possibility of earningarbitrage profits?Difficulty: ModerateAnswer:The law of one price states that equivalent securities are equally (or almost equally)priced when sold on different markets. As a result, risk-free arbitrage profits should not be possible.The purpose of this question to introduce the student to arbitrage profits and marketefficiency.68. Discuss the historical distributions of each of the following in terms of their averagereturn and the dispersion of their returns: U. S. small company stocks, U. S. largecompany stocks, U. S. long-term government bonds, and U.S. T-bills. Would any ofthese investments cause a loss in purchasing power during a 1926-2005 holding period?Difficulty: DifficultAnswer:The data given in Tables 5.3 & 5.5Whether the averages are measured on a geometric basis or an arithmetic basis, the ranking is always the same, with small company average>large companyaverage>government bond average>T-bill average. With regard to risk, therelationships among the standard deviations are small company>largecompany>government bonds>T-bills. These ranks indicate that the ex-post dataconfirm what would be expected - higher returns are earned to compensate for theincreased risk. None of these investments would have caused a loss in purchasingpower during the 1926-2002 period, because all had average returns higher than theaverage inflation rate.The goal of this question is to see if students have a general idea of the historicalrelationships among the returns and risk levels of various categories of investmentsrelative to each other and to the level of inflation.69. Discuss some reasons why an investor with a long time horizon might choose to investin common stocks, even though they have historically been riskier than governmentbonds or T-bills.Difficulty: EasyAnswer:Common stocks can be expected to provide for the best growth in purchasing powerbased on historical data. An investor with a long time horizon can tolerate fluctuations in stock returns because of the long-term upward trend in stock returns. How muchcommon stock an investor is willing to hold and what types of stocks he chooses for his portfolio will depend on his level of risk aversion.。

国际会计第七版课后答案(第五章)作者：弗雷德里克

Chapter 5Reporting and DisclosureDiscussion Questions1. Accounting measurement is the process of assigning numerical symbols to events or objects.Disclosure, on the other hand, is the communication of accounting measurements to intended users. Advances in financial disclosure are likely to outpace those related to accounting measurement for a number of reasons. First, many would argue that financial disclosure is a less controversial area than accounting measurement. Second, changes in disclosure requirements are more rapidly implemented than changes in accounting measurement rules. Finally, whereas a single set of accounting measurement rules may not serve users equally well under different social, economic and legal systems, a company can disclose without necessarily sacrificing its accounting measurement system.2.Four reasons why multinational corporations are increasingly being held accountable toconstituencies other than traditional investor groups:a.The development and growth of the influence of trade unions.b.The growing recognition of the view that those who are significantly affected bydecisions made by institutions in general must be given the opportunity to influence thosedecisions.c.The rejection by many governments of classical economic premises such as the beliefthat the regulated pursuit of private gain maximizes society’s welfare.d.The increasing concern over the social and economic impact of multinationalcorporations in host countries.3.Arguments in favor of equal disclosure include:a.The absence of equal disclosure would create an unfair playing field for U.S. companies.Non-U.S. companies would have a competitive advantage in that they would not have todisclose the same information and so would not incur the costs involved in generatingand publishing it.b.Investors in non-U.S. companies have the same information needs as those who invest inU.S. companies. A market concerned with investor protection would make sure thatinvestors have timely and material information on all listed companies, not just thosedomiciled in the United States.c.Unequal disclosure might impede cross-company comparisons involving U.S. and non-U.S. companies.Possible reasons against equal disclosure include:a.The high cost of meeting equal disclosure requirements may deter foreign issuers fromlisting in the United States.b.The extra costs involved work against the benefits of listing to the foreign companies.Evaluation of arguments:All of these arguments have merit. There is no unambiguously correct answer as to what disclosure requirements should be imposed on foreign issuers, and there has been a contentious debate on this subject in the U.S. in recent years. In practice, fairness arguments often carry great weight in public debate, even when objective economic analysis does not support them.4.Managers in Continental Europe and in Japan have for many years strongly objected to disclosinginformation about business segment financial results. These managers have argued that the information can be used by their competitors. In addition, Continental Europe and Japan have had traditions of low disclosure.Requirements for disclosure about segment results have become more stringent in Japan, France, and Germany in response to strong investor and analyst demand for the information. More generally, the three countries are striving to improve the quality of their financial reporting standards in order to improve the reputation and credibility of their capital markets.5.The simple answer is that mandatory disclosures are corporate disclosures made in response toregulatory requirements (for example, rules issued by national regulators or stock exchanges), and that voluntary disclosures are purely discretionary in nature. The distinction between mandatory and voluntary disclosures can be ambiguous in some settings, however. For example, the requirement that U.S. companies must file Form 10-Ks with the U.S. Securities and Exchange Commission is straightforward. However, measurement and disclosure approaches for some of the items in the Form 10-K are not. Similarly, there are widely divergent views concerning what types of press announcements are mandatory versus voluntary.Two possible explanations for differences in managers’ voluntary disclosure practices are: (1) Managers in highly competitive industries may be less forthcoming than managers in less competitive industries due to the expected cost of releasing information of potential use to their competitors. (2) Managers are expected to be more forthcoming when there is good news to disclose, than when there is bad news, particularly when the news can be expected to affect share prices.Two explanations for differences in managers’ mandatory disclosure practices are: (1) Cross-jurisdictional differences in disclosure requirements. (2) Differences in the extent of compliance with disclosure rules due to cross-jurisdictional differences in enforcement.6. Triple bottom line reporting refers to reporting on a company’s eco nomic, social, andenvironmental performance. It is a form of social responsibility reporting designed to demonstrate good corporate citizenship. So-called “sustainability” reports are an increasingly popular means of triple bottom line reporting. There is substantial variation in social reporting today. More regulation would improve comparability, but it might also stifle reporting innovations. The usefulness of social reporting to outside parties, particularly investors, needs to be demonstrated before implementing more regulation for it.6.Often we expect to observe less voluntary disclosure by companies in emerging market countriesthan by those in developed countries:a.Equity markets are relatively less developed in many emerging market countries,resulting in lower total demand for company information by investors and analysts.b.In many emerging market countries, most financing is supplied by banks and insiderssuch as family groups. This also leads to less demand for timely, credible publicdisclosure, and in these markets enhanced disclosure may have limited benefits.8. In general, for the same reasons as in Discussion Question 7, we expect to observe fewerregulatory disclosure requirements in emerging market countries than in developed countries.The equity markets and disclosure requirements in many emerging market countries are not yet well developed, and accounting and auditing systems in emerging market countries are less well developed than in more developed market countries.9. The two broad objectives of investor-oriented equity markets are investor protection and marketquality. In the absence of investor protection, investors will not be willing to participate in a market. However, in the absence of market quality, markets will not function satisfactorily.Many would consider the objectives equally important.10. It certainly is possible that more required disclosure will further encourage investorparticipation in capital markets by providing more and better information on which to base investment decisions. Benefits of increased investor participation include increased liquidity, reduced transaction costs, and more accurate and efficient market pricing. However, it can also be argued that in some situations disclosure requirements are excessive. In markets where disclosure requirements are considered too stringent, companies may be deterred from publicly listing their shares, and may choose to use secondary markets (such as the over-the-counter market in the United States) that lack the investor protections of regulated stock exchanges, and which provide investors with lower liquidity and higher transaction costs. Thus, more required disclosure is not necessarily better than less.11. Forecasts of revenues and income are relatively uncommon because there can be legalrepercussions if forecasts are not met. Forecasts rely on subjective estimates of uncertain future events, making them unreliable in many situations. Vaguer forms of forward looking information are more common than precise forecasts. For example, directional forecasts (up or down) of revenues and income are more common than range forecasts which are, in turn, more common than precise forecasts of these amounts.12. Corporate governance refers to the structure of relationships and responsibilities amongshareholders, board members, and corporate managers. Investors and financial analysts use information about a company’s corporate governance (for example, whether an audit committee’s members are independ ent, and responsibilities and remuneration of board members) to better assess the level of investor protection (and therefore, expected cash flows to investors) at the company.Exercises1. a. Transparent financial reporting means that timely and accurate disclosures are made onall important matters affecting a company’s financial position and performance. Itimplies openness, communication, and accountability.b. Transparent financial reporting protects investors because nothing is hidden from them.Investors can better assess the risks of owning securities when information is truthfuland complete. Transparent financial reporting also improves market quality. Itenhances investor confidence. Open communication creates markets that are fair,orderly, efficient, and free from abuse and misconduct.c. The financial reporting requirements on the Hong Kong Exchange promote transparentfinancial reporting and they protect investors and promote market quality. For example,they require a complete set of audited financial statements, including a balance sheet,income statement, cash flow statement, and explanatory notes. Substantial disclosuresare also required, including segments and forward looking information discussed in thechapter. Reports must include a management discussion and analysis. Accountingprinciples may be either Hong Kong Financial Reporting Standards or InternationalFinancial Reporting Standards. Both sets of standards are known for their high quality.All reports must be in English. There are requirements on corporate governance.Timely disclosure of price sensitive information is required. Annual reports must bepublished within four months of year-end and half-yearly reports must be publishedwithin three months. Overall, the reporting requirements are substantial and complete. 2.Schering AG provides a qualitative forecast of one-year-ahead and two-year-ahead net sales.One-year-ahead net sales are expected to increase in the “mid to high single-digit” range. From this, an investor would likely infer growth of between 6 and 8 percent. Two-year-ahead sales are expected to increase further. Thus, this forecast is directional (up). There are similar forecasts of net sales for certain products and for certain regions. For example, Yasmin® is expected to experience “double-digit” growth, while Betaferon® is expected to grow at “high single-digit” rates. Net sales in Europe are expected to grow at “mid single-digit” rates, while those in the United States are forecast to be “above average.” Schering also forecasts an operating margin of 18 percent for the next year. This is a precise forecast. There is no forecast of net income.Investors should find this information useful, but specific growth percentages would be even useful. Investors are concerned about a company’s future prospects. Management’s expectations guide users’ own forecasts. Investors would also find a forecast of net income useful.3. IFRS 8 requires that the following items be disclosed for each reportable segment:a.Profit or loss.b.Assets.c.Particular income and expense items if such measures are regularly provided to the chiefoperating decision maker.d.Reconciliations of reportable segment revenues, profit or loss, assets, and liabilities toconsolidated totals.(A reportable segment is an operating segment about which separate financial information isavailable that is evaluated regularly by management in assessing segment performance and deciding how to allocate resources to operating segments.)In addition to the above items, information must also be disclosed about:a.Revenues derived from products or services.b.Revenues derived from countries.c.Major customers.d.How operating segments are determined.Lafarge discloses that its reportable segments are its four product lines. The company discloses all of the items required to be disclosed by reportable segment. Operating income, assets, and individual income and expense items are reported. Segment revenues, operating income, assets, and liabilities are reconciled to consolidated totals.Lafarge also discloses revenues by selected countries and regions of the world. In addition, capital expenditure and capital employed by selected countries and regions are disclosed. There is no information about major customers, but Lafarge may have a large, diversified customer base.Overall, Lafarge complies with the requirements of IFRS 8 and even goes beyond its requirements in some cases.4. a. Overall headcount has increased between the two years. Both of its divisions(pharmaceuticals and diagnostics) show increased levels of employment. With theexception of Latin America, all regions of the world also show increased levels ofemployment. Roche attributes these increases to the fact that it has been expanding fasterthan its competitors.b.“Regretted losses” refers to “fluctuations not initiated by Roche,” presumably employeeswho quit the company on their own accord. While the overall percentage of employeeslost (“fluctuation”)has increased between the two years, the percentage of regrettedlosses has decreased.c.Roche states that it “places a high value on diversity and seeks to benefit from it….”Roche seems to have had some success in improving diversity in the company. Rochenotes that it employs people from over 190 countries and that the 336 employees in itsCorporate Center come from 23 countries. General managers from the local country head60 percent of its affiliates, and the trend is rising. Data presented on women in theworkplace all show improvements.d.Outside investors may find this information useful because it speaks to the welfare ofcompany employees. For example, satisfied employees will work harder to achieve acompany’s goals than unsatisfied ones will. The information is also useful in judgingwhether companies comply with employment laws, such as those dealing withnondiscriminatory hiring.5. The overall conclusion is that Roche’s safety record worsened while its environmental recordimproved.Safety:Note that Roche’s total number of workdays increased by 17 percent, while the total number of employees grew by 6 percent. Accidents and other measures of safety can be expected to increase, but not at rates higher than these. Occupational accidents increased by 14 percent, while work-related accidents per million working hours decreased 3 percent. These measures suggest that accident rates are about the same between the two years. There were no work-related fatalities in either year. Workdays lost due to work-related accidents increased by 31 percent, occupational illnesses increased by 60 percent, illnesses per million working hour increased 36 percent, and workdays lost due to occupational illnesses increased 42 percent. These measures indicate a worsening safety record. Transport accident per metric ton transported decreased. In general, most measures got worse.Environmental:Energy consumption increased by 5 percent and TOC t/year increased 36 percent. However, the other pollution measures (such as CO2t/year and NO2t/year) decreased. Figures later in the disclosure compare eco-efficiency measures for 2005, 2004, and 1992. Long-term trends (92/05) of all measures beside the one for CO2show significant decreases. In genera l, Roche’s environmental record has improved.6. a. According to the Web site, the objective of the International Auditing and AssuranceStandards Board (IAASB) is to serve the public interest by:•setting, independently and under its own authority, high quality standards on auditing, quality control, review, other assurance, and related services, and •facilitating the convergence of national and international standards,thereby enhancing the quality and uniformity of practice throughout the world andstrengthening public confidence in the global auditing and assurance profession.b.According to this Web site, auditing standards refer to the audit or review of historicalfinancial information, while assurance standards refer to engagements dealing withsubject matters other than historical financial information.c.PricewaterhouseCoopers states that Roche’s internal sustainability reporting guidelinesare properly applied, that its data collection system is functioning as designed, and that its“social dim ension reporting provides an appropriate basis for the disclosure of socialdimension information…” Thus, Roche has received a “clean opinion”on itssustainability reporting.7. a. Corporate social responsibility is about how companies conduct themselves in relation to“stakeholders,” such as workers, consumers, and the broader society in which firmsoperate.b.Some argue that “the business of business is business.” In conducting their business,companies provide huge and critical contributions to society. Among these areproductivity gains, innovation and research, employment, and human capitaldevelopment. In poor countries, companies often contribute critical capital, technology,and skills that reduce poverty. Companies that compete and prosper make society betteroff. Under this view, the proper guardian of the public interest is government, notbusiness. Another view is that social issues (and social responsibility) are not tangentialto business but fundamental to it. Companies that ignore public sentiment makethemselves vulnerable to attack. Ignoring social issues turns a blind eye to forces thatmay alter a company’s strategic future. Thus, companies ought to do more than the lawrequires since social issues ultimately feed into shareholder value.c.Whether companies ought to report on their social responsibility activities probablydepends on one’s view of corporate social responsibility. Nevertheless, a strong case canbe made that proactive disclosure of a company’s societal contribu tions can positivelyaffect its image and ultimately its bottom line.d.As noted in c., the relevance of CSR disclosures for outside investors is that a company’ssocietal contributions can positively affect its image and ultimately its bottom line.8. a. The performance indicators recommended in the GRI guidelines are as follows:Economic Performance IndicatorsCore IndicatorsAdditional IndicatorsDirect Economic ImpactsCustomersEC1. Net sales.EC2. Geographic breakdown of markets.For each product or product range, disclosenational market share by country where this is 25% or more. Disclose market share and sales for eachcountry where national sales represent 5% or moreof GDP.SuppliersEC3. Cost of all goods, materials, and servicespurchased.EC11. Supplier breakdown by Organization and country. List all suppliers from which purchases in the reporting period represent 10% or more of total purchases in that period. Also identify all countries where total purchasing represents 5% or more of GDP. EC4. Percentage of contracts that were paid in accordance with agreed terms, excluding agreed penalty arrangements. Terms may include conditions such as scheduling of payments, form of payment, or other conditions. This indicator is the percent of contracts that werepaid according to terms, regardless of the details ofthe terms.EmployeesEC5. Total payroll and benefits (including wages,pension, other benefits, and redundancy payments)broken down by country or region. This remuneration should refer to current payments andnot include future commitments.Providers of CapitalEC6. Distributions to providers of capital brokendown by interest on debt and borrowings, anddividends on all classes of shares, with any arrearsof preferred dividends to be disclosed. Thisincludes all forms of debt and borrowings, not only long-term debt.EC7. Increase/decrease in retained earnings at endof period.Public SectorEC8. Total sum of taxes of all types paid broken down by country. EC12. Total spent on non-core business infrastructure development. This is infrastructureEC9. Subsidies received broken down by country or region. This refers to grants, tax relief, and other types of financial benefits that do not represent a transaction of goods and services.Explain definitions used for types of groups.built outside the main business activities of the reporting entity such as a school, or hospital for employees and their families.E10. Donations to community, civil society, andother groups broken down in terms of cash and in-kind donations per type of group.Indirect Economic ImpactsEC13. The Organization’s indirect economicimpacts. Identify major externalities associated withthe reporting Organization’s products and services .Environmental Performance IndicatorsCore Indicators Additional IndicatorsMaterialsEN1. Total materials use other than water, by type.Provide definitions used for types of materials.Report in tons, kilograms, or volume.EN2. Percentage of materials used that are wastes(processed or unprocessed) from sources external to the reporting Organization. Refers to both post-consumer recycled material and waste fromindustrial sources. Report in tons, kilograms, orvolume.EnergyEN3. Direct energy use segmented by primary source. Report on all energy sources used by the reportingOrganization for its own operations as well as for the production and delivery of energy products (e.g., electricity or heat) to other Organizations. Report in joules.EN17. Initiatives to use renewable energy sources and to increase energy efficiency. EN18. Energy consumption footprint (i.e., annualized lifetime energy requirements) of major products. Report in joules. EN4. Indirect energy use. Report on all energy used to produce and deliver energy products purchased by the reporting Organization (e.g., electricity or heat). Report in joules.EN19. Other indirect (upstream/downstream) energy use and implications, such as Organizational travel, product lifecycle management, and use of energy-intensive materials. WaterEN5. Total water use. EN20. Water sources and relatedecosystems/habitats significantly affected by use ofwater. Include Ramsar-listed wetlands and theoverall contribution to resulting environmentaltrends.EN21. Annual withdrawals of ground and surfacewater as a percent of annual renewable quantity ofwater available from the sources. Breakdown byregion.EN22. Total recycling and reuse of water.Include wastewater and other used water (e.g.,cooling water).BiodiversityEN6. Location and size of land owned, leased, or managed in biodiversity-rich habitats. EN23. Total amount of land owned, leased, or managed for production activities or extractive use. EN24. Amount of impermeable surface as apercentage of land purchased or leased.EN7. Description of the major impacts onbiodiversity associated with activities and/or products and services in terrestrial, freshwater, and marine environments. EN25. Impacts of activities and operations on protected and sensitive areas (e.g., IUCN protectedarea categories 1-4, world heritage sites, and biosphere reserves).EN26. Changes to natural habitats resulting fromactivities and operations and percentage of habitatprotected or restored.Identify type of habitat affected and its status.EN27. Objectives, programs, and targets forprotecting and restoring native ecosystems andspecies in degraded areas.EN28. Number of IUCN Red List species withhabitats in areas affected by operations.EN29. Business units currently operating orplanning operations in or around protected orsensitive areas.Emissions, Effluents, and WasteEN8. Greenhouse gas emissions. (CO2, CH4, N2O, HFCs, PFCs, SF6). Report separate subtotals for each gas in tons and in tons of CO2 equivalent for the following: - direct emissions from sources owned or controlled by the reporting entity - indirect emissions from imported electricity heat or steamEN30. Other relevant indirect greenhouse gas emissions. (CO2, CH4, N2O, HFCs, PFCs, SF6). Refers to emissions that are a consequence of the activities of the reporting entity, but occur from sources owned or controlled by another entity Report in tons of gas and tons of CO2 equivalent. EN9. Use and emissions of ozone-depletingsubstances. Report each figure separately in accordance with Montreal Protocol Annexes A, B, C, and E in tons of CFC-11 equivalents (ozone-depleting potential).EN31. All production, transport, import, or export of any waste deemed “hazardous” under the terms of the Basel Convention Annex I, II, III, and VIII.EN10. NOx, SOx, and other significant air emissions by type. Include emissions of substances regulated under: - local laws and regulations - Stockholm POPs Convention (Annex A, B, and C) –persistent organic pollutants - Rotterdam Convention on Prior Informed Consent (PIC)- Helsinki, Sofia, and Geneva Protocols to the Convention on Long-Range Trans-boundary Air Pollution EN32. Water sources and related ecosystems/habitats significantly affected by discharges of water and runoff. Include Ramsar-listed wetlands and the overall contribution to resulting environmental trends. See GRI Water Protocol.EN11. Total amount of waste by type anddestination.“Destination” refers to the method by w hich wasteis treated, including composting, reuse, recycling,recovery, incineration, or land filling. Explain typeof classification method and estimation method.EN12. Significant discharges to water by type.EN13. Significant spills of chemicals, oils, and fuelsin terms of total number and total volume.Significance is defined in terms of both the size ofthe spill and impact on the surroundingenvironment.SuppliersEN33. Performance of suppliers relative toenvironmental components of programmer andprocedures described in response to GovernanceStructure and Management Systems section. Products and ServicesEN14. Significant environmental impacts ofprincipal products and services.Describe and quantify where relevant.EN15. Percentage of the weight of products soldthat is reclaimable at the end of the products’ usefullife and percentage that is actually reclaimed.ComplianceEN16. Incidents of and fines for non-compliancewith all applicable internationaldeclarations/conventions/treaties, and national, sub-national, regional, and local regulations associatedwith environmental issues. Explain in terms ofcountries of operationTransportEN34. Significant environmental impacts oftransportation used for logistical purposes.OverallEN35. Total environmental expenditures by type.。

公司理财(第七版)习题答案

《公司理财（第七版）》练习题答案注：红字部分为修改内容，待教材再版时进行更正。

项目一认识公司理财一、单项选择题1.A 公司制企业的优点：容易转让所有权；有限债务责任；无限存续；更容易筹集资金。

公司制企业的缺点：组建公司的成本高；存在代理问题；双重课税。

2.B 购置机器设备等属于投资活动的固定资产投资。

3.A 应收账款资产的风险比现金资产风险大，认为两个企业收益水平相同则忽略了获得利润所承担的风险。

4.A 在上市公司，股东财富是由其所拥有的股票数量和股票市场价格两方面来决定的。

在股票数量一定时，股票价格达到最高，股东财富也就达到最大化。

5.C 相关者利益最大化才能体现合作共赢的价值理念。

股东财富最大化体现的是股东的利益。

6.B（将“企业收益最大化”改为“企业价值最大化”）企业价值最大化的缺点：（1）理财目标过于理论化，不易操作；（2）由于受评估标准和评估方式的影响，很难做到客观和准确。

7.A 相关者利益最大化目标强调风险与报酬的均衡，将风险控制在公司可以承受的范围内。

8.D 过分地强调社会责任而使公司价值减少，就可能导致整个社会资金运用的次优化，从而使社会经济发展步伐减缓。

9.D 公司的社会责任是指公司在谋求股东财富最大化之外所负有的维护和增进社会利益的义务，不包括对股东的责任。

10.下列属于通过采取激励方式协调股东与经营者利益冲突的方法是（ A ）。

A．股票期权 B．解聘 C．接收 D．限制性借款11.C 在公司内部，会计信息主要是提供给管理层决策使用，而在公司外部，会计信息则主要是为公司的投资者、债权人等提供服务。

12.B 经济繁荣期应增加劳动力。

13.D 市场经济条件下，经济发展与运行带有一定的波动性。

大体上经历复苏、繁荣、衰退和萧条几个阶段的循环，这种循环叫做经济周期。

14.D 大额定期存单市场不属于短期债券市场。

短期债券市场主要买卖1年以内的短期公司债券和政府债券，短期债券的转让可以通过贴现的方式进行。

Corporate Finance 第7版答案Ch020

Chapter 20: Long-Term Debt20.1 When you purchase a bond on a day other than a coupon payment date, there will bean adjustment in the actual price paid. Since coupons are paid in arrears, you canthink of them as earned monthly, but paid at the end of each 6-month period.Therefore, if you buy a bond during any 6-month period, at the end of that period youwill receive a coupon for some months you did not "earn." Those months of couponmust be paid to the one who earned them -- the seller, and you make that payment atthe time you buy the bond.In each of the following, the rate is 10%, so the monthly interest is 10% / 12 =0.83333%. Since the bonds are trading at 100 (or 100% of par), you will pay=+NPrice100%(.8333%)where N is the number of months since the last coupon payment.a. If you purchase the bond on March 1, you owe the seller two months of interest.Therefore, N=2, and the price is:=+=Price100%2(.8333%)101.667%If the face value of the bonds is $1,000, then you will pay $1,000 + $1,000 (0.016667)= $1,016.67.b. If you purchase the bond on October 1, you owe the seller three months ofinterest. Therefore, N=3, and the price is=+=Price100%3(.8333%)102.5%If the face value of the bonds is $1,000, then you will pay $1,000 + $1,000 (0.025) =$1,025.c. Since July 1 is an interest payment date, there is no accrued interest on the Raeobonds. If today is July 1, you will pay 100% of the face value for the bond. If theface value of the bonds is $1,000, then you will pay $1,000.d. If you purchase the bond on August 15, you owe the seller six weeks (1 1/2 months)of interest. Therefore, N=1.50, and the price isPrice100% 1.5(.8333%)101.25%=+=If the face value of the bonds is $1,000, then you will pay $1,000 + $1,000 (0.0125) =$1,012.50.20.2 a. A protective covenant is the part of an indenture or loan agreement that limits theactions of the borrowing company.b. A negative covenant prohibits actions that the company may want to take. Examplesinclude limits on dividends, inability to pledge assets, prohibition of mergers andprohibitions on additional issue of long-term debt.c. A positive covenant specifies actions that the firm is obliged to take. Examplesinclude maintaining a minimum level of working capital and furnishing additionalfinancial statements to the lender.d. A sinking fund is an account managed by a bond trustee for the purpose of repayingbonds.20.3 Sinking funds provide additional security to bonds. If a firm is experiencingfinancial difficulty, it is likely to have trouble making its sinking fund payments.Thus, the sinking fund provides an early warning system to the bondholders about thequality of the bonds.A drawback to sinking funds is that they give the firm an option that the bondholdersmay find distasteful. If bond prices are low, the firm may satisfy its sinking fund bybuying bonds in the open market. If bond prices are high though, the firm maysatisfy its sinking fund by purchasing bonds at face value. Those bonds beingrepurchased are chosen through a lottery.20.4 Open-end mortgage is riskier because the firm can issue additional bonds on itsproperty. The additional bonds will cause an increase in interest payments; thisincreases the risk to the existing bonds.20.5 The difference between the call price and the face value is the call premium. Thefirst few years during which a company is prohibited from calling its bonds is thecall-protected period (or the grace period).20.6 a. If KIC’s bonds are non-callable, the price today is the PV of the coupon which willbe received at the end of the next year, plus the expected value of the bond one yearhence. The price of the bond one year from now will depend upon the interest ratewhich prevails in the market.[Note: the problem has been simplifed for you by making these bonds perpetuities.For bonds with more common maturities (say, 20 or 30 years), you could use thepricing formulas you learned in Chapter 5]The first step is to find the value of the bonds under each of the interest rateassumptions. Since the bonds to be issued will be perpetuities, the price is found asCouponPricerSo, at 14% 120Price 857.14.14== and at 7% 120Price 1,714.29.07== From the formula in the text: [][]Non-Callable Bond 14%7%1yr coupon + E(price at end of year)Value 1+r 120.5().5()1120.5(857.14).5(1,714.29)1.111,266.41st P P r =++=+++== [Note for students who have studied term structure: the assumption of risk-neutrality implies that the forward rate is equal to the expected future spot rate.]b.If the KIC bond is callable, then the bond value will be less than the amount computed in part a. If the bond price rises above $1,450, KIC will call it. Therefore, bondholders will not pay as much for a callable bond. 20.7 If interest rates rise to 15%, the price of the Bowdeen bonds will fall. If the price ofthe fir m’s bonds is low, Bowdeen will not call them. The firm would be foolish topay the call price for something worth less than the call price. In this case, thebondholders will receive the coupon payment, C. They will still be holding a bondworth C / 0.15. Their total holding will be C + C / 0.15.If interest rates fall to 8%, it is highly likely that the price of the bonds will rise abovethe call price. If this happens, Bowdeen will call the bonds. In this case, thebondholders will receive the call price, $1,250, plus the coupon payment, C.The selling price today of the bonds is the PV of the expected payoffs to thebondholders.Following the procedure in the book:Step 1: determine end-of-yr payoff if rates drop to 8%= call price plus coupon= 1250 + CStep 2: determine end-of-yr payoff if rates rise to 15% = bondholders' position at year end = C/0.15 + C Step 3: Set desired issue price equal to PV of Expected Value of end of year payoffs, and solve for C: Expected Value of end of year payoffs = E(payoffs) = (Prob of rate drop)(payoff if rate drops) + (Prob of rate rise)(payoff if rate rises) ()[]() E(payoffs) Issue price = 1 + discount rate .401250.600.15$1,000 1.12124.00C C C C ⎡⎤+++⎢⎥⎣⎦== Therefore, the required coupon rate is 124.12412.4%1000==20.8 a.This problem is very similar to 20.6, part a); this time we can combine the steps. []Non-Callable Bond 1yr coupon Pr(rate rise)(Price if rate rise) + Pr(rate drop)(Price if rate drop)Value 1808080.65.35.06.091.081,164.61st r +=+⎡⎤⎛⎫⎛⎫++ ⎪ ⎪⎢⎥⎝⎭⎝⎭⎣⎦== b. Follow the procedure used in problem 20.7, except now the call premium is not fixed,but is a function of the coupon, which you must find.Let C=coupon.Payoff if rates drop to 6% = call price + coupon= ( 1000 + C) + C= 1,000 + 2CPayoff if rates rise to 9% = bondholders' position at year end= C/.09 + CSet desired issue price equal to PV of Expected Value of end of year payoffs and solve for C: Expected Value of end of year payoffs = E(payoffs) = (Prob of rate drop)(payoff if rate drops) + (Prob of rate rise)(payoff if rate rises) ()[]() E(payoffs) Issue price = $1,000=1 + discount rate .6510002.350.09$1,000 1.0877.63C C C C ⎡⎤+++⎢⎥⎣⎦== c.To the company, the value of the call provision will be given by the difference between the value of an outstanding, non-callable bond and the call provision. Non-callable bond value = $77.63 / 0.06 = $1,293.83 Value to the company of the call provision: ()()1-.35$1,293.83 - $1,077.63Value = 1.08130.12= 20.9 To find next year’s bond price if it is non-callable, notice from the solutions for 20.7and 20.8, the equations to find the required coupon for a callable fond can be re-written for the value of a callable bond:()Callable Bond E payoffs 1 yr from now Value 1 + discount rate =and[]E(payoff) = Prob(rate rise)(Payoff if rate rise) + Prob(rate drop)(Payoff if rate drop)where now it is the Value that is unknown, rather than C .So, for this problem:()[]()90.60115090.40900.12Value 1.107443361.10981.82⎡⎤+++⎢⎥⎣⎦=+==20.10 The NPV of the refunding is the difference between the gain from refunding and therefunding costs.Let:r 1 = the coupon rate of the old bonds andr 2 = the coupon rate of the new bonds.C = the call premiumF = the face valueB = the par value of the old bondsK = the issuing costs()()122B r r Gain =r $500,000,000.09.07.07$142,857,143--==()C B Cost =F+K 90500,000,0001,00080,000,000$125,000,000*=+=And then find the difference:NPV = $142,857,143 - $125,000,000= $17,857,14320.11 Recall from your study of Capital Budgeting that incremental NPV = 0 impliesindifference between 2 projects or alternatives. In this caseNPV = PV(Gain) - PV(Cost)()22250.08-r Gain = r after-tax Cost 250(.12)(1.35)19.50=-= Since these are already in terms of PV and we want NPV = 0:()()22222250.08-r 019.50r -250.08-r 19.50r r .0742=-==Refinancing is a wise option if borrowing costs are below 7.42%.20.12 As in the 2 previous problems, the solution requires finding the NPV. In this case,find the NPV of each alternative and choose the option with the highest NPV. Recallthis is the procedure you learned in Capital Budgeting.8% perpetual bond:()$75 million.08-.07Gain =.07=$10,714,286Cost = ($75 million)(.085) + $10 million= $16,375,000NPV = Gain - Cost= - $5,660,7149% perpetual bond:()$87.5 million.09-.0725Gain =.0725$21,120,690=Cost = ($87.5 million)(.095) + $12 million= $20,312,500NPV = Gain - Cost= $808,190So Ms. Kimberly should recommend the re-financing of the 9% perpetual bond, sincethat NPV is greater thanNPV, and it is greater than $0.8%20.13 Bonds with an S&P’s rating of BB and below or a Moody’s rating of Ba and beloware called junk bonds (or below-investment grade bonds). The recent controversiesof junk bonds are:i. Junk bonds increase the firm’s interest deduction.ii. Junk bonds increase the possibility of high leverage, which may lead towholesale default in economic downturns.iii. The recent wave of mergers financed by junk bonds has frequently resultedin dislocations and loss of jobs.20.14 a. For a floating rate bond, the coupon payments are adjustable. The adjustments areusually tied to an interest rate index.b. Deep discount bonds are also called pure discount bonds or zero coupon bonds. Asthe latter name implies, these bonds do not pay a coupon. To generate a return, thesebonds are sold at prices well below par, since the price is the PV of the lump summaturity value.c. Income bonds are similar to conventional bonds, except their coupon payments aretied to the firm’s income. The bondholders are paid onl y if the firm generatesenough income to do so. These bonds are attractive for firms to issue because if thefirm cannot make an interest payment, it is not in default.20.15 Characteristic Public Issues Direct Financinga. Require SEC registration Yes Nob. Higher interest cost No Yesc. Higher fixed cost Yes Nod. Quicker access to funds No Yese. Active secondary market Yes Nof. Easily renegotiated No Yesg. Lower floatation costs No Yesh. Require regular amortization Yes Noi Ease of repurchase at favorable prices Yes Noj. High total cost to small borrowers Yes Nok. Flexible terms No Yesl. Require less intensive investigation Yes No20.16 a. Yes. The statement is true. In an efficient market, the callable bonds will be sold at alower price than that of the non-callable bonds, other things being equal. This isbecause the holder of callable bonds effectively sold a call option to the bond issuer.Since the issuer holds the right to call the bonds, the price of the bonds will reflectthe disadvantage to the bondholders and the advantage to the bond issuer (i.e., thebondholder has the obligation to surrender their bonds when the call option isexercised by the bond issuer.)As interest rate falls, the call option of the callable bonds are more likely to beexercised by the bond issuer. Since the non-callable bonds do not have such adrawback, the value of the bond will go up to reflect the decrease in the market rateof interest. Thus, the price of non-callable bonds will move higher than that of thecallable bonds.。

(完整word版)投资学第7版Test Bank答案05

Multiple Choice Questions1. Over the past year you earned a nominal rate of interest of 10 percent on your money.The inflation rate was 5 percent over the same period. The exact actual growth rate of your purchasing power wasA) 15.5%.B) 10.0%.C) 5.0%.D) 4.8%.E) 15.0%Answer: D Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.10% / 1.5% - 1 = 4.8%.2. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of7%. What is your approximate annual real rate of return if the rate of inflation was 3% over the year?A) 4%.B) 10%.C) 7%.D) 3%.E) none of the above.Answer: A Difficulty: EasyRationale: 7% - 3% = 4%.3. If the annual real rate of interest is 5% and the expected inflation rate is 4%, the nominalrate of interest would be approximatelyA) 1%.B) 9%.C) 20%.D) 15%.E) none of the above.Answer: B Difficulty: EasyRationale: 5% + 4% = 9%.4. You purchased a share of stock for $20. One year later you received $1 as dividend andsold the share for $29. What was your holding period return?A) 45%B) 50%C) 5%D) 40%E) none of the aboveAnswer: B Difficulty: ModerateRationale: ($1 + $29 - $20)/$20 = 0.5000, or 50%.5. Which of the following determine(s) the level of real interest rates?I)the supply of savings by households and business firmsII)the demand for investment fundsIII)the government's net supply and/or demand for fundsA) I onlyB) II onlyC) I and II onlyD) I, II, and IIIE) none of the aboveAnswer: D Difficulty: ModerateRationale: The value of savings by households is the major supply of funds; the demand for investment funds is a portion of the total demand for funds; the government'sposition can be one of either net supplier, or net demander of funds. The above factors constitute the total supply and demand for funds, which determine real interest rates.6. Which of the following statement(s) is (are) true?I)The real rate of interest is determined by the supply and demand for funds.II)The real rate of interest is determined by the expected rate of inflation.III)The real rate of interest can be affected by actions of the Fed.IV)The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.A) I and II only.B) I and III only.C) III and IV only.D) II and III only.E) I, II, III, and IV onlyAnswer: B Difficulty: ModerateRationale: The expected rate of inflation is a determinant of nominal, not real, interest rates. Real rates are determined by the supply and demand for funds, which can be affected by the Fed.7. Which of the following statements is true?A) Inflation has no effect on the nominal rate of interest.B) The realized nominal rate of interest is always greater than the real rate of interest.C) Certificates of deposit offer a guaranteed real rate of interest.D) None of the above is true.E) A, B and CAnswer: D Difficulty: ModerateRationale: Expected inflation rates are a determinant of nominal interest rates. The realized nominal rate of interest would be negative if the difference between actual and anticipated inflation rates exceeded the real rate. The realized nominal rate of interest would be less than the real rate if the unexpected inflation were greater than the real rate of interest. Certificates of deposit contain a real rate based on an estimate of inflation that is not guaranteed.8. Other things equal, an increase in the government budget deficitA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rates.D) increases business prospects.E) none of the above.Answer: B Difficulty: ModerateRationale: An increase in the government budget deficit, other things equal, causes the government to increase its borrowing, which increases the demand for funds and drives interest rates up.9. Ceteris paribus, a decrease in the demand for loanable fundsA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rate.D) results from an increase in business prospects and a decrease in the level of savings.E) none of the above.Answer: A Difficulty: ModerateRationale: A decrease in demand, ceteris paribus, always drives interest rates down. An increase in business prospects would increase the demand for funds. The savings level affects the supply of, not the demand for, funds.10. The holding period return (HPR) on a share of stock is equal toA) the capital gain yield during the period, plus the inflation rate.B) the capital gain yield during the period, plus the dividend yield.C) the current yield, plus the dividend yield.D) the dividend yield, plus the risk premium.E) the change in stock price.Answer: B Difficulty: ModerateRationale: The HPR of any investment is the sum of the capital gain and the cash flow over the period, which for common stock is B.11. Historical records regarding return on stocks, Treasury bonds, and Treasury billsbetween 1926 and 2005 show thatA) stocks offered investors greater rates of return than bonds and bills.B) stock returns were less volatile than those of bonds and bills.C) bonds offered investors greater rates of return than stocks and bills.D) bills outperformed stocks and bonds.E) treasury bills always offered a rate of return greater than inflation.Answer: A Difficulty: ModerateRationale: The historical data show that, as expected, stocks offer a greater return and greater volatility than the other investment alternatives. Inflation sometimes exceeded the T-bill return.12. If the interest rate paid by borrowers and the interest rate received by savers accuratelyreflects the realized rate of inflation:A) borrowers gain and savers lose.B) savers gain and borrowers lose.C) both borrowers and savers lose.D) neither borrowers nor savers gain or lose.E) both borrowers and savers gain.Answer: D Difficulty: ModerateRationale: If the described interest rate accurately reflects the rate of inflation, bothborrowers and lenders are paying and receiving, respectively, the real rate of interest;thus, neither group gains.Use the following to answer questions 13-15:You have been given this probability distribution for the holding period return for KMP stock:13. What is the expected holding period return for KMP stock?A) 10.40%B) 9.32%C) 11.63%D) 11.54%E) 10.88%Answer: A Difficulty: ModerateRationale: HPR = .30 (18%) + .50 (12%) + .20 (-5%) = 10.4%14. What is the expected standard deviation for KMP stock?A) 6.91%B) 8.13%C) 7.79%D) 7.25%E) 8.85%Answer: B Difficulty: DifficultRationale: s = [.30 (18 - 10.4)2 + .50 (12 - 10.4)2 + .20 (-5 - 10.4)2]1/2 = 8.13%15. What is the expected variance for KMP stock?A) 66.04%B) 69.96%C) 77.04%D) 63.72%E) 78.45%Answer: A Difficulty: DifficultRationale: s = [.30 (18 - 10.4)2 + .50 (12 - 10.4)2 + .20 (-5 - 10.4)2] = 66.04%16. If the nominal return is constant, the after-tax real rate of returnA) declines as the inflation rate increases.B) increases as the inflation rate increases.C) declines as the inflation rate declines.D) increases as the inflation rate decreases.E) A and D.Answer: E Difficulty: ModerateRationale: Inflation rates have an inverse effect on after-tax real rates of return.17. The risk premium for common stocksA) cannot be zero, for investors would be unwilling to invest in common stocks.B) must always be positive, in theory.C) is negative, as common stocks are risky.D) A and B.E) A and C.Answer: D Difficulty: ModerateRationale: If the risk premium for common stocks were zero or negative, investorswould be unwilling to accept the lower returns for the increased risk.18. A risk-free intermediate or long-term investmentA) is free of all types of risk.B) does not guarantee the future purchasing power of its cash flows.C) does guarantee the future purchasing power of its cash flows as it is insured by the U.S. Treasury.D) A and B.E) B and C.Answer: B Difficulty: ModerateRationale: A risk-free U. S. Treasury bond is a fixed income instrument, and thus does not guarantee the future purchasing power of its cash flows. As a result, purchasing power risk is present.19. You purchase a share of Boeing stock for $90. One year later, after receiving a dividendof $3, you sell the stock for $92. What was your holding period return?A) 4.44%B) 2.22%C) 3.33%D) 5.56%E) none of the aboveAnswer: D Difficulty: ModerateRationale: HPR = (92 - 90 + 3) / 90 = 5.56%20. Toyota stock has the following probability distribution of expected prices one year fromnow:If you buy Toyota today for $55 and it will pay a dividend during the year of $4 per share, what is your expected holding period return on Toyota?A) 17.72%B) 18.89%C) 17.91%D) 18.18%E) None of the aboveAnswer: D Difficulty: DifficultRationale: E(P1) = .25 (54/55 - 1) + .40 (64/55 - 1) + .35 (74/55 - 1) = 18.18%.21. Which of the following factors would not be expected to affect the nominal interestrate?A) the supply of loanable fundsB) the demand for loanable fundsC) the coupon rate on previously issued government bondsD) the expected rate of inflationE) government spending and borrowingAnswer: C Difficulty: EasyRationale: The nominal interest rate is affected by supply, demand, government actions and inflation. Coupon rates on previously issued government bonds reflect historical interest rates but should not affect the current level of interest rates.22. Your Certificate of Deposit will mature in one week and you are considering how toinvest the proceeds. If you invest in a 30-day CD the bank will pay you 4%. If you invest in a 2-year CD the bank will pay you 6% interest. Which option would youchoose?A) the 30-day CD, no matter what you expect interest rates to do in the futureB) the 2-year CD, no matter what you expect interest rates to do in the futureC) the 30-day CD if you expect that interest rates will fall in the futureD) the 2-year CD if you expect that interest rates will fall in the futureE) You would be indifferent between the 30-day and the 2-year CDs.Answer: D Difficulty: ModerateRationale: You would prefer to lock in the higher rate on the 2-year CD rather than subject yourself to reinvestment rate risk. If you expected interest rates to rise in the future the opposite choice would be better.23. In words, the real rate of interest is approximately equal toA) the nominal rate minus the inflation rate.B) the inflation rate minus the nominal rate.C) the nominal rate times the inflation rate.D) the inflation rate divided by the nominal rate.E) the nominal rate plus the inflation rate.Answer: A Difficulty: EasyRationale: The actual relationship is (1 + real rate) = (1 + nominal rate) / (1 + inflation rate). This can be approximated by the equation: real rate = nominal rate - inflation rate.24. If the Federal Reserve lowers the discount rate, ceteris paribus, the equilibrium levels offunds lent will __________ and the equilibrium level of real interest rates will___________A) increase; increaseB) increase; decreaseC) decrease; increaseD) decrease; decreaseE) reverse direction from their previous trendsAnswer: B Difficulty: ModerateRationale: A lower discount rate would encourage banks to make more loans, which would increase the money supply. The supply curve would shift to the right and the equilibrium level of funds would increase while the equilibrium interest rate would fall.25. What has been the relationship between T-Bill rates and inflation rates since the 1980s?A) The T-Bill rate was sometimes higher than and sometimes lower than the inflationrate.B) The T-Bill rate has equaled the inflation rate plus a constant percentage.C) The inflation rate has equaled the T-Bill rate plus a constant percentage.D) The T-Bill rate has been higher than the inflation rate almost the entire period.E) The T-Bill rate has been lower than the inflation rate almost the entire period.Answer: D Difficulty: ModerateRationale: The T-Bill rate was higher than the inflation rate for over two decades.26. “Bracket Creep” happens whenA) tax liabilities are based on real income and there is a negative inflation rate.B) tax liabilities are based on real income and there is a positive inflation rate.C) tax liabilities are based on nominal income and there is a negative inflation rate.D) tax liabilities are based on nominal income and there is a positive inflation rate.E) too many peculiar people make their way into the highest tax bracket.Answer: D Difficulty: ModerateRationale: A positive inflation rate typically leads to higher nominal income. Higher nominal income means people will have higher tax liabilities and in some cases will put them in higher tax brackets. This can happen even when real income has declined.27. The holding-period return (HPR) for a stock is equal toA) the real yield minus the inflation rate.B) the nominal yield minus the real yield.C) the capital gains yield minus the tax rate.D) the capital gains yield minus the dividend yield.E) the dividend yield plus the capital gains yield.Answer: E Difficulty: EasyRationale: HPR consists of an income component and a price change component. The income component on a stock is the dividend yield. The price change component is the capital gains yield.28. The historical arithmetic rate of return on small stocks over the 1926-2005 period hasbeen _______. The standard deviation of small stocks' returns has been ________ than the standard deviation of large stocks' returns.A) 12.43%, lowerB) 13.11%, lowerC) 16.24%, higherD) 17.95%, higherE) 21.53%, higherAnswer: D Difficulty: ModerateRationale: See Table 5-5.Use the following to answer question 29:You have been given this probability distribution for the holding period return for Cheese, Inc stock:29. Assuming that the expected return on Cheese's stock is 14.35%, what is the standarddeviation of these returns?A) 4.72%B) 6.30%C) 4.38%D) 5.74%E) None of the aboveAnswer: D Difficulty: ModerateRationale: Variance = .20*(24-14.35)2 + .45*(15-14.35)2 + .35*(8-14.35)2 = 32.9275.Standard deviation = 32.9275.1/2 = 5.74.30. An investor purchased a bond 45 days ago for $985. He received $15 in interest andsold the bond for $980. What is the holding period return on his investment?A) 1.52%B) 0.50%C) 1.92%D) 0.01%E) None of the aboveAnswer: E Difficulty: EasyRationale: HPR = ($15+980-985)/$985 = .010152284 = approximately 1.02%.31. Over the past year you earned a nominal rate of interest of 8 percent on your money.The inflation rate was 3.5 percent over the same period. The exact actual growth rate of your purchasing power wasA) 15.55%.B) 4.35%.C) 5.02%.D) 4.81%.E) 15.04%Answer: B Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.08 / 1.035 - 1 = 4.35%.32. Over the past year you earned a nominal rate of interest of 14 percent on your money.The inflation rate was 2 percent over the same period. The exact actual growth rate of your purchasing power wasA) 11.76%.B) 16.00%.C) 15.02%.D) 14.32%.E) none of the above.Answer: A Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.14 / 1.02 - 1 = 11.76%.33. Over the past year you earned a nominal rate of interest of 12.5 percent on your money.The inflation rate was 2.6 percent over the same period. The exact actual growth rate of your purchasing power wasA) 9.15%.B) 9.90%.C) 9.65%.D) 10.52%.E) none of the above.Answer: C Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.125 / 1.026 - 1 = 9.65%.34. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of4%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year?A) 4%.B) 2%.C) 6%.D) 3%.E) none of the above.Answer: B Difficulty: EasyRationale: 4% - 2% = 2%.35. A year ago, you invested $2,500 in a savings account that pays an annual interest rate of2.5%. What is your approximate annual real rate of return if the rate of inflation was1.6% over the year?A) 4.1%.B) 2.5%.C) 2.9%.D) 1.6%.E) none of the above.Answer: E Difficulty: EasyRationale: 2.5% - 1.6% = 0.9%.36. A year ago, you invested $12,000 in an investment that produced a return of 16%. Whatis your approximate annual real rate of return if the rate of inflation was 2% over the year?A) 18%.B) 2%.C) 16%.D) 15%.E) none of the above.Answer: E Difficulty: EasyRationale: 16% - 2% = 14%.37. If the annual real rate of interest is 3.5% and the expected inflation rate is 2.5%, thenominal rate of interest would be approximatelyA) 3.5%.B) 2.5%.C) 1%.D) 6.8%.E) none of the above.Answer: E Difficulty: EasyRationale: 3.5% + 2.5% = 6%.38. If the annual real rate of interest is 2.5% and the expected inflation rate is 3.4%, thenominal rate of interest would be approximatelyA) 4.9%.B) 0.9%.C) -0.9%.D) 7%.E) none of the above.Answer: E Difficulty: EasyRationale: 2.5% + 3.4% = 5.9%.39. If the annual real rate of interest is 4% and the expected inflation rate is 3%, the nominalrate of interest would be approximatelyA) 4%.B) 3%.C) 1%.D) 5%.E) none of the above.Answer: E Difficulty: EasyRationale: 4% + 3% = 7%.40. You purchased a share of stock for $12. One year later you received $0.25 as dividendand sold the share for $12.92. What was your holding period return?A) 9.75%B) 10.65%C) 11.75%D) 11.25%E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($0.25 + $12.92 - $12)/$12 = 0.975, or 9.75%.41. You purchased a share of stock for $120. One year later you received $1.82 as dividendand sold the share for $136. What was your holding period return?A) 15.67%B) 22.12%C) 15.67%D) 13.24%E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($1.82 + $136 - $120)/$120 = 0.1485, or 14.85%.42. You purchased a share of stock for $65. One year later you received $2.37 as dividendand sold the share for $63. What was your holding period return?A) 0.57%B) -0.2550%C) -0.89%D) 1.63%E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($2.37 + $63 - $65)/$65 = 0.0056, or 0.57%.Use the following to answer questions 43-45:You have been given this probability distribution for the holding period return for a stock:43. What is the expected holding period return for the stock?A) 11.67%B) 8.33%C) 9.56%D) 12.4%E) None of the aboveAnswer: E Difficulty: ModerateRationale: HPR = .40 (22%) + .35 (11%) + .25 (-9%) = 10.4%44. What is the expected standard deviation for the stock?A) 2.07%B) 9.96%C) 7.04%D) 1.44%E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [.40 (22 - 10.4)2 + .35 (11 - 10.4)2 + .25 (-9 - 10.4)2]1/2 = 12.167%45. What is the expected variance for the stock?A) 142.07%B) 189.96%C) 177.04%D) 128.17%E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [ .40 (22 - 10.4)2 + .35 (11 - 10.4)2 + .25 (-9 - 10.4)2] = 148.04%46. Which of the following measures of risk best highlights the potential loss from extremenegative returns?A) Standard deviationB) VarianceC) Upper partial standard deviationD) Value at Risk (VaR)E) None of the aboveAnswer: D Difficulty: Moderate47. Over the past year you earned a nominal rate of interest of 3.6 percent on your money.The inflation rate was 3.1 percent over the same period. The exact actual growth rate of your purchasing power wasA) 3.6%.B) 3.1%.C) 0.5%.D) 6.7%.E) none of the aboveAnswer: E Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.036/ 1.031% - 1 = 0.328%.48. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of4.3%. What is your approximate annual real rate of return if the rate of inflation was 3%over the year?A) 4.3%.B) -1.3%.C) 7.3%.D) 3%.E) none of the above.Answer: E Difficulty: EasyRationale: 4.3% - 3% = 1.3%.49. If the annual real rate of interest is 3.5% and the expected inflation rate is 3.5%, thenominal rate of interest would be approximatelyA) 0%.B) 3.5%.C) 12.25%.D) 7%.E) none of the above.Answer: D Difficulty: EasyRationale: 3.5% + 3.5% = 7%.50. You purchased a share of CSCO stock for $20. One year later you received $2 asdividend and sold the share for $31. What was your holding period return?A) 45%B) 50%C) 60%D) 40%E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($2 + $31 - $20)/$20 = 0.65, or 65%.Use the following to answer questions 51-53:You have been given this probability distribution for the holding period return for GM stock:51. What is the expected holding period return for GM stock?A) 10.4%B) 11.4%C) 12.4%D) 13.4%E) 14.4%Answer: E Difficulty: ModerateRationale: HPR = .40 (30%) + .40 (11%) + .20 (-10%) = 14.4%52. What is the expected standard deviation for GM stock?A) 16.91%B) 16.13%C) 13.79%D) 15.25%E) 14.87%Answer: E Difficulty: DifficultRationale: s = [.40 (30 - 14.4)2 + .40 (11 - 14.4)2 + .20 (-10 - 14.4)2]1/2 = 14.87%53. What is the expected variance for GM stock?A) 200.00%B) 221.04%C) 246.37%D) 14.87%E) 16.13%Answer: B Difficulty: DifficultRationale: s = [.40 (30 - 14.4)2 + .40 (11 - 14.4)2 + .20 (-10 - 14.4)2] = 221.04%54. You purchase a share of CAT stock for $90. One year later, after receiving a dividendof $4, you sell the stock for $97. What was your holding period return?A) 14.44%B) 12.22%C) 13.33%D) 5.56%E) none of the aboveAnswer: B Difficulty: ModerateRationale: HPR = ([97 - 90] + 4) / 90 = 12.22%55. When comparing investments with different horizons the ____________ provides themore accurate comparison.A) arithmetic averageB) effective annual rateC) average annual returnD) historical annual averageE) none of the aboveAnswer: B Difficulty: Easy56. Annual Percentage Rates (APRs) are computed usingA) simple interest.B) compound interest.C) either A or B can be used.D) best estimates of expected real costs.E) none of the above.Answer: B Difficulty: Easy57. An investment provides a 2% return semi-annually, its effective annual rate isA) 2%.B) 4%.C) 4.02%D) 4.04%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.02)2 -1 = 4.04%58. An investment provides a 3% return semi-annually, its effective annual rate isA) 3%.B) 6%.C) 6.06%D) 6.09%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.03)2 -1 = 6.09%59. An investment provides a 2.1% return quarterly, its effective annual rate isA) 2.1%.B) 8.4%.C) 8.56%D) 8.67%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.021)4 -1 = 8.67%60. Skewnes is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) None of the aboveAnswer: C Difficulty: Moderate61. Kurtosis is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) A and CAnswer: C Difficulty: Moderate62. When a distribution is positively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: A Difficulty: Moderate63. When a distribution is negatively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: C Difficulty: Moderate64. If a distribution has “fat tails” it exhibitsA) positive skewnessB) negative skewnessC) a kurtosis of zeroD) kutrosisE) A and DAnswer: D Difficulty: ModerateEssay Questions65. Discuss the relationships between interest rates (both real and nominal), expectedinflation rates, and tax rates on investment returns.Difficulty: ModerateAnswer:The nominal interest rate is the quoted interest rate; however this rate is approximately equal to the real rate of interest plus the expected rate of inflation. Thus, an investor is expecting to earn the real rate in terms of the increased purchasing power resulting from the investment. In addition, the investor should consider the after-tax returns on theinvestment. The higher the inflation rate, the lower the real after-tax rate of return.Investors suffer an inflation penalty equal to the tax rate times the inflation rate.The rationale for this question is to ascertain that the student understands therelationships among these basic determinants of the after-tax real rate of return.66. Discuss why common stocks must earn a risk premium.Difficulty: EasyAnswer:Most investors are risk averse; that is, in order to accept the risk involved in investing in common stocks, the investors expect a return from the stocks over and above the return the investors could earn from a risk-free investment, such as U. S. Treasury issues. This excess return (the return in excess of the risk-free rate) is the risk premium required by the investors to invest in common stocks.The purpose of this question is to ascertain that the students understanding the basicrisk-return relationship, as the relationship applies to investing in common stocks vs. a risk-free asset (i.e., why would investors be willing to assume the risk of common stock as investment vehicles)?67. Discuss the law of one price and how this concept relates to the possibility of earningarbitrage profits?Difficulty: ModerateAnswer:The law of one price states that equivalent securities are equally (or almost equally) priced when sold on different markets. As a result, risk-free arbitrage profits should not be possible.The purpose of this question to introduce the student to arbitrage profits and market efficiency.68. Discuss the historical distributions of each of the following in terms of their averagereturn and the dispersion of their returns: U. S. small company stocks, U. S. largecompany stocks, U. S. long-term government bonds, and U.S. T-bills. Would any of these investments cause a loss in purchasing power during a 1926-2005 holding period?Difficulty: DifficultAnswer:The data given in Tables 5.3 & 5.5Whether the averages are measured on a geometric basis or an arithmetic basis, theranking is always the same, with small company average>large companyaverage>government bond average>T-bill average. With regard to risk, therelationships among the standard deviations are small company>largecompany>government bonds>T-bills. These ranks indicate that the ex-post dataconfirm what would be expected - higher returns are earned to compensate for theincreased risk. None of these investments would have caused a loss in purchasingpower during the 1926-2002 period, because all had average returns higher than the average inflation rate.The goal of this question is to see if students have a general idea of the historicalrelationships among the returns and risk levels of various categories of investmentsrelative to each other and to the level of inflation.。

第五章金融衍生工具答案

一、单项选择题答案及解析1.A 参见教材P145。

2.C 参见教材P146。

3.B 参见教材P148。

4.A 参见教材P148。

5.D 参见教材P150。

6.B 参见教材P151。

7.B 参见教材P160。

8.D 参见教材P159。

9.B 参见教材P178。

10.C 参见教材P161。

11.A 参见教材P165。

12.D 参见教材P166。

13.D 参见教材P167。

14.C 参见教材P168。

15.A 参见教材P168。

16.A 参见教材P169。

17.B 参见教材P174。

18.D 参见教材P171。

19.B 参见教材P174。

20.C 参见教材P174。

21.B 参见教材P170。

22.C 参见教材P163。

23.C 参见教材P176。

24.D 参见教材P149。

25.D 参见教材P178。

26.C 参见教材P179。

27.B 参见教材P179。

28.D 参见教材P183。

29.A 参见教材P194。

30.B 参见教材P171。

31.D 参见教材P146。

32.A 参见教材P148。

33.D 参见教材P149。

34.C 参见教材P193。

35.B 参见教材P164。

36.A 参见教材P155。

37.B 参见教材P149。

38.B 参见教材P194。

39.C 参见教材P157。

40.C 参见教材P164。

42.A 参见教材P159。

43.B 参见教材P159。

44.A 参见教材P169。

45.A 参见教材P148。

46.D 参见教材P149。

47.A 参见教材P181。

48.C 参见教材P151。

49.B 参见教材P194。

50.C 参见教材P192。

51.D 参见教材P189。

52.B 参见教材P183。

53.B 参见教材P186。

54.C 参见教材P188。

二、不定项选择题答案及解析1.ABCD 参见教材P145。

2.ABCD 参见教材P147。

3.BCD 参见教材P147。

4.ACD 参见教材P148。

投资学第7版Test-Bank答案05

Multiple Choice Questions1. Over the past year you earned a nominal rate of interest of 10 percent on your money.The inflation rate was 5 percent over the same period. The exact actual growth rate of your purchasing power wasA) 15.5%.B) 10.0%.C) 5.0%.D) 4.8%.E) 15.0%Answer: D Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.10% / 1.5% - 1 = 4.8%.2. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of7%. What is your approximate annual real rate of return if the rate of inflation was 3% over the year?A) 4%.B) 10%.C) 7%.D) 3%.E) none of the above.Answer: A Difficulty: EasyRationale: 7% - 3% = 4%.3. If the annual real rate of interest is 5% and the expected inflation rate is 4%, the nominalrate of interest would be approximatelyA) 1%.B) 9%.C) 20%.D) 15%.E) none of the above.Answer: B Difficulty: EasyRationale: 5% + 4% = 9%.4. You purchased a share of stock for $20. One year later you received $1 as dividend andsold the share for $29. What was your holding period return?A) 45%B) 50%C) 5%D) 40%E) none of the aboveAnswer: B Difficulty: ModerateRationale: ($1 + $29 - $20)/$20 = 0.5000, or 50%.5. Which of the following determine(s) the level of real interest rates?I)the supply of savings by households and business firmsII)the demand for investment fundsIII)the government's net supply and/or demand for fundsA) I onlyB) II onlyC) I and II onlyD) I, II, and IIIE) none of the aboveAnswer: D Difficulty: ModerateRationale: The value of savings by households is the major supply of funds; the demand for investment funds is a portion of the total demand for funds; the government'sposition can be one of either net supplier, or net demander of funds. The above factors constitute the total supply and demand for funds, which determine real interest rates.6. Which of the following statement(s) is (are) true?I)The real rate of interest is determined by the supply and demand for funds.II)The real rate of interest is determined by the expected rate of inflation.III)The real rate of interest can be affected by actions of the Fed.IV)The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.A) I and II only.B) I and III only.C) III and IV only.D) II and III only.E) I, II, III, and IV onlyAnswer: B Difficulty: ModerateRationale: The expected rate of inflation is a determinant of nominal, not real, interest rates. Real rates are determined by the supply and demand for funds, which can be affected by the Fed.7. Which of the following statements is true?A) Inflation has no effect on the nominal rate of interest.B) The realized nominal rate of interest is always greater than the real rate of interest.C) Certificates of deposit offer a guaranteed real rate of interest.D) None of the above is true.E) A, B and CAnswer: D Difficulty: ModerateRationale: Expected inflation rates are a determinant of nominal interest rates. The realized nominal rate of interest would be negative if the difference between actual and anticipated inflation rates exceeded the real rate. The realized nominal rate of interest would be less than the real rate if the unexpected inflation were greater than the real rate of interest. Certificates of deposit contain a real rate based on an estimate of inflation that is not guaranteed.8. Other things equal, an increase in the government budget deficitA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rates.D) increases business prospects.E) none of the above.Answer: B Difficulty: ModerateRationale: An increase in the government budget deficit, other things equal, causes the government to increase its borrowing, which increases the demand for funds and drives interest rates up.9. Ceteris paribus, a decrease in the demand for loanable fundsA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rate.D) results from an increase in business prospects and a decrease in the level of savings.E) none of the above.Answer: A Difficulty: ModerateRationale: A decrease in demand, ceteris paribus, always drives interest rates down. An increase in business prospects would increase the demand for funds. The savings level affects the supply of, not the demand for, funds.10. The holding period return (HPR) on a share of stock is equal toA) the capital gain yield during the period, plus the inflation rate.B) the capital gain yield during the period, plus the dividend yield.C) the current yield, plus the dividend yield.D) the dividend yield, plus the risk premium.E) the change in stock price.Answer: B Difficulty: ModerateRationale: The HPR of any investment is the sum of the capital gain and the cash flow over the period, which for common stock is B.11. Historical records regarding return on stocks, Treasury bonds, and Treasury billsbetween 1926 and 2005 show thatA) stocks offered investors greater rates of return than bonds and bills.B) stock returns were less volatile than those of bonds and bills.C) bonds offered investors greater rates of return than stocks and bills.D) bills outperformed stocks and bonds.E) treasury bills always offered a rate of return greater than inflation.Answer: A Difficulty: ModerateRationale: The historical data show that, as expected, stocks offer a greater return and greater volatility than the other investment alternatives. Inflation sometimes exceeded the T-bill return.12. If the interest rate paid by borrowers and the interest rate received by savers accuratelyreflects the realized rate of inflation:A) borrowers gain and savers lose.B) savers gain and borrowers lose.C) both borrowers and savers lose.D) neither borrowers nor savers gain or lose.E) both borrowers and savers gain.Answer: D Difficulty: ModerateRationale: If the described interest rate accurately reflects the rate of inflation, bothborrowers and lenders are paying and receiving, respectively, the real rate of interest;thus, neither group gains.Use the following to answer questions 13-15:You have been given this probability distribution for the holding period return for KMP stock:13. What is the expected holding period return for KMP stock?A) 10.40%B) 9.32%C) 11.63%D) 11.54%E) 10.88%Answer: A Difficulty: ModerateRationale: HPR = .30 (18%) + .50 (12%) + .20 (-5%) = 10.4%14. What is the expected standard deviation for KMP stock?A) 6.91%B) 8.13%C) 7.79%D) 7.25%E) 8.85%Answer: B Difficulty: DifficultRationale: s = [.30 (18 - 10.4)2 + .50 (12 - 10.4)2 + .20 (-5 - 10.4)2]1/2 = 8.13%15. What is the expected variance for KMP stock?A) 66.04%B) 69.96%C) 77.04%D) 63.72%E) 78.45%Answer: A Difficulty: DifficultRationale: s = [.30 (18 - 10.4)2 + .50 (12 - 10.4)2 + .20 (-5 - 10.4)2] = 66.04%16. If the nominal return is constant, the after-tax real rate of returnA) declines as the inflation rate increases.B) increases as the inflation rate increases.C) declines as the inflation rate declines.D) increases as the inflation rate decreases.E) A and D.Answer: E Difficulty: ModerateRationale: Inflation rates have an inverse effect on after-tax real rates of return.17. The risk premium for common stocksA) cannot be zero, for investors would be unwilling to invest in common stocks.B) must always be positive, in theory.C) is negative, as common stocks are risky.D) A and B.E) A and C.Answer: D Difficulty: ModerateRationale: If the risk premium for common stocks were zero or negative, investorswould be unwilling to accept the lower returns for the increased risk.18. A risk-free intermediate or long-term investmentA) is free of all types of risk.B) does not guarantee the future purchasing power of its cash flows.C) does guarantee the future purchasing power of its cash flows as it is insured by the U.S. Treasury.D) A and B.E) B and C.Answer: B Difficulty: ModerateRationale: A risk-free U. S. Treasury bond is a fixed income instrument, and thus does not guarantee the future purchasing power of its cash flows. As a result, purchasing power risk is present.19. You purchase a share of Boeing stock for $90. One year later, after receiving a dividendof $3, you sell the stock for $92. What was your holding period return?A) 4.44%B) 2.22%C) 3.33%D) 5.56%E) none of the aboveAnswer: D Difficulty: ModerateRationale: HPR = (92 - 90 + 3) / 90 = 5.56%20. Toyota stock has the following probability distribution of expected prices one year fromnow:If you buy Toyota today for $55 and it will pay a dividend during the year of $4 per share, what is your expected holding period return on Toyota?A) 17.72%B) 18.89%C) 17.91%D) 18.18%E) None of the aboveAnswer: D Difficulty: DifficultRationale: E(P1) = .25 (54/55 - 1) + .40 (64/55 - 1) + .35 (74/55 - 1) = 18.18%.21. Which of the following factors would not be expected to affect the nominal interestrate?A) the supply of loanable fundsB) the demand for loanable fundsC) the coupon rate on previously issued government bondsD) the expected rate of inflationE) government spending and borrowingAnswer: C Difficulty: EasyRationale: The nominal interest rate is affected by supply, demand, government actions and inflation. Coupon rates on previously issued government bonds reflect historical interest rates but should not affect the current level of interest rates.22. Your Certificate of Deposit will mature in one week and you are considering how toinvest the proceeds. If you invest in a 30-day CD the bank will pay you 4%. If you invest in a 2-year CD the bank will pay you 6% interest. Which option would youchoose?A) the 30-day CD, no matter what you expect interest rates to do in the futureB) the 2-year CD, no matter what you expect interest rates to do in the futureC) the 30-day CD if you expect that interest rates will fall in the futureD) the 2-year CD if you expect that interest rates will fall in the futureE) You would be indifferent between the 30-day and the 2-year CDs.Answer: D Difficulty: ModerateRationale: You would prefer to lock in the higher rate on the 2-year CD rather than subject yourself to reinvestment rate risk. If you expected interest rates to rise in the future the opposite choice would be better.23. In words, the real rate of interest is approximately equal toA) the nominal rate minus the inflation rate.B) the inflation rate minus the nominal rate.C) the nominal rate times the inflation rate.D) the inflation rate divided by the nominal rate.E) the nominal rate plus the inflation rate.Answer: A Difficulty: EasyRationale: The actual relationship is (1 + real rate) = (1 + nominal rate) / (1 + inflation rate). This can be approximated by the equation: real rate = nominal rate - inflation rate.24. If the Federal Reserve lowers the discount rate, ceteris paribus, the equilibrium levels offunds lent will __________ and the equilibrium level of real interest rates will___________A) increase; increaseB) increase; decreaseC) decrease; increaseD) decrease; decreaseE) reverse direction from their previous trendsAnswer: B Difficulty: ModerateRationale: A lower discount rate would encourage banks to make more loans, which would increase the money supply. The supply curve would shift to the right and the equilibrium level of funds would increase while the equilibrium interest rate would fall.25. What has been the relationship between T-Bill rates and inflation rates since the 1980s?A) The T-Bill rate was sometimes higher than and sometimes lower than the inflationrate.B) The T-Bill rate has equaled the inflation rate plus a constant percentage.C) The inflation rate has equaled the T-Bill rate plus a constant percentage.D) The T-Bill rate has been higher than the inflation rate almost the entire period.E) The T-Bill rate has been lower than the inflation rate almost the entire period.Answer: D Difficulty: ModerateRationale: The T-Bill rate was higher than the inflation rate for over two decades.26. “Bracket Creep” happens whenA) tax liabilities are based on real income and there is a negative inflation rate.B) tax liabilities are based on real income and there is a positive inflation rate.C) tax liabilities are based on nominal income and there is a negative inflation rate.D) tax liabilities are based on nominal income and there is a positive inflation rate.E) too many peculiar people make their way into the highest tax bracket.Answer: D Difficulty: ModerateRationale: A positive inflation rate typically leads to higher nominal income. Higher nominal income means people will have higher tax liabilities and in some cases will put them in higher tax brackets. This can happen even when real income has declined.27. The holding-period return (HPR) for a stock is equal toA) the real yield minus the inflation rate.B) the nominal yield minus the real yield.C) the capital gains yield minus the tax rate.D) the capital gains yield minus the dividend yield.E) the dividend yield plus the capital gains yield.Answer: E Difficulty: EasyRationale: HPR consists of an income component and a price change component. The income component on a stock is the dividend yield. The price change component is the capital gains yield.28. The historical arithmetic rate of return on small stocks over the 1926-2005 period hasbeen _______. The standard deviation of small stocks' returns has been ________ than the standard deviation of large stocks' returns.A) 12.43%, lowerB) 13.11%, lowerC) 16.24%, higherD) 17.95%, higherE) 21.53%, higherAnswer: D Difficulty: ModerateRationale: See Table 5-5.Use the following to answer question 29:You have been given this probability distribution for the holding period return for Cheese, Inc stock:29. Assuming that the expected return on Cheese's stock is 14.35%, what is the standarddeviation of these returns?A) 4.72%B) 6.30%C) 4.38%D) 5.74%E) None of the aboveAnswer: D Difficulty: ModerateRationale: Variance = .20*(24-14.35)2 + .45*(15-14.35)2 + .35*(8-14.35)2 = 32.9275.Standard deviation = 32.9275.1/2 = 5.74.30. An investor purchased a bond 45 days ago for $985. He received $15 in interest andsold the bond for $980. What is the holding period return on his investment?A) 1.52%B) 0.50%C) 1.92%D) 0.01%E) None of the aboveAnswer: E Difficulty: EasyRationale: HPR = ($15+980-985)/$985 = .010152284 = approximately 1.02%.31. Over the past year you earned a nominal rate of interest of 8 percent on your money.The inflation rate was 3.5 percent over the same period. The exact actual growth rate of your purchasing power wasA) 15.55%.B) 4.35%.C) 5.02%.D) 4.81%.E) 15.04%Answer: B Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.08 / 1.035 - 1 = 4.35%.32. Over the past year you earned a nominal rate of interest of 14 percent on your money.The inflation rate was 2 percent over the same period. The exact actual growth rate of your purchasing power wasA) 11.76%.B) 16.00%.C) 15.02%.D) 14.32%.E) none of the above.Answer: A Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.14 / 1.02 - 1 = 11.76%.33. Over the past year you earned a nominal rate of interest of 12.5 percent on your money.The inflation rate was 2.6 percent over the same period. The exact actual growth rate of your purchasing power wasA) 9.15%.B) 9.90%.C) 9.65%.D) 10.52%.E) none of the above.Answer: C Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.125 / 1.026 - 1 = 9.65%.34. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of4%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year?A) 4%.B) 2%.C) 6%.D) 3%.E) none of the above.Answer: B Difficulty: EasyRationale: 4% - 2% = 2%.35. A year ago, you invested $2,500 in a savings account that pays an annual interest rate of2.5%. What is your approximate annual real rate of return if the rate of inflation was1.6% over the year?A) 4.1%.B) 2.5%.C) 2.9%.D) 1.6%.E) none of the above.Answer: E Difficulty: EasyRationale: 2.5% - 1.6% = 0.9%.36. A year ago, you invested $12,000 in an investment that produced a return of 16%. Whatis your approximate annual real rate of return if the rate of inflation was 2% over the year?A) 18%.B) 2%.C) 16%.D) 15%.E) none of the above.Answer: E Difficulty: EasyRationale: 16% - 2% = 14%.37. If the annual real rate of interest is 3.5% and the expected inflation rate is 2.5%, thenominal rate of interest would be approximatelyA) 3.5%.B) 2.5%.C) 1%.D) 6.8%.E) none of the above.Answer: E Difficulty: EasyRationale: 3.5% + 2.5% = 6%.38. If the annual real rate of interest is 2.5% and the expected inflation rate is 3.4%, thenominal rate of interest would be approximatelyA) 4.9%.B) 0.9%.C) -0.9%.D) 7%.E) none of the above.Answer: E Difficulty: EasyRationale: 2.5% + 3.4% = 5.9%.39. If the annual real rate of interest is 4% and the expected inflation rate is 3%, the nominalrate of interest would be approximatelyA) 4%.B) 3%.C) 1%.D) 5%.E) none of the above.Answer: E Difficulty: EasyRationale: 4% + 3% = 7%.40. You purchased a share of stock for $12. One year later you received $0.25 as dividendand sold the share for $12.92. What was your holding period return?A) 9.75%B) 10.65%C) 11.75%D) 11.25%E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($0.25 + $12.92 - $12)/$12 = 0.975, or 9.75%.41. You purchased a share of stock for $120. One year later you received $1.82 as dividendand sold the share for $136. What was your holding period return?A) 15.67%B) 22.12%C) 15.67%D) 13.24%E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($1.82 + $136 - $120)/$120 = 0.1485, or 14.85%.42. You purchased a share of stock for $65. One year later you received $2.37 as dividendand sold the share for $63. What was your holding period return?A) 0.57%B) -0.2550%C) -0.89%D) 1.63%E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($2.37 + $63 - $65)/$65 = 0.0056, or 0.57%.Use the following to answer questions 43-45:You have been given this probability distribution for the holding period return for a stock:43. What is the expected holding period return for the stock?A) 11.67%B) 8.33%C) 9.56%D) 12.4%E) None of the aboveAnswer: E Difficulty: ModerateRationale: HPR = .40 (22%) + .35 (11%) + .25 (-9%) = 10.4%44. What is the expected standard deviation for the stock?A) 2.07%B) 9.96%C) 7.04%D) 1.44%E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [.40 (22 - 10.4)2 + .35 (11 - 10.4)2 + .25 (-9 - 10.4)2]1/2 = 12.167%45. What is the expected variance for the stock?A) 142.07%B) 189.96%C) 177.04%D) 128.17%E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [ .40 (22 - 10.4)2 + .35 (11 - 10.4)2 + .25 (-9 - 10.4)2] = 148.04%46. Which of the following measures of risk best highlights the potential loss from extremenegative returns?A) Standard deviationB) VarianceC) Upper partial standard deviationD) Value at Risk (VaR)E) None of the aboveAnswer: D Difficulty: Moderate47. Over the past year you earned a nominal rate of interest of 3.6 percent on your money.The inflation rate was 3.1 percent over the same period. The exact actual growth rate of your purchasing power wasA) 3.6%.B) 3.1%.C) 0.5%.D) 6.7%.E) none of the aboveAnswer: E Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.036/ 1.031% - 1 = 0.328%.48. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of4.3%. What is your approximate annual real rate of return if the rate of inflation was 3%over the year?A) 4.3%.B) -1.3%.C) 7.3%.D) 3%.E) none of the above.Answer: E Difficulty: EasyRationale: 4.3% - 3% = 1.3%.49. If the annual real rate of interest is 3.5% and the expected inflation rate is 3.5%, thenominal rate of interest would be approximatelyA) 0%.B) 3.5%.C) 12.25%.D) 7%.E) none of the above.Answer: D Difficulty: EasyRationale: 3.5% + 3.5% = 7%.50. You purchased a share of CSCO stock for $20. One year later you received $2 asdividend and sold the share for $31. What was your holding period return?A) 45%B) 50%C) 60%D) 40%E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($2 + $31 - $20)/$20 = 0.65, or 65%.Use the following to answer questions 51-53:You have been given this probability distribution for the holding period return for GM stock:51. What is the expected holding period return for GM stock?A) 10.4%B) 11.4%C) 12.4%D) 13.4%E) 14.4%Answer: E Difficulty: ModerateRationale: HPR = .40 (30%) + .40 (11%) + .20 (-10%) = 14.4%52. What is the expected standard deviation for GM stock?A) 16.91%B) 16.13%C) 13.79%D) 15.25%E) 14.87%Answer: E Difficulty: DifficultRationale: s = [.40 (30 - 14.4)2 + .40 (11 - 14.4)2 + .20 (-10 - 14.4)2]1/2 = 14.87%53. What is the expected variance for GM stock?A) 200.00%B) 221.04%C) 246.37%D) 14.87%E) 16.13%Answer: B Difficulty: DifficultRationale: s = [.40 (30 - 14.4)2 + .40 (11 - 14.4)2 + .20 (-10 - 14.4)2] = 221.04%54. You purchase a share of CAT stock for $90. One year later, after receiving a dividendof $4, you sell the stock for $97. What was your holding period return?A) 14.44%B) 12.22%C) 13.33%D) 5.56%E) none of the aboveAnswer: B Difficulty: ModerateRationale: HPR = ([97 - 90] + 4) / 90 = 12.22%55. When comparing investments with different horizons the ____________ provides themore accurate comparison.A) arithmetic averageB) effective annual rateC) average annual returnD) historical annual averageE) none of the aboveAnswer: B Difficulty: Easy56. Annual Percentage Rates (APRs) are computed usingA) simple interest.B) compound interest.C) either A or B can be used.D) best estimates of expected real costs.E) none of the above.Answer: A Difficulty: Easy57. An investment provides a 2% return semi-annually, its effective annual rate isA) 2%.B) 4%.C) 4.02%D) 4.04%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.02)2 -1 = 4.04%58. An investment provides a 3% return semi-annually, its effective annual rate isA) 3%.B) 6%.C) 6.06%D) 6.09%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.03)2 -1 = 6.09%59. An investment provides a 2.1% return quarterly, its effective annual rate isA) 2.1%.B) 8.4%.C) 8.56%D) 8.67%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.021)4 -1 = 8.67%60. Skewnes is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) None of the aboveAnswer: C Difficulty: Moderate61. Kurtosis is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) A and CAnswer: C Difficulty: Moderate62. When a distribution is positively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: A Difficulty: Moderate63. When a distribution is negatively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: C Difficulty: Moderate64. If a distribution has “fat tails” it exhibitsA) positive skewnessB) negative skewnessC) a kurtosis of zeroD) positive kutrosisE) A and DAnswer: D Difficulty: ModerateEssay Questions65. Discuss the relationships between interest rates (both real and nominal), expectedinflation rates, and tax rates on investment returns.Difficulty: ModerateAnswer:The nominal interest rate is the quoted interest rate; however this rate is approximately equal to the real rate of interest plus the expected rate of inflation. Thus, an investor is expecting to earn the real rate in terms of the increased purchasing power resulting from the investment. In addition, the investor should consider the after-tax returns on theinvestment. The higher the inflation rate, the lower the real after-tax rate of return.Investors suffer an inflation penalty equal to the tax rate times the inflation rate.The rationale for this question is to ascertain that the student understands therelationships among these basic determinants of the after-tax real rate of return.66. Discuss why common stocks must earn a risk premium.Difficulty: EasyAnswer:Most investors are risk averse; that is, in order to accept the risk involved in investing in common stocks, the investors expect a return from the stocks over and above the return the investors could earn from a risk-free investment, such as U. S. Treasury issues. This excess return (the return in excess of the risk-free rate) is the risk premium required by the investors to invest in common stocks.The purpose of this question is to ascertain that the students understanding the basicrisk-return relationship, as the relationship applies to investing in common stocks vs. a risk-free asset (i.e., why would investors be willing to assume the risk of common stock as investment vehicles)?67. Discuss the law of one price and how this concept relates to the possibility of earningarbitrage profits?Difficulty: ModerateAnswer:The law of one price states that equivalent securities are equally (or almost equally) priced when sold on different markets. As a result, risk-free arbitrage profits should not be possible.The purpose of this question to introduce the student to arbitrage profits and market efficiency.68. Discuss the historical distributions of each of the following in terms of their averagereturn and the dispersion of their returns: U. S. small company stocks, U. S. largecompany stocks, U. S. long-term government bonds, and U.S. T-bills. Would any of these investments cause a loss in purchasing power during a 1926-2005 holding period?Difficulty: DifficultAnswer:The data given in Tables 5.3 & 5.5Whether the averages are measured on a geometric basis or an arithmetic basis, theranking is always the same, with small company average>large companyaverage>government bond average>T-bill average. With regard to risk, therelationships among the standard deviations are small company>largecompany>government bonds>T-bills. These ranks indicate that the ex-post dataconfirm what would be expected - higher returns are earned to compensate for theincreased risk. None of these investments would have caused a loss in purchasingpower during the 1926-2002 period, because all had average returns higher than the average inflation rate.The goal of this question is to see if students have a general idea of the historicalrelationships among the returns and risk levels of various categories of investmentsrelative to each other and to the level of inflation.。

金融英语第五章答案

Chapter 5Ⅰ. Answer the following questions in English.1.How do central banks earn money?It is a bank that can lend to other banks in times of need. And then make a profit.2. What is primary responsibility of central bank?Its primary responsibility is to maintain the stability of the national currency and money supply, but more active duties include controlling subsidized-loan interest rates, and acting as a lender of last resort1to the banking sector during times of financial crisis (private banks often being integral to the national financial system ).3. What is central bank's primary liability?A central bank's primary liabilities are the currency outstanding, and these liabilities are backed by the assets the bank owns.4. What is open market operations?Open market operations are the means of implementing monetary policy by which a central bank controls its national money supply by buying and selling government securities, or other financial instruments. Monetary targets, such as interest rates or exchange rates, are used to guide this implementation.5. What are the functions of legal reserve requirements?legal reserve requirements were introduced to reduce the risk of banks overextending themselves and suffering from bank runs, as this could lead to knock-on effects on other banks.6. What is mean about M1 and M2 ?Currency and bank reserves together make up the monetary base,calledM1 and M2.7. Why do central banks establish reserve requirements for other banks? Because it plays a important role in market.8. Does the lower interest rate stimulate economy development?Low interest rates tend to stimulate borrowing from the banking system. This expansion of credit causes an expansion of the supply of money, through the money creation process in a fractional reserve banking system. This in turn leads to an unsustainable "monetary boom" during which the "artificially stimulated" borrowing seeks out diminishing investment opportunities. This boom results in widespread malinvestments8, causing capital resources to be" misallocated into areas that would not attract investment if the money supply remained stable.Ⅱ. Fill in the each blank with an appropriate word or expression.1. Through open market operations, a central bank influences themoney supply_ in an economy directly. Each time it buys securities, exchangingmoney for the security, it _raises_____ the money supply. Conversely, selling of securities lowers the money supply.2. Central banks generally earn___ money by __issuing___ currencynotes and "selling" them to the public for interest-bearing assets, such as governmentbonds.3. Typically a central bank __controls____ certain types of short-term interest rates.These _influence_____ the stock and bond markets as well as mortgage and otherinterest rates.4. All banks are required to _hold_____ a certain percentage of their assets ascapital, a rate which may be _established_______ by the central bank or the bankingsupervisor.5. The mechanism to move the market towards a "target rate" is generally to __lend____ money or borrow money in theoretically unlimited quantities,until the targeted market rate is sufficiently _close_______ to the target.6. Most countries control bank mergers and are wary of concentration in this industry _due to_____ the danger of groupthink and runaway lending bubbles based on___ a single point of failure, the credit culture of the few large banks.Ⅲ. Translate the following sentences into English.1．中国人民银行运用的货币政策工具包括准备金率、中央银行基准利率、再贴现率、中央银行贷款、公开市场操作和其他由国务院规定的政策工具。

Corporate Finance 第7版答案Ch025

Chapter 25: Derivatives and Hedging Risk25.1 a. A forward contract is an arrangement calling for the future delivery of an asset at an agreed-uponprice.b. A futures contract obliges traders to purchase or sell an asset at an agreed-upon price on a specifiedfuture date. The long position is held by the trader who commits to purchase. The short position isheld by the trader who commits to sell. Futures differ from forward contracts in their standardization,exchange trading, margin requirements, and daily settling (marking to market).25.2 1. Futures contracts are standardized and traded on exchanges, while forward contracts are tailor-made tosuit the specific needs of two counterparties. The standardization of contracts increases the liquidity offutures markets in comparison to forward markets and also allows traders to enter into their positionswith a certain degree of anonymity.2.The holder of a futures contract is insulated from default risk due to clearing corporations and marginrequirements. The owner of a forward contract has no guarantee that his counterparty will not default,and therefore forward holders must carefully evaluate each others’ credit risk before entering into acontract.3.Since futures positions are marked-to-market at the close of trading, gains and losses on futurespositions are realized daily, while gains or losses on a forward contract are not realized until thedelivery of the asset.25.3 a. i. Since the futures price of wheat is $5.10 per bushel at the end of trading on March 18, thedelivery price on that date is $5.10 per bushel.ii. On the delivery date, the long and short positions in a futures contract transact with the clearing corporation at the current futures price. Therefore, you will pay the current futures price of $5.10per barrel in order to receive the wheat. The difference between the price that you pay atdelivery and the price at which you entered into the contract is reconciled by daily marked-to-market gains and losses.iii. On March 15, you entered into a long futures position in wheat at a price of $5.00 per bushel.Since the closing futures price is $5.03 per bushel, your account receives a cash inflow of $0.03 atthe end of the day. Your position in wheat futures increases to $5.03 per bushel (= $5.00 + $0.03).On March 16, your opening long position in wheat futures is $5.03 per bushel. Since the closingfutures price is $5.08 per bushel, your account receives a cash inflow of $0.05 at the end of theday. Your position in wheat futures increases to $5.08 per bushel (= $5.00 + $0.03 + $0.05).On March 17, your opening long position in wheat futures is $5.08 per bushel. Since the closingfutures price is $5.12 per bushel, your account receives a cash inflow of $0.04 at the end of theday. Your position in wheat futures increases to $5.12 per bushel (= $5.00 + $0.03 + $0.05 +$0.04).On March 18, your opening long position in wheat futures is $5.12 per bushel. Since the closingfutures price is $5.10 per bushel, your account experiences a cash outflow of $0.02 at the end ofthe day. Your position in wheat futures decreases to $5.10 per bushel (= $5.00 + $0.03 + $0.05 +$0.04 - $0.02). Since you receive a notice of delivery on this date, you will pay the $5.10 futuresprice and receive 1 bushel of wheat.Therefore, the net amount that you pay for one bushel of wheat is $5.00 per bushel.b. i. Since the futures price wheat is $4.98 per bushel at the end of trading on March 18, the delivery price on that date is $4.98 per bushel .ii. On the delivery date, the long and short positions in a futures contract transact with the clearingcorporation at the current futures price. Therefore, you will pay the current futures price of $4.98 per barrel in order to receive the wheat. The difference between the price that you pay at delivery and the price at which you entered into the contract is reconciled by daily marked-to-market gains and losses.iii. On March 15, you entered into a long futures position in wheat at a price of $5.00 per bushel.Since the closing futures price is $5.03 per bushel, your account receives a cash inflow of $0.03 at the end of the day. Your position in wheat futures increases to $5.03 per bushel (= $5.00 + $0.03).On March 16, your opening long position in wheat futures is $5.03 per bushel. Since the closingfutures price is $5.08 per bushel, your account receives a cash inflow of $0.05 at the end of the day. Your position in wheat futures increases to $5.08 per bushel (= $5.00 + $0.03 + $0.05).On March 17, your opening long position in wheat futures is $5.08 per bushel. Since the closing futures price is $5.12 per bushel, your account receives a cash inflow of $0.04 at the end of the day. Your position in wheat futures increases to $5.12 per bushel (= $5.00 + $0.03 + $0.05 + $0.04).On March 18, your opening long position in wheat futures is $5.12 per bushel. Since the closing futures price is $5.10 per bushel, your account experiences a cash outflow of $0.02 at the end of the day. Your position in wheat futures decreases to $5.10 per bushel (= $5.00 + $0.03 + $0.05 + $0.04 - $0.02).On March 19, your opening long position in wheat futures was $5.10 per bushel. Since the closing futures price is $4.98 per bushel, you will experience a cash outflow of $0.12 at the end of the day. Your position in wheat futures decreases to $4.98 per bushel (= $5.00 + $0.03 + $0.05 + $0.04 - $0.02 - $0.12). Since you will receive a notice of delivery on this date, you will pay the $4.98 futures price and receive 1 bushel of wheat. Notice that even though you only paid $4.98 for the delivery of wheat, the net amount that you paid for it out of your pocket is $5.00 per bushel, the futures price at which you originally entered into the position.Cash Flow March 15Enter into Long Futures Positon at $5.00 per bushel None March 15Futures Price Increases to $5.03 per bushel $0.03March 16Futures Price Increases to $5.08 per bushel $0.05March 17Futures Price Increases to $5.12 per bushel $0.04March 18Futures Price Decreases to $5.10 per bushel -$0.02March18Pay Futures Price of $5.10 at Delivery -$5.10Total Net Cash Flow-$5.00EventTherefore, the net amount that you pay for one bushel of wheat is $5.00 per bushel.25.4 a. The forward price of an asset with no carrying costs or convenience value is:Forward Price = S 0(1+ r) where S 0 = the current price of the underlying assetr = the interest rate between the initiation of the forward contract and the delivery dateSince you will receive the bond’s face value of $1,000 in 11 years and the 11-year spot interest rate is currently 8% per annum, the current price of the bond is $428.88 [= $1,000 / (1.08)11 ].Since the forward contract defers delivery of the bond for one year, the appropriate interest rate to use in the forward pricing equation is the one-year spot interest rate of 3%:Forward Price = $428.88(1.03) = $441.75 Therefore, the forward price of your contract is $441.75.b. If both the 1-year and 11-year spot interest rates unexpectedly shift downward by 2%, the appropriateinterest rates to use when pricing the bond is 6% per annum (EAY), and the appropriate interest rate to use in the forward pricing equation is 1% per annum (EAY). Given these changes, the current price of the bond increases to $526.79 [= $1,000 / (1.06)11]. The new forward price of the contract is: Forward Price = $526.79(1.01) = $532.06 Therefore, the forward price of an otherwise identical contract will increase to $532.06 given theunexpected change in the 1-year and 11-year spot interest rates.25.5 a. You would create a short position by selling futures contracts.b. A short position reduces your overall risk if you are hurt by decreases in the price of the underlyingasset. For example, if you are selling oil in one year at the spot price, you will make less money if the price of oil falls over the next year. In order to hedge this risk, you should sell oil futures contracts that expire in approximately one year.c. You would create a long position by purchasing futures contracts.Cash Flow March 15Enter into Long Futures Positon at $5.00 per bushel None March 15Futures Price Increases to $5.03 per bushel $0.03March 16Futures Price Increases to $5.08 per bushel $0.05March 17Futures Price Increases to $5.12 per bushel $0.04March 18Futures Price Decreases to $5.10 per bushel -$0.02March 19Futures Price Decreases to $4.98 per bushel -$0.12March 19Pay Futures Price of $4.98 at Delivery -$4.98Total Net Cash Flow-$5.00Eventd. A long position reduces your overall risk if you are hurt by increases in the price of the underlyingasset. For example, if you are planning to purchase oil in one year at the spot price, you will have topay more for the oil if the spot price increases over the next year. In order to hedge this risk, youshould buy oil futures contracts that expire in approximately one year.25.6 If Mark Fisher believes that the futures price of silver will fall over the next month, he should take on ashort position in silver futures contracts with approximately one month until expiration. By selling futures contracts now, he will be locking in a sales price that is higher than what he believes he will be able topurchase silver futures for in one month’s tim e.25.7 William Santiago is a little naïve about the capabilities of hedging. While hedging can significantly reducethe risk of changes in foreign exchange markets, it cannot completely eliminate it. Basis risk is the primary reason that hedging cannot reduce 100% of any firm’s exposure to price fluctuations. Basis risk arises when the price movements of the hedging instrument do not perfectly match the price movements of the assetbeing hedged.25.8 a. The forward price of an asset with no carrying costs or convenience value is:Forward Price = S0(1+ r)where S0= the current price of the underlying assetr = the interest rate between the initiation of the forward contract and the delivery date Since you will receive the bond’s face value of $1,000 in 18 months and the 18-month spot interestrate is currently 10.67% (EAY), the current price of the bond is $858.92 [= $1,000 / (1.1067)3/2].Since the forward contract defers delivery of the bond for six months, the appropriate interest rate touse in the forward pricing equation is the six-month spot interest rate of 9.83% (EAY).Forward Price = $858.92(1.0983)1/2 = $900.15Therefore, the forward price of your contract is $900.15.b. It is important to remember that 100 basis points equals 1% and one basis point equals 0.01%.Therefore, if all rates increase by 30 basis points, each rate increases by 0.003. The new 18-month spotrate (EAY) is 0.1097 (= 0.1067 + 0.003), and the new 6-month spot rate (EAY) is 0.1013 (= 0.0983 +0.003).Since the owner of a forward contract will receive the bond’s face value of $1,000 in 18 months andthe 18-month spot interest rate is currently 10.97% (EAY) the current price of the bond is $855.44 [=$1,000 / (1.1097)3/2].Since the forward contract defers delivery of the bond for six months, the appropriate interest rate touse in the forward pricing equation is the six-month spot interest rate of 10.13% (EAY).Forward Price = $855.44(1.1013)1/2 = $897.72Therefore, the forward price of an otherwise identical contract is $897.72 given the 30 basis pointincrease in all semiannual rates.25.9 Let r equal the interest rate between the initiation of the contract and the delivery of the asset.Cash Flows From Strategy 1Today 1 YearPurchase Silver-S0--Borrow+S0-S0(1+r)Total Cash Flow0-S0(1+r)Cash Flows from Strategy 2Today 1 YearPurchase Silver Forward---fTotal Cash Flow0-fNotice that each strategy results in the ownership of silver in one year for no cash outflow today.Since the payoffs from both the strategies are identical, the two strategies must cost the same in orderto preclude arbitrage.The forward price (f) of a contract on an asset with no carrying costs or convenience value equals thecurrent spot price of the asset (S0) multiplied by 1 plus the appropriate interest rate between theinitiation of the contract and the delivery date of the asset.Therefore, f must equal S0(1+r).25.10 Kevin will be hurt if the yen loses value relative to the dollar over the next eight months. Depreciationin the yen relative to the dollar results in a decrease in the yen / dollar exchange rate. Since Kevin ishurt by a decrease in the exchange rate, he should take on a short position in yen per dollar futurescontracts in order to hedge his risk.25.11 a. Your former roommate’s annual mortgage payments form a 20-year annuity, discounted at thelong-term interest rate of 10%. Solve for the payment amount so that the present value of theannuity equals $300,000, the amount of principal that your former roommate plans to borrow.$300,000 = C * A200.10C = $35,238Therefore, your former roommate’s annual mortgage payment will be $35,238.b.The most significant risk that you face is interest rate risk. If the current market rate of interestrises between today and the date that you meet with the president of MAX, the fair value of themortgage will decrease, and the president will only be willing to purchase the mortgage from youfor a price less than $300,000. If this is the case, you will not be able to loan your formerroommate the full $300,000 that you promised her.c.Treasury bond prices have an inverse relationship with interest rates. As interest rates rise,Treasury bonds become less valuable; as interest rates fall, Treasury bonds become more valuable.Since you are hurt when interest rates rise, you are also hurt when Treasury bonds decrease invalue. In order to protect yourself from decreases in the price of Treasury bonds, you should takea short position in Treasury bond futures to hedge his interest rate risk. Since three-monthTreasury bond futures contracts are available and each contract is for $100,000 of T-bonds, youwould take a short position in three 3-month Treasury bond futures contracts in order to hedgeyour $300,000 exposure to changes in the market interest rate over the next three monthsd.i. If the market interest rate is 12% on the date that you meet with the president ofMAX, the fair value of the mortgage equals an annuity that makes annual payments of$35,238 for 20 years, discounted at 12%.Mortgage Value = $35,238A200.12= $263,208Therefore, MAX’s president will be willing to pay you $263,208 for the mortgage if themarket interest rate is 12% on the date of your meeting.ii. An increase in the interest rate will cause the value of the T-bond futures contracts to decrease.iii. You will make money on your short position in the T-bond futures contracts if interest rates rise.e.i. If the market interest rate is 9% on the date that you meet with the president ofMAX, the fair value of the mortgage equals an annuity that makes annual payments of$35,238 for 20 years, discounted at 9%.Mortgage Value = $35,238A200.09= $321,672Therefore, MA X’s president will be willing to pay you $321,672 for the mortgage if themarket interest rate is 9% on the date of your meeting.ii. A decrease in the interest rate will cause the value of the T-bond futures contracts to increase.iii. You will lose money on your short position in the T-bond futures contracts if interest rates fall.25.12 a. The price of a bond equals the present value of its cash flows.Price of Bond A = $1,000 / (1.11) = $900.90Price of Bond B = $1,000 / (1.11)5= $593.45Price of Bond C = $1,000 / (1.11)10= $352.18b. If the market rate of interest increases to 14% per annum, the price of each bond will be:Price of Bond A = $1,000 / (1.14) = $877.19Price of Bond B = $1,000 / (1.14)5= $519.37Price of Bond C = $1,000 / (1.14)10= $269.74c.The percentage change in the price of each bond is calculated as follows:Percentage Change in Bond Price = (New Price / Old Price) – 1Percentage Change in Bond A = ($877.19 / $900.90) – 1= -2.63%Percentage Change in Bond B = ($519.37 / $593.45) – 1= -12.48%Percentage Change in Bond C = ($269.74 / $352.18) –1= -23.41%Therefore, Bond C experienced the greatest percentage change in price.25.13 a. The price of a bond equals the present value of its cash flows.Since Bond A pays an annual coupon of 7%, the bond’s owner will receive $70 (= 0.07 * $1,000)at the end of each year in addition to the bond’s $1,000 face value when the bond matures at theend of year 4..Price of Bond A = $70 / 1.10 + $70 / (1.10)2 + $70 / (1.10)3 + $1,070 / (1.10)4= $904.90The price of Bond A is $904.90.Since Bond B pays an annual coupon of 11%, the bond’s owner will receive $110 (= 0.11 *$1,000) at the end of each year in addition to the bond’s $1,000 face value when the bond maturesat the end of year 4.Price of Bond B = $110 / 1.10 + $110 / (1.10)2 + $110 / (1.10)3 + $1,110 / (1.10)4= $1,031.70The price of Bond B is $1,031.70.The duration of a bond is the average time to payment of the bo nd’s cash flows, weighted by theratio of the present value of each payment to the price of the bond.The relative value of each payment is the present value of the payment divided by the price of thebond. The contribution of each payment to the duration of the bond is the relative value of thepayment multiplied by the amount of time (in years) until the payment occurs.Bond APayment PV of Payment Relative Value Time to Payment (in years)Duration$70$63.640.070310.0703$70$57.850.063920.1279$70$52.590.058130.1744$1,070$730.820.80764 3.23053.6031The duration of Bond A is 3.6031 years.Bond BPayment PV of Payment Relative Value Time to Payment (in years)Duration$110$100.000.096910.0969$110$90.910.088120.1762$110$82.640.080130.2403$1,110$758.140.73494 2.93943.4529The duration of Bond B is 3.4529 years.b. If the market interest rate decreases to 7% per annum:Price of Bond A = $70 / 1.07 + $70 / (1.07)2 + $70 / (1.07)3 + $1,070 / (1.07)4= $1,000Price of Bond B = $110 / 1.07 + $110 / (1.07)2 + $110 / (1.07)3 + $1,110 / (1.07)4= $1,135.49c.Bond A should experience a greater percentage change in its price. Bond A has a higher durationthan Bond B since a larger proportion of its payments occur in later years. Bonds with higherdurations will experience greater percentage changes in price for a given movement in the interestrate.d. The percentage change in the price of each bond is:Percentage Change in Bond Price = (New Price / Old Price) – 1Percentage Change in Bond A = ($1,000 / $904.90) – 1= 10.51%Percentage Change in Bond B = ($1,135.49 / $1,031.70) – 1= 10.06%25.14 The duration of a bond is the average time to payment of the bond’s cash flows, weighted by the ratioof the present value of each payment to the price of the bond.Since the bond is selling at par, the market interest rate must equal 9%, the annual coupon rate on thebond. The price of a bond selling at par is equal to its face value. Therefore, the price of this bond is$1,000.The relative value of each payment is the present value of the payment divided by the price of the bond.The contribution of each payment to the duration of the bond is the relative value of the paymentmultiplied by the amount of time (in years) until the payment occurs.Payment PV of Payment Relative Value Time to Payment (in years)Duration$90$82.570.082610.0826$90$75.750.075820.1515$1,090$841.680.84173 2.52502.7591Therefore, the duration of the bond is 2.7591 years.25.15 The duration of a bond is the average time to payment of the bond’s cash flows, weighted by the ratioof the present value of each payment to the price of the bond.Since the bond is selling at par, the market interest rate must equal 9%, the annual coupon rate on thebond. The price of a bond selling at par is equal to its face value. Therefore, the price of this bond is$1,000.The relative value of each payment is the present value of the payment divided by the price of the bond.The contribution of each payment to the duration of the bond is the relative value of the paymentmultiplied by the amount of time (in years) until the payment occurs.Payment PV of Payment Relative Value Time to Payment (in years)Duration$90$82.570.082610.0826$90$75.750.075820.1515$90$69.500.069530.2085$1,090$772.180.77224 3.08873.5313Therefore, the duration of the bond is 3.5313 years.25.16 The duration of a bond is the avera ge timing of the bond’s cash flows, weighted by the ratio of thepresent value of each payment to the price of the bond.In order to determine the duration of a bond, first calculate the bond’s price.Since this bond pays an annual coupon of 5%, th e bond’s owner will receive $50 (= 0.05 * $1,000) atthe end of each year in addition to the bond’s $1,000 face value at the end of year 4. Use the marketinterest rate of 9% per annum to discount the bond’s cash flows.Price of Bond = $50 / 1.09 + $50 / (1.09)2 + $50 / (1.09)3 + $1,050 / (1.09)4= $870.41Next, set up the following table to calculate the bond’s duration. The relative value of each payment isthe present value of the payment divided by the price of the bond. The contribution of each payment tothe duration of the bond is the relative value of the payment multiplied by the amount of time (in years)until the payment occurs.Payment PV of Payment Relative Value Time to Payment (in years)Duration$50$45.870.052710.0527$50$42.080.048320.0967$50$38.610.044430.1331$1,050$743.850.85464 3.41843.7008Therefore, the duration of the bond is 3.7008 years.25.17 The duration of a liability is the average time to payment of the cash flows required to retire theliability, weighted by the ratio of the present value of each payment to the present value of allpayments related to the liability.In order to determine the duration of a liability, first calculate the present value of all the paymentsrequired to retire it. Since the Hansels plan to pay $20,000 at the beginning of each year for four years,the present value of these payments can be calculated using the annuity formula. Use the marketinterest rate of 15% to discount these payments.PV(College Payments two years from today) = $20,000A40.15= $57,100The annuity formula yields the present value of the college payments one year prior to the initialpayment. Since the first payment will occur three years from today, discount this amount must by twoyears in order to find its present value.PV(College Payments) = $57,100 / (1.15)2= $43,176Therefore, the present value of the Hansels’ college payments is $43,176.Next, set up the foll owing table to calculate the liability’s duration. The relative value of each paymentis the present value of the payment divided by the present value of the entire liability. The contributionof each payment to the duration of the entire liability is the relative value of the payment multiplied bythe amount of time (in years) until the payment occurs.Payment PV of Payment Relative Value Time to Payment (in years)Duration$20,000$13,150.320.304630.9137$20,000$11,435.060.26484 1.0594$20,000$9,943.530.23035 1.1515$20,000$8,646.550.20036 1.20164.3262Therefore, the duration of the Hansels’ liability is 4.3262 years.25.18 The duration of a portfolio of assets or liabilities is the weighted average of the duration of the portfolio’sindividual items, weighted by their relative market values.a. The total market value of Blue Steel’s assets is $1,255 million (= $43 + $615 + $345 + $55 + $197).The relative market value and duration of each asset is listed below. The relative value of each asset isthe market value of the asset divided by the market value of all the bank’s assets.Relative Value Duration (in years)Federal Funds Deposits0.03430Accounts Receivable0.49000.33Short-Term Loans0.27490.75Long-Term Loans0.04385Mortagages0.157015Since the duration of a group of assets is the weighted average of the durations of each individual assetin the gro up, the duration of Blue Steel’s assets is:Duration of Assets = (0.0343)(0) + (0.4900)(0.33) + (0.2749)(0.75) + (0.0438)(5) + (0.1570)(15)= 2.94Therefore, the duration of Blue Steel’s assets is 2.94 years.b. The total market value of Blue Stee l’s liabilities is $1,110 million (= $490 + $370 + $250). Therelative market value and duration of each liability is listed below. The relative value of each liabilityis the market value of the liability divided by the market value of all the bank’s lia bilities.Relative Value Duration (in years)Checking and Savings Deposits0.44140Certificates of Deposit0.3333 1.5Long-Term Financing0.225210Since the duration of a group of liabilities is the weighted average of the durations of each individualliability in the group, the duration of Blue Steel’s liabilities is:Duration of Liabilities = (0.4414)(0) + (0.3333)(1.5) + (0.2252)(10)= 2.75Therefore, the duration of Blue Steel’s liabilities is 2.75 years.c.Since the duration of Blue Steel’s assets does not equal the duration of its liabilities, the bank is notimmune from interest rate risk.25.19 The duration of a port folio of assets or liabilities is the weighted average of the duration of the portfolio’sindividual items, weighted by their relative market values.a. The total market value of Magnum’s assets is $1,800 million (= $100 + $500 + $1,200). The relativemarket value and duration of each asset is listed below. The relative value of each asset is the marketvalue of the asset divided by the market value of all the bank’s assets.Relative Value Duration (in years)Overnight Money0.05560Loans0.27781Mortgages0.666712Since the duration of a group of assets is the weighted average of the durations of each individual assetin the group, the duration of Magnum’s assets is:Duration of Assets = (0.0556)(0) + (0.2778)(1) + (0.6667)(12)= 8.28Therefore, the duration of Magnum’s assets is 8.28 years.b. The total market value of Magnum’s li abilities is $1,200 million (= $300 + $400 + $500). The relativemarket value and duration of each liability is listed below. The relative value of each liability is themarket value of the liability divided by the market value of all the bank’s liabiliti es.Relative Value Duration (in years)Checking and Savings Accounts0.25000Certificates of Deposit0.3333 1.1Long-Term Debt0.416719Since the duration of a group of liabilities is the weighted average of the durations of each individualliability in the group, the duration of Magnum’s liabilities is:Duration of Liabilities = (0.2500)(0) + (0.3333)(1.1) + (0.4167)(19)= 8.28Therefore, the duration of Magnum’s liabilities is 8.28 years.c.The duration of Magnum’s assets equals the duration of its liabilities. However, the bank is still notimmune from interest rate risk since the value of its assets is greater than the value of its liabilities.Duration matching only eliminates risk if the value of the firm’s assets equals the value of the firm’sliabilities.。

CorporateFinance第7版答案Ch009

CorporateFinance第7版答案Ch009Chapter 9: Capital Market Theory: An Overview9.1 a. The capital gain is the appreciation of the stock price. Because the stock price increased from $37 per share to $38 per share, you earned a capital gain of $1 per share (=$38 - $37).Capital Gain = (P t+1– P t) (Number of Shares)= ($38 - $37) (500)= $500You earned $500 in capital gains.b.The total dollar return is equal to the dividend income plus the capital gain. You received $1,000 in dividend income, as stated in the problem, and received $500 in capital gains, as found in part (a).Total Dollar Gain = Dividend income + Capital gain= $1,000 + $500= $1,500Your total dollar gain is $1,500.c.The percentage return is the total dollar gain on the investment as of the end of year 1 divided by the $18,500 initial investment (=$37 500).R t+1= [Div t+1 + (P t+1– P t)] / P t= [$1,000 + $500] / $18,500= 0.0811The percentage return on the investment is 8.11%.d.No. You do not need to sell the shares to include the capital gains in the computation of your return. Since you could realize the gain if you choose, you should include it in your analysis.9.2 a. The capital gain is the appreciation of the stock price. Find the amount that Seth paid for the stock one year ago by dividing his total investment by the number of shareshe purchased ($52.00 = $10,400 / 200). Because the price of the stock increased from $52.00 per share to $54.25 per share, he earned a capital gain of $2.25 per share (=$54.25 - $52.00).Capital Gain = (P t+1– P t) (Number of Shares)= ($54.25 - $52.00) (200)= $450Seth’s capital gain is $450.b. The total dollar return is equal to the dividend income plus the capital gain. He received$600 in dividend income, as stated in the problem, and received $450 in capital gains, asfound in part (a).Total Dollar Gain = Dividend income + Capital gain= $600 + $450= $1,050Seth’s total dollar return is $1,050.c. The percentage return is the total dollar gain on the investment as of the end of year 1divided by the initial investment of $10,400.R t+1= [Div t+1 + (P t+1– P t)] / P t= [$600 + $450] / $10,400= 0.1010The percentage return is 10.10%.e.The dividend yield is equal to the dividend payment divided by the purchase price of the stock.Dividend Yield = Div1 / P t= $600 / $10,400= 0.0577The stock’s dividend yield is 5.77%.9.3Apply the percentage return formula. Note that the stock price declined during the period. Since the stock price decline was greater than the dividend, your return was negative.R t+1= [Div t+1 + (P t+1– P t)] / P t= [$2.40 + ($31 - $42)] / $42= -0.2048The percentage return is –20.48%.9.4Apply the holding period return formula. The expected holding period return is equal to the total dollar return on the stock divided by the initial investment.R t+2= [P t+2– P t] / P t= [$54.75 - $52] / $52= 0.0529The expected holding period return is 5.29%.9.5Use the nominal returns, R, on each of the securities and the inflation rate, π, of 3.1% to calculate the real return, r.r = [(1 + R) / (1 + π)] – 1a.The nominal return on large-company stocks is 12.2%. Apply the formula for the realreturn, r.r = [(1 + R) / (1 + π)] – 1= [(1 + 0.122) / (1 + 0.031)] – 1= 0.0883The real return on large-company stocks is 8.83%.b.The nominal return on long-term corporate bonds is 6.2%. Apply the formula for the realreturn, r.r = [(1 + R) / (1 + π)] – 1= [(1 + 0.062) / (1 + 0.031)] – 1= 0.03The real return on long-term corporate bonds is 3.0%.c.The nominal return on long-term government bonds is 5.8%. Apply the formula for thereal return, r.r = [(1 + R) / (1 + π)] – 1= [(1 + 0.058) / (1 + 0.031)] – 1= 0.0262The real return on long-term government bonds is 2.62%.d.The nominal return on U.S. Treasury bills is 3.8%. Apply the formula for the real return,r.r = [(1 + R) / (1 + π)] – 1= [(1 + 0.038) / (1 + 0.031)] – 1= 0.00679The real return on U.S. Treasury bills is 0.679%.9.6The difference between risky returns on common stocks and risk-free returns on Treasury bills iscalled the risk premium. The average risk premium was 8.4 percent (= 0.122 – 0.038) over theperiod. The expected return on common stocks can be estimated as the current return on Treasury bills, 2 percent, plus the average risk premium, 8.4 percent.Risk Premium = Average common stock return – Average Treasury bill return= 0.122 – 0.038= 0.084E(R) = Treasury bill return + Average risk premium= 0.02 + 0.084= 0.104The expected return on common stocks is 10.4 percent.9.7Below is a diagram that depicts the stocks’ price movements. Two years ago, each stock had thesame price, P0. Over the first year, General Materials’ stock price increa sed by 10 percent, or (1.1) ?P0. Standard Fixtures’stock price declined by 10 percent, or (0.9) ?P0. Over the second year,General Materials’ stock price decreased by 10 percent, or (0.9) (1.1) ?P0, while StandardFixtures’ stock price increased by 10 percent, or (1.1) (0.9) ?P0. Today, each of the stocks isworth 99% of its original value.General Materials 0 00= (0.99) P0Standard Fixtures P0 (0.9) P0(0.9) (1.1) P0 = (0.99) P09.8Apply the five-year holding-period return formula to calculate the total return on the S&P 500over the five-year period.Five-year holding-period return = (1 +R1) ? (1 +R2) ? (1 +R3) ? (1 +R4) ? (1 +R5) – 1= (1 + -0.0491) ? (1 + 0.2141) ? (1 + 0.2251) ?(1 + 0.0627) ? (1 + 0.3216) – 1= 0.9864The five-year holding-period return is 98.64 percent.9.9The historical risk premium is the difference between the average annual return on long-termcorporate bonds and the average risk-free rate on Treasury bills. The average risk premium is 2.4 percent (= 0.062 – 0.038). Risk Premium = Average corporate bond return – Average Treasury bill return= 0.062 – 0.038= 0.024The expected return on long-term corporate bonds is equal to the current return on Treasury bills,2 percent, plus the average risk premium, 2.4 percent.E(R) = Treasury bill return + Average risk premium= 0.02 + 0.024= 0.044The expected return on long-term corporate bonds is 4.4%.9.10 a. To calculate the expected return, multiply the return for each of the three scenarios by therespective probability of occurrence.E(R M) = R Recession? Prob(Recession)+ R Normal? Prob(Normal) + R Boom? Prob(Boom)= -0.082 ? 0.25 + 0.123 ? 0.50 + 0.258 ? 0.25= 0.1055The expected return on the market is 10.55 percent.E(R T) = R Recession? Prob(Recession)+ R Normal? Prob(Normal) + R Boom? Prob(Boom)= 0.035 ? 0.25 + 0.035 ? 0.50 + 0.035 ? 0.25= 0.035The expected return on Treasury bills is 3.5 percent.b.The expected risk premium is the difference between the expected market return and theexpected risk-free return.Risk Premium = E(R M) – E(R T)= 0.1055 – 0.035= 0.0705The expected risk premium is 7.05 percent.9.11 a. Divide the sum of the returns by seven to calculate the average return over the seven-year period.R= (R t-7 + R t-6 + R t-5 + R t-4 + R t-3 + R t-2 + R t-1) / (7)= (-0.026 + -0.01 + 0.438 + 0.047 + 0.164 + 0.301 + 0.199) / (7)= 0.159The average return is 15.9 percent.b.The variance, σ2, of the portfolio is equal to the sum of the squared differences betweeneach return and the mean return [(R - R)2], divided by six.R R - R(R - R)2-0.026 -0.185 0.03423-0.01 -0.169 0.028560.438 0.279 0.077840.047 -0.112 0.012540.164 0.005 0.000030.301 0.142 0.020160.199 0.040 0.00160Total 0.17496Because the data are historical, the appropriate denominator in the calculation of thevariance is six (=T– 1).σ2= [∑(R - R)2] / (T– 1)= 0.17496 / (7 – 1)= 0.02916The variance of the portfolio is 0.02916.The standard deviation is equal to the square root of the variance.σ= (σ2)1/2= (0.02916)1/2= 0.1708The standard deviation of the portfolio is 0.1708.9.12 a. Calculate the difference between the return on common stocks and the return on Treasury bills.Year CommonStocksTreasuryBillsRealizedRisk Premium-7 32.4% 11.2% 21.2% -6 -4.9 14.7 -19.6 -5 21.4 10.5 10.9 -4 22.5 8.8 13.7 -3 6.3 9.9 -3.6 -2 32.2 7.7 24.5 Last 18.5 6.2 12.3 b.The average realized risk premium is the sum of the premium of each of the seven years,divided by seven.Average Risk Premium = (0.212 + -0.196 + 0.109 + .137 + -0.036 + 0.245 + 0.123) / 7= 0.0849The average risk premium is 8.49 percent.c.Yes. It is possible for the observed risk premium to be negative. This can happen in anysingle year, as it did in years -6 and -3. The average risk premium over many years islikely positive.9.13 a. To calculate the expected return, multiply the return for each of the three scenarios by therespective probability of that scenario occurring.E(R) = R Recession? Prob(Recession)+ R Moderate? Prob(Moderate) + R Rapid? Prob(Rapid)= 0.05 ? 0.2 + 0.08 ? 0.6 + 0.15 ?0.2= 0.088The expected return is 8.8 percent.b.The variance, σ2, of the stock is equal to the sum of the weighted squared differencesbetween each return and the mean return [Prob(R) ? (R - R)2]. Use the mean returncalculated in part (a).R R - R(R - R)2Prob(R) ? (R - R)20.05 -0.038 0.001444 0.00028880.08 -0.008 0.000064 0.00003840.15 0.062 0.003844 0.0007688Variance 0.0010960 The standard deviation, σ, is the square root of the variance.σ= (σ2)1/2= (0.0010960)1/2= 0.03311The standard deviation is 0.03311.9.14 a. To calculate the expected return, multiply the market return for each of the fivescenarios by the respective probability of occurrence.R M= (0.23 ? 0.12) + (0.18 ? 0.4) + (0.15 ? 0.25) + (0.09 ? 0.15) + (0.03 ? 0.08)= 0.153The expected return on the market is 15.3 percent.b.To calculate the expected return, multiply the stock’s return for each of the five scenarios by the respective probability of occurrence.R= (0.12 ? 0.12) + (0.09 ? 0.4) + (0.05 ? 0.25) + (0.01 ? 0.15) + (-0.02 ? 0.08)= 0.0628The expected return on Tribli stock is 6.28 percent.9.15 a. Divide the sum of the returns by four to calculate the expected returns on Belinkie Enterprises and Overlake Company over the four-year period.R Belinkie= (R1 + R2 + R3 + R4) / (4)= (0.04 + 0.06 + 0.09 + 0.04) / 4= 0.0575The expected return on Belinkie Enterprises stock is 5.75 percent.R Overlake = (R1 + R2 + R3 + R4) / (4)= (0.05 + 0.07 + 0.10 + 0.14) / (4)= 0.09The expected return on Overlake Company stock is 9 percent.b.The variance, σ2, of each stock is equal to the sum of the weighted squared differences between each return and the mean return [Prob(R) ? (R - )2]. Use the mean return calculated in part (a). Each of the four states is equally likely.Belinkie Enterprises:R R - R(R - R)2Prob(R) ? (R - R)20.04 -0.0175 0.00031 0.0000770.06 0.0025 0.00001 0.0000030.09 0.0325 0.00106 0.0002640.04 -0.0175 0.00031 0.000077Variance 0.000421 The variance of Belinkie Enterprises stock is 0.000421.Overlake Company:R R - R(R - R)2Prob(R) ? (R - R)20.05 -0.04 0.0016 0.00040.07 -0.02 0.0004 0.00010.10 0.01 0.0001 0.0000250.14 0.05 0.0025 0.000625Variance 0.00115 The variance of Overlake Company stock is 0.00115.9.16 a. Divide the sum of the returns by five to calculate the average return over the five-year period.R S= (R1 + R2 + R3 + R4 + R5) / (5)= (0.477 + 0.339 + -0.35 + 0.31 + -0.005) / (5)= 0.1542The average return on small-company stocks is 15.42 percent.R M= (R1 + R2 + R3 + R4 + R5) / (5)= (0.402 + 0.648 + -0.58 + 0.328 + 0.004) / (5)= 0.1604The average return on the market index is 16.04 percent.b.The variance, σ2, of each is equal to the sum of the squared differences between eachreturn and the mean return [(R - R)2], divided by four. The standard deviation, σ, is thesquare root of the variance.Small-company stocks:R S R- R S (R S - R S)2S0.477 0.3228 0.104199840.339 0.1848 0.03415104-0.35 -0.5042 0.254217640.31 0.1558 0.02427364-0.005 -0.1592 0.02534464Total 0.44218680Because the data are historical, the appropriate denominator in the variance calculation is four (=T– 1).σ2S= [∑(R S - R S)2] / (T– 1)= 0.44218680 / (5 – 1)= 0.1105467The variance of the small-company returns is 0.1105467.The standard deviation is equal to the square root of the variance.σS= (σ2S)1/2= (0.1105467)1/2= 0.33249The standard deviation of the small-company returns is 0.33249.Market Index of Common Stocks:R S R- R S (R S - R S)2S0.402 0.2416 0.058370560.648 0.4876 0.23775376-0.58 -0.7404 0.548192160.328 0.1676 0.028089760.004 -0.1564 0.02446096Total 0.89686720Because the data are historical, the appropriate denominator in the variance calculation isfour (=T– 1).σ2S= [∑(R S - R S)2] / (T– 1)= (0.89686720) / (5 –1)= 0.2242168The variance of the market index of common stocks is 0.2242168.The standard deviation is equal to the square root of the variance.σS= (σ2S)1/2= (0.2242168)1/2= 0.47352The standard deviation of the market index is 0.47352.9.17 Common Stocks:Divide the sum of the returns by seven to calculate the average return over the seven-yearperiod.R CS= (R1 + R2 + R3 + R4 + R5 + R6 + R7) / (7)= (0.3242 + -0.0491 + 0.2141 + 0.2251 + 0.0627 + 0.3216 + 0.1847) / (7)= 0.1833The average return on common stocks is 18.33 percent.The variance, σ2, is equal to the sum of the squared differences between each return and the mean return [(R - R)2], divided by six.R CS R- R CS (R CS - R CS)2CS0.3242 0.1409 0.0198-0.0491 -0.2324 0.05400.2141 0.0308 0.00090.2251 0.0418 0.00170.0627 -0.1206 0.01460.3216 0.1383 0.01910.1847 0.0014 0.0000TotalBecause the data are historical, the appropriate denominator in the variance calculation is six (=T–1).σ2CS= [∑(R CS - R C S)2] / (T– 1)= (0.1102) / (7 – 1)= 0.018372The variance of the common stock returns is 0.018372.Small Stocks:Divide the sum of the returns by seven to calculate the average return over the seven-year period.R SS= (R1 + R2 + R3 + R4 + R5 + R6 + R7) / (7)= (0.3988 + 0.1388 + 0.2801 + 0.3967 + -0.0667 + 0.2466 + 0.0685) / (7)= 0.2090The average return on small stocks is 20.90 percent.The variance, σ2, is equal to the sum of the squared differences between each return and the mean return [(R - R)2], divided by six.R SS R- R SS (R SS - R SS)2SS0.3988 0.1898 0.03600.1388 -0.0702 0.00490.2801 0.0711 0.00510.3967 0.1877 0.0352-0.0667 -0.2757 0.07600.2466 0.0376 0.00140.0685 -0.1405 0.0197Total 0.1784Because the data are historical, the appropriate denominator in the calculation of the variance is six (=T– 1).σ2SS= [∑(R SS - R SS)2] / (T– 1)= (0.1784) / (7 – 1)= 0.029734The variance of the small stock returns is 0.029734.Long-Term Corporate Bonds:Divide the sum of the returns by seven to calculate the average return over the seven-year period.R CB= (R1 + R2 + R3 + R4 + R5 + R6 + R7) / (7)= (-0.0262 + -0.0096 + 0.4379 + 0.0470 + 0.1639 + 0.3090 + 0.1985) / (7)= 0.1601The average return on long-term corporate bonds is 16.01 percent.The variance, σ2, is equal to the sum of the squared differences between each return and the mean return [(R - R)2], divided by six.R CB R- R CB (R CB - R CB)2CB-0.0096 -0.1697 0.02880.4379 0.2778 0.07720.0470 -0.1131 0.01280.1639 0.0038 0.00000.3090 0.1489 0.02220.1985 0.0384 0.0015Total 0.1771Because the data are historical, the appropriate denominator in the calculation of the variance is six (=T– 1).σ2CB= [∑(R CB - R CB)2] / (T– 1)= (0.1771) / (7 – 1)= 0.029522The variance of the long-term corporate bond returns is 0.029522.Long-Term Government Bonds:Divide the sum of the returns by seven to calculate the average return over the seven-year period.R GB= (R1 + R2 + R3 + R4 + R5 + R6 + R7) / (7)= (-0.0395 + -0.0185 + 0.4035 + 0.0068 + 0.1543 + 0.3097 + 0.2444) / (7)= 0.1568The average return on long-term government bonds is 15.68 percent.The variance, σ2, is equal to the sum of the squared differences between each return and the mean return [(R - R)2], divided by six.R GB R- R GB (R GB - R GB)2GB-0.0395 -0.1963 0.0385-0.0185 -0.1383 0.01910.4035 0.2467 0.06090.0068 -0.1500 0.02250.1543 -0.0025 0.00000.3097 0.1529 0.02340.2444 0.0876 0.0077Total 0.1721Because the data are historical, the appropriate denominator in the calculation of the variance is six (=T– 1).σ2GB= [∑(R GB - R GB)2] / (T– 1)= (0.1721) / (7 – 1)= 0.02868The variance of the long-term government bond returns is 0.02868.U.S. Treasury Bills:Divide the sum of the returns by seven to calculate the average return over the seven-yearperiod.R TB= (R1 + R2 + R3 + R4 + R5 + R6 + R7) / (7)= (0.1124 + 0.1471 + 0.1054 + 0.0880 + 0.0985 + 0.0772 + 0.0616) / (7)= 0.0986The average return on the Treasury bills is 9.86 percent.The variance, σ2, is equal to the sum of the squared differences between each return and the mean return [(R - R)2], divided by six.R TB R- R TB (R TB - R TB)2TB0.1124 0.0138 0.00020.1471 0.0485 0.00240.1054 0.0068 0.00000.0880 -0.0106 0.00010.0985 -0.0001 0.00000.0772 -0.0214 0.00050.0616 -0.0370 0.0014Total 0.0045Because the data are historical, the appropriate denominator in the calculation of the variance issix (=T– 1).σ2TB= [∑(R TB - R TB)2] / (T– 1)= (0.0045) / (7 – 1)= 0.00075The variance of the Treasury bill returns is 0.00075.9.18 a. Divide the sum of the returns by six to calculate the average return over the six-year period.R S= (R1 + R2 + R3 + R4 + R5 + R6 + R7) / (6)= (0.0685 + -0.0930 + 0.2287 + 0.1018 + -0.2156 + 0.4463) / (6)= 0.0895The average return on small-company stocks is 8.95 percent.R T= (R1 + R2 + R3 + R4 + R5 + R6 + R7) / (6)= (0.0616 + 0.0547 + 0.0635 + 0.0837 + 0.0781 + 0.056) / (6)= 0.0663The average return on U.S. Treasury bills is 6.63 percent.b.The variance, σ2, of each security is equal to the sum of the squared differences betweeneach return and the mean return [(R - R)2], divided by five. The standard deviation isequal to the square root of the variance.Small-Company Stocks:R S R- R S (R S - R S)2S0.0685 -0.020950 0.000439-0.0930 -0.182450 0.0332880.2287 0.139250 0.0193910.1018 0.012350 0.000153-0.2156 -0.305050 0.0930560.4463 0.356850 0.127342Total 0.273667Because the data are historical, the appropriate denominator in the calculation of the variance is five (=T– 1).σ2S= [∑(R S - R S)2] / (T– 1)= (0.273667) / (6 –1)= 0.054733The variance of small-company stocks is 0.0547.The standard deviation is equal to the square root of the variance.σS= (σ2S)1/2= (0.054733)1/2= 0.2340The standard deviation of small-company stocks is .2340.U.S. Treasury bills:R T R- R T (R T - R T)2T0.0616 -0.004667 0.0000220.0547 -0.011567 0.0001340.0635 -0.002767 0.0000080.0837 0.017433 0.0003040.0781 0.011833 0.0001400.0560 -0.010267 0.000105Total 0.000713Because the data are historical, the appropriate denominator in the calculation of the variance is five (=T– 1).σ2T= [∑(R T - R T)2] / (T– 1)= (0.000713) / (6 –1)= 0.000143The variance of small-company stocks is 0.000143.The standard deviation is equal to the square root of the variance.σT= (σ2T)1/2= (0.000143)1/2= 0.0119The standard deviation of small-company stocks is 0.0119.c.The average return on Treasury bills is lower than the average return on small-companystocks. However, the standard deviation of the returns on Treasury bills is also lowerthan the standard deviation of the small-company stock returns. There is a positiverelationship between the risk of a security and the expected return on a security.9.19 According to the normal distribution, there is a 95.44 percent probability that a return will bewithin two standard deviations of the mean. Thus, roughly 95 percent of International Trading’sreturns will fall within two standard deviations of the mean.Range of Returns = ± (2 ?σ)= 0.175 ± (2 ? 0.085)= [0.005, 0.345]The range in which 95 percent of the returns will fall is between 0.5 percent and 34.5 percent.。

Corporate Finance 第7版答案Ch018

Chapter 18: Dividends and Other Payouts18.1 February 16: Declaration date - the board of directors declares a dividend paymentthat will be made on March 14.February 24: Ex-dividend date - the shares trade ex dividend on and after this date.Sellers before this date receive the dividend. Purchasers on or after this date do notreceive the dividend.February 26: Record date - the declared dividends are distributable to shareholdersof record on this date.March 14: Payable date - the checks are mailed.18.2 Based on Miller and Modigliani reasoning, the stock will sell for $8.75. This is thesame price you paid for the stock, and you are selling before the ex-dividend date.When the stock goes ex-dividend, the price is expected to fall $0.75 a share.18.3 a. If the dividend is declared, the price of the stock will drop on the ex-dividend date bythe value of the dividend, $5. It will then trade for $95.b. If it is not declared, the price will remain at $100.c. Mann’s outflows for investments are $2,000,000. These outflows occur immediately.One year from now, the firm will realize $1,000,000 in net income and it will pay$500,000 in dividends, but the need for financing is immediate. Mann must finance$2,000,000 through the sale of shares worth $100. It must sell $2,000,000 / $100 =20,000 shares.d. The MM model is not realistic since it does not account for taxes, brokerage fees,uncertainty over future cash flows, investors’ preferences, signaling effects, andagency costs.18.4 a. The ex-dividend date is Feb. 27, which is two business days before the record date.b. The stock price should drop by $1.25 on the ex-dividend date.18.5 Knowing that share price can be expressed as the present value of expected futuredividends does not make dividend policy relevant. Under the growing perpetuitymodel, if overall corporate cash flows are unchanged, then a change in dividendpolicy only changes the timing of the dividends. The PV of those dividends is thesame. This is true because, given that future earnings are held constant, dividendpolicy simply represents a transfer between current and future stockholders.In a more realistic context and assuming a finite holding period, the value of theshares should represent the future stock price as well as the dividends. Any cashflow not paid as a dividend will be reflected in the future stock price. As such the PVof the flows will not change with shifts in dividend policy; dividend policy is stillirrelevant.18.6 a.The price is the PV of the dividends, and there are only 2 more cash flows associated with this stock: 1$2D =and 2$17.5375D =. Find the present value of this cash flow series: 2$2$17.5375PV 1.15 1.15$15=+= b.The current value of your shares is ($15)(500) = $7,500. since you want equal payments, you want an annuity, which solves: $7,500X 1.15X 1.152=+ Solving for X , the cash flows are $4,613.3721 each year, However, you will receive $1,000 in dividends in the first year, so you must sell shares to make up the difference, At the end of the first year, you must sell just enough shares to generate $3,613.3721. In order to do that, first you must determine the stock price. At that time, the price will be the PV of the liquidating dividend: $17.5375$15.251.15= and $3,613.3721236.942$15.25= shares So you must sell 236.942 shares. At the end of the 2nd year, the remaining shares will each earn the liquidating dividend. To check your work, note that you will receive $4,613.38 [(500 - 236.942) x $17.5375]. (Rounding causes the discrepancy). 18.7 a.Assume that the dividend has yet to be paid. Since the firm has a 100% payout policy, the entire net income, $32,000 will be paid as a dividend. Then, the current value of the firm is the discounted value from 1 year hence, plus the current income: $1,545,600Value $32,000 1.12$1,412,000=+= b. The current price of $141.20 per share will fall by the value of the dividend to $138: $32,000 net income Price $141.2010,000 shares outstanding $141.20$3.20$138.00=-=-=18.7(continued) c.i. According to MM, it cannot be true that the low dividend is depressing theprice. Since dividend policy is irrelevant, the level of the dividend shouldnot matter. Any funds not distributed as dividends add to the value of thefirm hence the stock price. These directors merely want to change the timingof the dividends (more now, less in the future). As the calculations belowindicate, the value of the firm is unchanged by their proposal. Therefore,share price will be unchanged.To show this, consider what would happen if the dividend was increased to$4.25. Since only the existing shareholders will get the dividend, therequired dollar amount is $4.25 x 10,000 shares = $42,500. Then, the dollarsto be raised are:$42,500 required funds - $32,000 net income$10,500 dollars to be raised with sale of new sharesSince those new shareholders must also earn 12%, their share of the firm oneyear from now is 10,500 x 1.12 = $11,760, meaning that the old shareholders'interest falls to $1,545,600 - $11,760 = $1,533,840. Under this scenario, the current value of the firm is $1,533,840Value $42,500 1.12$1,412,000=+= Since the firm value is the same as under a), the change in dividend policyhad no effect.ii. The new shareholders are not entitled to receive the current dividend. Theywill receive only the value of the equity one year hence. The PV of those flows is$1,533,840$1,369,5001.12= so the share price will be$1,369,500$136.9510,000= and shares sold will be$10,50076.67$136.95=18.8 a. Expected price is the PV of future cashflows. Since the $1.2 million is current period,and the $15 million is already PV, we don't have to discount. Therefore, price per share is total dollars scaled by total shares$1,200,000$15,000,000Price $16.21,000,000+== b. He can invest the dividends into the Gibson stock.$1.2 million x 50% x 1,000Dividends that he gets = = $6001,000,000 0.6 + 15Expected share price after dividend ==$15.61Number of shares that Jeff needs to buy = 600 / 15.6 = 3818.9 For either alternative, assume the $2,000,000 cash is after corporate tax.Alternative 1:Firm invests cash, either in T-bills or in preferred stock, and then pays out as specialdividend in 3 yearsIf the firm invests in T-Bills :()3after corporate tax yield 7(1-.35) 4.55FV =2,000,0001.04552,285,609.89==+=After personal tax cash flow to the stock holders:()ATCF 2,285,609.891.311,577,070.82=-=If the firm invests in preferred stock (assume dividends will be re-invested in thesame preferred stock):after corporate tax dividend:preferred dividends: 11% ( 2,000,000) = $220,000Since 70% of preferred dvds are excluded from tax:Taxable dvds = 220,000 x .3 = 66,000Tax = 66,000 x .35 = 23,100after corporate tax dividend = 220,000 - 23,100= 196,900Therefore,18.9 (continued)196,900after corp tax yield on pref stock .098452,000,000== ()3FV 2,000,0001.098452,650,762.85==After personal tax cash flow to the stock holders:()ATCF 2,650,762.821.311,829,026.37=-=Alternative 2:Firm pays out dividend now, and individuals invest in T-bills:After personal tax cash to be invested= 2,000,000(1-.31)= 1,380,000After personal tax yield on T-bills= .07 (1-.31)= .0483After personal tax cash flow to the stock holders:()3ATCF FV 1,380,0001.04831,589,775.66===The after-tax cash flow for the shareholders is maximized when the firm invests thecash in the preferred stocks.18.10 You should not expect to find either low dividend, high growth stocks or tax-freemunicipal bo nds in the University of Pennsylvania’s portfolio. Since the universitydoes not pay taxes on investment income, it will want to invest in securities, whichprovide the highest pre-tax return. Since tax-free municipal bonds generally providelower returns than taxable securities, there is no reason for the university to holdmunicipal bonds.The Litzenberger-Ramaswamy research (discussed in the section on empiricalevidence) found that high dividend stocks pay higher pre-tax returns than riskcomparable low dividend stocks because of the taxes on dividend income. Since theUniversity of Pennsylvania does not pay taxes, it would be wise to invest in highdividend stocks rather than low dividend stocks in the same risk class.18.11 a. If T C = T 0 =0, then1=-=-DP P DP P b e b e So, the stock price will fall by the amount of the dividend. b.If T C = 0 and T 0 ≠ 0 then 01T D P P b e -=- So, the stock price will fall by the after-tax proceeds from the dividend. c.In a, there was no tax disadvantage to dividends. Thus, investors are indifferent between buying the stock at P b and receiving the dividend or waiting, buying the stock at P e and receiving a subsequent capital gain. When only the dividend is taxed, after-tax proceeds must be equated for investors to be indifferent. Since the after-tax proceeds from the dividend are D (1 - T 0), the price will fall by that amount. d.No, Elton and Gruber’s paper is not a prescription for dividend policy. In a world with taxes, a firm should never issue stock to pay a dividend, but the presence of taxes does not imply that firms should not pay dividends from excess cash. The prudent firm, when faced with other financial considerations and legal constraints may choose to pay dividends.18.12 a.Let x be the ordinary income tax rate. The individual receives an after-tax dividend of $1,000(1-x) which she invests in Treasury bonds. The T-bond will generate after-tax cash flows to the investor of $1,000 (1 - x)[1+0.08(1-x)]. If the firm invests the money, its proceeds are $1,000 [1 + 0.08 (1-0.35)]. To be indifferent, the investor’s proceeds must be the same whether she invests the after-tax dividend or receives the proceeds from the firm’s investment and pays taxes on that amount. Set the 2 equations equal and solve for x: ()()()(){}1,000110.08111,00010.0810.350.35x x x x ⎡⎤⎡⎤-+-=-+-⎣⎦⎣⎦= Note: This argument does not depend upon the length of time the investment is held. b. Yes, this is a reasonable answer. She is only indifferent if the after-tax proceeds fromthe $1,000 investment in identical securities are identical; that occurs only when thetax rates are identical.c. Since both investors will receive the same pre-tax return, you would expect the sameanswer as in part a. Yet, because Carlson enjoys a tax benefit from investing in stock(70% of income from stock is exempt from corporate taxes), the tax rate on ordinaryincome which induces indifference, is much lower. Again, set the 2 equations equaland solve for x:()()[](){}()1,0001-10.12111,0001.121(0.30)(.35)10.5%x x x x ⎡⎤⎡⎤+-=-+-⎣⎦⎣⎦=d. It is a compelling argument, but there are legal constraints, which deter firms frominvesting large sums in stock of other companies.18.13 The bird-in-the-hand argument is based upon the erroneous assumption that increaseddividends make a firm less risky. If capital spending and investment spending areunchanged, the firm’s overall cash flows are not affected by the dividend policy.18.14 This argument is theoretically correct. In the real world with transaction costs ofsecurity trading, home-made dividends can be more expensive than dividendsdirectly paid out by the firms. However, the existence of financial intermediariessuch as mutual funds reduces the transaction costs for individuals greatly. Thus, as awhole, the desire for current income shouldn’t be a major factor favoring high -current-dividend policy.18.15 To minimize her tax burden, your aunt should divest herself of high dividend yieldstocks and invest in low dividend yield stock. Or, if possible, she should keep herhigh dividend stocks, borrow an equivalent amount of money and invest that moneyin a tax deferred account.18.16 This is not evidence on investor preferences. A rise in stock price when the currentdividend is increased may reflect expectations that future earnings, cash flows, etc.will rise. The better performance of the 115 companies, which raised their payouts,may also reflect a signal by management through the dividends that the firms wereexpected to do well in the future.18.17 Virginia Power’s investors probably were not aware of the cash flow crunch. Thus,the price drop was due to the negative information about the cost overruns. Even ifthey were suspicious that there were overruns, the announcement would still cause adrop in price because it removed all uncertainty about overruns and indicated theirmagnitude.18.18As the firm has been paying out regular dividends for more than 10 years, the currentsevere cut in dividends can cause the shareholders to lower their expectations oncurrent and future cash flows of the firm. It then results in the drop in the stock price.18.19 a. Cap’s past behavior suggests a preference for capital gains while Widow Jonesexhibits a preference for current income.b. Cap could show the widow how to construct homemade dividends through the sale ofstock. Of course, Cap will also have to convince her that she lives in an MM world.Remember that homemade dividends can only be constructed under the MMassumptions.c. Widow Jones may still not invest in Neotech because of the transaction costsinvolved in constructing homemade dividends. Also the Widow may desire theuncertainty resolution which comes with high dividend stocks.18.20 The capital investment needs of small, growing companies are very high. Therefore,payment of dividends could curtail their investment opportunities. Their other optionis to issue stock to pay the dividend thereby incurring issuance costs. In either case,the companies and thus their investors are better off with a zero dividend policyduring the firms’ rapid growth phases. This fact makes these firms attractive only tolow dividend clienteles.This example demonstrates that dividend policy is relevant when there are issuancecosts. Indeed, it may be relevant whenever the assumptions behind the MM modelare not met.18.21 Unless there is an unsatisfied high dividend clientele, a firm cannot improve its shareprice by switching policies. If the market is in equilibrium, the number of peoplewho desire high dividend payout stocks should exactly equal the number of suchstocks available. The supplies and demands of each clientele will be exactly met inequilibrium. If the market is not in equilibrium, the supply of high dividend payoutstocks may be less than the demand. Only in such a situation could a firm benefitfrom a policy shift.18.22 a. Using the formula from the text:Div1 = Div0 + s (t EPS1 - Div0)= 1.25 + 0.3 (0.4 x 4.5 -1.25)= 1.415b. same as in part a, except adjustment rate, s, is 0.6:Div1 = Div0 + s (t EPS1 - Div0)= 1.25 + 0.6 (0.4 x 4.5 - 1.25)= 1.58Note: Part “a” is more conservative since the adjustment rate is lower.18.23 This finding implies that firms use initial dividends to “signal” their potential growthand positive NPV prospects to the stock market. The initiation of regular cashdividends also serves to convince the market that their high current earnings are nottemporary.。

投资学第七版ch05课后答案

CHAPTER 5Answers to Questions1.There are four ways to manage riskRisk avoidance. Invest only in safe investments like CD’s.Risk anticipation. Using cash reserves, purchasing insurance.Risk transfer. Using derivatives to transfer risk to others willing to bear it.Risk reduction. Diversifying investments across asset classes.2.In answering this question, one assumes that the young person has a steady job,adequate insurance coverage, and sufficient cash reserves. The young individual is inthe accumulation phase of the investment life cycle. During this phase, an individualshould consider moderately high-risk investments, such as common stocks, becausehe/she has a long investment horizon and potentially long work life. Therefore youshould disagree with this statement.3.In answering this question, one assumes that the 63-year-old individual has adequateinsurance coverage and a cash reserve. Depending on her income from socialsecurity, she may need some current income from her retirement portfolio to meetliving expenses. At the same time, she will need to protect herself against inflation.Removing all her money from her company's retirement plan and investing it inmoney market funds would satisfy the investor's short-term current income needs.Investing in long-term investments, such as common stock mutual funds, wouldprovide the investor with needed inflation protection. Therefore she should considerkeeping a portion of her investments in stocks (30 to 50%) and the balance in bondsand money market funds.4.Typically investment strategies change during an individual's lifetime. In theaccumulating phase, the individual is accumulating net worth to satisfy short-termneeds (e.g., house and car purchases) and long-term goals (e.g., retirement andchildren's college needs). In this phase, the individual is willing to invest inmoderately high-risk investments in order to achieve above-average rates of return.In the consolidating phase, an investor has paid off many outstanding debts andtypically has earnings which exceed expenses. In this phase, the investor is becomingmore concerned with long-term needs of retirement or estate planning. Although theinvestor is willing to accept moderate portfolio risk, he/she is not willing to jeopardizethe "nest egg."In the spending phase, the typical investor is retired or semi-retired. This investorwishes to protect the nominal value of his/her savings, but at the same time must makesome investments for inflation protection.The gifting phase is often concurrent with the spending phase. The individualbelieves that the portfolio will provide sufficient income to meet expenses, plus a48reserve for uncertainties. If an investor believes there are excess amounts available inthe portfolio, he/she may decide to make "gifts" to family or friends, institutecharitable trusts, or establish trusts to minimize estate taxes.5. A policy statement is important for both the investor and the investment advisor. Apolicy statement assists the investor in establishing realistic investment goals,assessing constraints (liquidity, time horizon, tax effects etc.) as well as, providing abenchmark by which a portfolio manager's performance may be measured.Exercise6.Student7.The 45-year old uncle and 35-year old sister differ in terms of time horizon. However,each has some time before retirement (20 versus 30 years). Each should have asubstantial proportion of his/her portfolio invested in equities, with the 35-year oldsister possibly having more equity investments in small firms or international firms(i.e., can tolerate greater portfolio risk). These investors could also differ in currentliquidity needs (such as children, education expenses, etc.), tax concerns, and/or otherunique needs or preferences.8.Before constructing an investment policy statement, the financial planner needs toclarify the client's investment objectives (e.g. capital preservation, capitalappreciation, current income or total return) and constraints (e.g. liquidity needs, timehorizon, tax factors, legal and regulatory constraints, and unique needs andpreferences).9.CFA Examination IIIa) At this point we know (or can reasonably infer) thatMr. Franklin is:•unmarried (a recent widower) and childless•70 years of age•in good health•possesses a large amount of (relatively) liquid wealth and intends to leave his estate to a tax-exempt medical research foundation, to whom he is also giving a large currentcash gift•free of debt (not explicitly stated, but neither is the opposite)•in the highest tax brackets (not explicitly stated, but apparent)•not skilled in the management of a large investment portfolio, but also not a complete novice since he owned significant assets of his own prior to his wife's death •not burdened by large or specific needs for current income•not in need of large or specific amounts of current liquidityBased on this information, an appropriate Investment Policy Statement would be: Objectives:Return Requirements: The incidental throw-off of income from Mr. Franklin's large asseta need can easily be met by minor portfolio adjustments. Thus, an inflation-adjustedenhancement of the capital base for the benefit of the foundation will be the primary49return goal (i.e., real growth of capital). Tax minimization will be a continuingcollateral goal.Risk Tolerance: Account circumstances and the long-term return goal suggest that the nature of investment risk from his prior ownership of stocks and bonds, he has a stilllong actuarial life expectancy and is in good current health, and his heir-thefoundation, thanks to his generosity-is already possessed of a large asset base.Constraints:Time Horizon: Even disregarding Mr. Franklin's still-long actuarial life expectancy, the horizon is long-term because the remainder of his estate, the foundation, has avirtually perpetual life span.Liquidity Requirement: Given what we know and the expectation of an ongoing income stream of considerable size, no liquidity needs that would require specific fundingappear to exist.Taxes: Mr. Franklin is no doubt in the highest tax brackets, and investment actions should take that fact into account on a continuing basis. Appropriate tax-sheltered investment(standing on their own merits as investments) should be considered. Tax minimizationwill be a specific investment goal.Legal and Regulatory: Investments, if under the supervision of an investment management Prudent Person rule.Unique Circumstances: The large asset total, the foundation as their ultimate recipient, and considerations) are important in this situation, if not necessarily unique.(b) Given that stocks have provided (and are expected to continue to provide) higherrisk adjusted returns than either bonds or cash, and considering that the return goal isfor long-term, inflation-protected growth of the capital base, stocks will be allotted themajority position in the portfolio. This is also consistent with Mr. Franklin's absenceof either specific current income needs (the ongoing cash flow should provide anadequate level for current spending) or specific liquidity needs. It is likely that incomewill accumulate to some extent and, if so, will automatically build a liquid emergencyfund for Mr. Franklin as time passes.Since the inherited warehouse and the personal residence are significant (15%) realestate assets already owned by Mr. Franklin, no further allocations to this asset class ismade. It should be noted that the warehouse is a source of cash flow, a diversifyingasset and, probably, a modest inflation hedge. For tax reasons, Mr. Franklin may wishto consider putting some debt on this asset, freeing additional cash for alternativeinvestment use.50Given the long-term orientation and the above-average risk tolerance in this situation, about 70% of total assets can be allocated to equities (including real estate)and about 30% to fixed income assets. International securities will be included in bothareas, primarily for their diversification benefits. Municipal bonds will be included inthe fixed income area to minimize income taxes. There is no need to press for yield inthis situation, nor any need to deliberately downgrade the quality of the issues utilized.Venture capital investment can be considered, but any commitment to this (or other"alternative" assets) should be kept small.The following is one example of an appropriate allocation that is consistent with the Investment Policy Statement and consistent with the historical and expected returnand other characteristics of the various available asset classes:CurrentRange TargetCash/Money Market 0 - 5% 0%U.S. Fixed Income 10 - 20 15Non-U.S. Fixed Income 5 - 15 10U.S. Stocks (Large Cap) 30 - 45 30(Small Cap) 15 - 25 15Non-U.S. Stocks 15 - 25 15Real Estate 10 - 15 15*Other 0 - 5 0100%*Includes the Franklin residence and warehouse, which together comprise the proportion of total assets shown.An alternate allocation could well be weighted more heavily to U.S. fixed income and less so to U.S. stocks, given the near equality of expected returns from those assets asindicated in Table 4.51CHAPTER 5Answers to Problems1.Most experts recommend that about 6 month's worth of living expenses be held incash reserves. Although these funds are identified as "cash," it is recommended thatthey be invested in instruments that can easily be converted to cash with little chanceof loss in value (e.g., money market mutual funds, etc.).Most experts recommend that an individual should carry life insurance equal to 7-10times an individual's annual salary. An unmarried individual should have coverageequal to at least 7 times salary, whereas a married individual with two children shouldhave more coverage (possibly 9-10 times salary).2. Married, filing jointly, $20,000 taxable income:Marginal tax rate = 15%Taxes due = 1,400 + (0.15)(20,000 – 14,000) = $2,300Average tax rate = 2,300/20,000 = 11.5%Married, filing jointly, $40,000 taxable income:Marginal tax rate = 15%Taxes due = 1,400 + (0.15)(40,000 – 14,000) = $5,300Average tax rate =5,300/40,000 = 13.25%Married, filing jointly, $60,000 taxable income:Marginal tax rate = 25%Taxes due = $7,820 + (0.25)($60,000 - $56,800) = $8,620verage tax rate = 8,620/60,000 = 14.37%3. Single with $20,000 taxable income:Marginal tax rate = 15%Taxes due = 700 + (0.15)(20,000 – 7,000) = $2,650Average tax rate = 2,650/20,000 = 13.25%Single with $40,000 taxable income:Marginal tax rate = 25%Taxes due = $3,910 + (0.25)(40,000 - 28,400) = $6,810Average tax rate = 6,810/40,000 = 17.03%Single with $60,000 taxable income:Marginal tax rate = 25%Taxes due = $3,910 + (0.25)(60,000 - 28,400) = $11,810Average tax rate = 11,810/60,000 = 19.68%4.(a). $10,000 invest in 9 percent tax-exempt IRA (assuming annual compounding)In 5 years: $10,000(1 + 0.09)5 = $15,386In 10 years: $10,000(1 + 0.09)10 = $23,67452In 20 years: $10,000(1 + 0.09)20 = $56,044(b). After-tax yield = Before-tax yield (1 - Tax rate)= 0.09(1 - 0.36)= 0.0576 or 5.76%$10,000 invest at 5.76 percent (assuming annual compounding)In 5 years: $10,000(1 + 0.0576)5 = $13,231In 10 years: $10,000(1 + 0.0576)10 = $17,507In 20 years: $10,000(1 + 0.0576)20 = $30,6505.(a). $10,000 invest in 10 percent tax-exempt IRA (assuming annual compounding)In 5 years: $10,000(1 + 0.10)5 = $16,105In 10 years: $10,000(1 + 0.10)10 = $25,937In 20 years: $10,000(1 + 0.10)20 = $67,275(b). After-tax yield = Before-tax yield (1 - Tax rate)= 0.10(1 - .15)= 0.085 or 8.50%$10,000 invest at 8.50 percent (assuming annual compounding)In 5 years: $10,000(1 + 0.10)5 = $15,037In 10 years: $10,000(1 + 0.10)10 = $22,610In 20 years: $10,000(1 + 0.10)20 = $51,12053Chapter 5Answers to Spreadsheet Exercises1.(a)Amount Interest Time FV2000 0.08 10 $4,317.855000 0.075 20 $21,239.2610000 0.1 25 $108,347.06(b)Amount Interest Time FV1000 0.1 20 $57,275.002000 0.06 15 $46,551.945000 0.085 25 $393,338.96(c)FV Interest Time Savings100000 0.07 17 $3,242.521000000 0.09 35 $4,635.84500000 0.11 25 $4,370.122.RegularIRAIRA Roth5000.00Contribution 5000.00Tax savings 1250.00 0.00Total Invested 6250.00 5000.00Current tax rate 0.25 0.25Tax rate at0.15retirement 0.15Time Horizon 25.00 25.000.12Rate 0.12FV Contribution 88877.42 88877.42FV Tax savings 11155.87Total Pre tax 100033.29Total after tax 86701.68 88877.42Retirement tax rate = 10%. After 25 years Regular IRA = $91,146. Roth IRA = $88,877Retirement tax rate = 15%. After 25 years Regular IRA = $86,702. Roth IRA = $88,87754Retirement tax rate = 25%. After 25 years Regular IRA = $77,814. Roth IRA = $88,877Retirement tax rate = 28%. After 25 years Regular IRA = $75,148. Roth IRA = $88,877Retirement tax rate = 33%. After 25 years Regular IRA = $77,704. Roth IRA = $88,8773. Student Exercise4.Interest rate 6%Withdrawalrate 8%Year PrincipaloutflowBalance0 $500,000.0$40,000.0$460,000.01 $487,600.0$39,008.0$448,592.02 $475,507.52$38,040.6$437,466.923 $463,714.93$37,097.19$426,617.744 $452,214.8$36,177.18$416,037.625 $440,999.88$35,279.99$405,719.896 $430,063.08$34,405.05$395,658.037 $419,397.51$33,551.8$385,845.718 $408,996.46$32,719.72$376,276.749 $398,853.34$31,908.27$366,945.0810 $388,961.78$31,116.94$357,844.8411 $379,315.53$30,345.24$348,970.2912 $369,908.5$29,592.68$340,315.82135556$360,734.77 $28,858.78 $331,875.99 14$351,788.55 $28,143.08$323,645.47 15$343,064.19 $27,445.14$315,619.06 16$334,556.20 $26,764.5$307,791.71 17$326,259.21 $26,100.74$300,158.47 18$318,167.98 $25,453.44$292,714.54 19$310,277.41 $24,822.19$285,455.22 20$302,582.53 $24,206.6$278,375.93 21$295,078.49 $23,606.28$271,472.21 22$287,760.54 $23,020.84$264,739.70 23$280,624.08 $22,449.93$258,174.15 24$273,664.60 $21,893.17$251,771.43 25$266,877.72 $21,350.22$245,527.55.Assume immediate loss of15%Interest rate 6% Withdrawal rate 8%Year PrincipaloutflowBalance 0 $500,000.00 $40,000.00$391,000.001 $414,460.00 $33,156.80$381,303.2572 $404,181.39 $32,334.51$371,846.883 $394,157.69 $31,532.62$362,625.084 $384,382.58 $30,750.61$353,631.98 5 $374,849.89 $29,987.99$344,861.90 6 $365,553.62 $29,244.29$336,309.33 7 $356,487.89 $28,519.03$327,968.868 $347,646.99 $27,811.76$319,835.239 $339,025.34 $27,122.03$311,903.3210 $330,617.51 $26,449.40$304,168.1111 $322,418.20 $25,793.46$296,624.74 12 $314,422.23 $25,153.78$289,268.45 13 $306,624.56 $24,529.96$282,094.59 14 $299,020.27 $23,921.62$275,098.65 15 $291,604.57 $23,328.37$268,276.216 $284,372.77 $22,749.82$261,622.9517 $277,320.33 $22,185.63$255,134.70 18 $270,442.78 $21,635.42$248,807.36 19 $263,735.80 $21,098.86$242,636.9584 20 $257,195.15 $20,575.61$236,619.5421 $250,816.71 $20,065.34$230,751.38 22 $244,596.46 $19,567.72$225,028.74 23 $238,530.47 $19,082.44$219,448.03 24 $232,614.91 $18,609.19$214,005.7225 $226,846.06 $18,147.68$208,698.386.Cap. Gain Incom eTotal TotalCap. Gain Income after tax after tax after tax beforetaxInitial Investment $ 10,000 Stocks 50% $ 5,000 8.00% 2.00% 6.56% 1.50% 8.06% 10.00%Bonds 50% $ 5,000 7.00% 5.25% 5.25% 7.00% Tax on CG 18% Tax on income25%Time 10 20 30 FV Stocks (taxable) $10,854.75 $23,565.10 $51,158.63FV Stocks (tax def) $12,968.71 $33,637.50 $87,247.01FV Stocks after tax $10,634.34 $27,582.75 $71,542.55FV Bonds (taxable) $8,340.48 $13,912.72 $23,207.76FV Bonds (tax def) $9,835.76 $19,348.42 $38,061.28FV Bonds after tax $8,065.32 $15,865.71 $31,210.25For longer time horizons you are better off putting stocks and bonds in the tax deferred account.59。

Fin-Acctg7-SM-Ch05

284
Financial Accounting 7/e Solutions Manual
(5-10 min.)
S 5-8
(a) Accounts Receivable……………………….. 400,000 Sales Revenue……………………………. 400,000 (b) Cash……………………………………………. 410,000 Accounts Receivable……………………. 410,000 (c) Allowance for Uncollectible Accounts….. Accounts Receivable……………………. (d) Uncollectible-Account Expense………….. Allowance for Uncollectible Accounts.. 7,000 7,000 9,000 9,000
(10 min.) 1. Interest for: 20X7 ($100,000 × .09 × 8/12)………………. 20X8 ($100,000 × .09)………………………. 20X9 ($100,000 × × 4/12)……………….
S 5-11
$6,000 9,000 3,000
Chapter 5
Short-Term Investments and Receivables
Short Exercises
(5 min.)
S 5-1
1. A trading investment is always a current asset because the investor intends to sell the trading investment in the very near future — days, weeks, or only a few months. A current asset is to be sold within one year or within the company’s operating cycle if longer than a year. 2. Trading investments are reported at their current market value.

Corporate Finance 第7版答案Ch004

Chapter 4: Net Present Value4.1 a. Future Value = C0 (1+r)T= $1,000 (1.05)10 = $1,628.89b. Future Value = $1,000 (1.07)10 = $1,967.15c. Future Value = $1,000 (1.05)20 = $2,653.30d.Because interest compounds on interest already earned, the interest earned in part (c),$1,653.30 (=$2,653.30 - $1,000) is more than double the amount earned in part (a),$628.89 (=$1,628.89).4.2 The present value, PV, of each cash flow is simply the amount of that cash flow discounted backfrom the date of payment to the present. For example in part (a), discount the cash flow in year 7 by seven periods, (1.10)7.a. PV(C7) = C7 / (1+r)7= $1,000 / (1.10)7= $513.16b. PV(C1) = $2,000 / 1.10 = $1,818.18c. PV(C8) = $500 / (1.10)8= $233.254.3The decision involves comparing the present value, PV, of each option. Choose the option withthe highest PV. Since the first cash flow occurs 0 years in the future, or today, it does not need to be adjusted.PV(C0) = $1,000Since the second cash flow occurs 10 years in the future, it must be discounted back 10 years ateight percent.PV(C10) = C10 / (1+r)10= $2,000 / (1.08)10= $926.39Since the present value of the cash flow occurring today is higher than the present value of the cash flow occurring in year 10, you should take the $1,000 now.4.4Since the bond has no interim coupon payments, its present value is simply the present value ofthe $1,000 that will be received in 25 years. Note that the price of a bond is the present value of its cash flows.P0= PV(C25)= C25 / (1+r)25= $1,000 / (1.10)25= $92.30The price of the bond is $92.30.4.5The future value, FV, of the firm’s investment must equal the $1.5 million pension liability.FV = C0 (1+r)27To solve for the initial investment, C0, discount the future pension liability ($1,500,000) back 27years at eight percent, (1.08)27.$1,500,000 / (1.08)27= C0= $187,780.23The firm must invest $187,708.23 today to be able to make the $1.5 million payment.4.6The decision involves comparing the present value, PV, of each option. Choose the option withthe highest PV.a. At a discount rate of zero, the future value and present value of a cash flow are alwaysthe same. There is no need to discount the two choices to calculate the PV.PV(Alternative 1) = $10,000,000PV(Alternative 2) = $20,000,000Choose Alternative 2 since its PV, $20,000,000, is greater than that of Alternative 1,$10,000,000.b.Discount the cash flows at 10 percent. Discount Alternative 1 back one year andAlternative 2, five years.PV(Alternative 1) = C / (1+r)= $10,000,000 / (1.10)1= $9,090,909.10PV(Alternative 2) = $20,000,000 / (1.10)5= $12,418,426.46Choose Alternative 2 since its PV, $12,418,426.46, is greater than that of Alternative1, $9,090,909.10.c.Discount the cash flows at 20 percent. Discount Alternative 1 back one year andAlternative 2, five years.PV(Alternative 1) = C / (1+r)= $10,000,000 / (1.20)1= $8,333,333.33PV(Alternative 2) = $20,000,000 / (1.20)5= $8,037,551.44Choose Alternative 1 since its PV, $8,333,333.33, is greater than that of Alternative 2,$8,037,551.44.d.You are indifferent when the PVs of the two alternatives are equal.Alternative 1, discounted at r= Alternative 2, discounted at r$10,000,000 / (1+r)1= $20,000,000 / (1+r)5Solve for the discount rate, r, at which the two alternatives are equally attractive.[1 / (1+r)1] (1+r)5= $20,000,000 / $10,000,000(1+r)4= 21+r = 1.18921r = 0.18921 = 18.921%The two alternatives are equally attractive when discounted at 18.921 percent. 4.7The decision involves comparing the present value, PV, of each offer. Choose the offer with thehighest PV.Since the Smiths’ payment occurs immediatel y, its present value does not need to be adjusted.PV(Smith) = $115,000The Joneses’ offer occurs three years from today. Therefore, the payment must be discountedback three periods at 10 percent.PV(Jones) = C3 / (1+r)3= $150,000 / (1.10)3= $112,697.22Since the PV of the Joneses’ offer, $112,697.22, is less than the Smiths’ offer, $115,000, you should choose the Smiths’ offer.4.8 a. Since the bond has no interim coupon payments, its present value is simply the presentvalue of the $1,000 that will be received in 20 years. Note that the price of the bond isthis present value.P0= PV(C20)= C20 / (1+r)20= $1,000 / (1.08)20= $214.55The current price of the bond is $214.55.b.To find the bond’s price 10 years from today, find t he future value of the current price.P10 = FV10= C0 (1+r)10= $214.55 (1.08)10= $463.20The bond’s price 10 years from today will be $463.20.c.To find the bond’s price 15 years from today, find the future value of the current price.P15= FV15= C0 (1+r)15= $214.55 (1.08)15= $680.59The bond’s price 15 years from today will be $680.59.4.9Ann Woodhouse would be willing to pay the present value of its resale value.PV = $5,000,000 / (1.12)10= $1,609,866.18The most she would be willing to pay for the property is $1,609,866.18.4.10 a. Compare the cost of the investment to the present value of the cash inflows. You shouldmake the investment only if the present value of the cash inflows is greater than the costof the investment. Since the investment occurs today (year 0), it does not need to bediscounted.PV(Investment) = $900,000PV(Cash Inflows) = $120,000 / (1.12) + $250,000 / (1.12)2 + $800,000 / (1.12)3= $875,865.52Since the PV of the cash inflows, $875,865.52, is less than the cost of the investment,$900,000, you should not make the investment.b.The net present value, NPV, is the present value of the cash inflows minus the cost of theinvestment.NPV = PV(Cash Inflows) – Cost of Investment= $875,865.52 – $900,000= -$24,134.48The NPV is -$24,134.48.c.Calculate the PV of the cash inflows, discounted at 11 percent, minus the cost of theinvestment. If the NPV is positive, you should invest. If the NPV is negative, youshould not invest.NPV = PV(Cash Inflows) – Cost of Investment= $120,000 / (1.11) + $250,000 / (1.11)2 + $800,000 / (1.11)3 – $900,000= -$4,033.18Since the NPV is still negative, -$4,033.18, you should not make the investment. 4.11Calculate the NPV of the machine. Purchase the machine if it has a positive NPV. Do notpurchase the machine if it has a negative NPV.Since the initial investment occurs today (year 0), it does not need to be discounted.PV(Investment) = -$340,000Discount the annual revenues at 10 percent.PV(Revenues) = $100,000 / (1.10) + $100,000 / (1.10)2 + $100,000 / (1.10)3 +$100,000 / (1.10)4 + $100,000 / (1.10)5= $379,078.68Since the maintenance costs occur at the beginning of each year, the first payment is notdiscounted. Each year thereafter, the maintenance cost is discounted at an annual rate of 10percent.PV(Maintenance) = -$10,000 - $10,000 / (1.10) - $10,000 / (1.10)2 - $10,000 / (1.10)3–$10,000 / (1.10)4= -$41,698.65NPV = PV(Investment) + PV(Cash Flows) + PV(Maintenance)= -$340,000 + $379,078.68 - $41,698.65= -$2,619.97Since the NPV is negative, -$2,619.97, you should not buy the machine.To find the NPV of the machine when the relevant discount rate is nine percent, repeat the above calculations, with a discount rate of nine percent.PV(Investment) = -$340,000Discount the annual revenues at nine percent.PV(Revenues) = $100,000 / (1.09) + $100,000 / (1.09)2 + $100,000 / (1.09)3 +$100,000 / (1.09)4 + $100,000 / (1.09)5= $388,965.13Since the maintenance costs occur at the beginning of each year, the first payment is notdiscounted. Each year thereafter, the maintenance cost is discounted at an annual rate of ninepercent.PV(Maintenance) = -$10,000 - $10,000 / (1.09) - $10,000 / (1.09)2 - $10,000 / (1.09)3–$10,000 / (1.09)4= -$42,397.20NPV = PV(Investment) + PV(Cash Flows) + PV(Maintenance)= -$340,000 + $388,965.13 - $42,397.20= $6,567.93Since the NPV is positive, $6,567.93, you should buy the machine.4.12 a. The NPV of the contract is the PV of the item’s revenue minus its cost.PV(Revenue) = C5 / (1+r)5= $90,000 / (1.10)5= $55,882.92NPV = PV(Revenue) – Cost= $55,882.92 - $60,000= -$4,117.08The NPV of the item is -$4,117.08.b.The firm will break even when the item’s NPV is equal to zero.NPV = PV(Revenues) – Cost= C5 / (1+r)5– Cost$0 = $90,000 / (1+r)5 - $60,000r = 0.08447 = 8.447%The firm will break even on the item with an 8.447 percent discount rate.4.13Compare the PV of your aunt’s offer with your roommate’s offer. Choose the offer with thehighest PV. The PV of your aunt’s offer is the sum of her payment to you and the benefit fromowning the car an additional year.PV(Aunt) = PV(Trade-In) + PV(Benefit of Ownership)= $3,000 / (1.12) + $1,000 / (1.12)= $3,571.43Since your roommate’s offer occurs today (year 0), it does not need to be discounted.PV(Roommate) = $3,500Since the PV of your aunt’s offer, $3,571.43, is higher than your roommate’s offer, $3,500,you sh ould accept your aunt’s offer.4.14The cost of the car 12 years from today will be $80,000. To find the rate of interest such that your$10,000 investment will pay for the car, set the FV of your investment equal to $80,000.FV = C0 (1+r)12$80,000 = $10,000 (1+r)12Solve for the interest rate, r.8 = (1+r)120.18921 = rThe interest rate required is 18.921%.4.15The deposit at the end of the first year will earn interest for six years, from the end of year 1 to theend of year 7.FV = $1,000 (1.12)6= $1,973.82The deposit at the end of the second year will earn interest for five years.FV = $1,000 (1.12)5= $1,762.34The deposit at the end of the third year will earn interest for four years.FV = $1,000 (1.12)4= $1,573.52The deposit at the end of the fourth year will earn interest for three years.FV = $1,000 (1.12)3= $1,404.93Combine the values found above to calculate the total value of the account at the end of theseventh year:FV = $1,973.82 + $1,762.34 + $1,573.52 + $1,404.93= $6,714.61The value of the account at the end of seven years will be $6,714.61.4.16To find the future value of the investment, convert the stated annual interest rate of eight percentto the effective annual yield, EAY. The EAY is the appropriate discount rate because it captures the effect of compounding periods.a.With annual compounding, the EAY is equal to the stated annual interest rate.FV = C0 (1+ EAY)T= $1,000 (1.08)3= $1,259.71The future value is $1,259.71.b.Calculate the effective annual yield (EAY), where m denotes the number of compoundingperiods per year.EAY = [1 + (r/m)]m– 1= [1 + (0.08 / 2)]2– 1= 0.0816Apply the future value formula, using the EAY for the interest rate.FV = C0 [1+EAY] 3= $1,000 (1 + 0.0816)3= $1,265.32The future value is $1,265.32.c.Calculate the effective annual yield (EAY), where m denotes the number of compoundingperiods per year.EAY = [1 + (r/m)]m– 1= [1 + (0.08 / 12)]12– 1= 0.083Apply the future value formula, using the EAY for the interest rate.FV = C0 (1+ EAY)3= $1,000 (1 + 0.083)3= $1,270.24The future value is $1,270.24.d.Continuous compounding is the limiting case of compounding. The EAY is calculated asa function of the constant, e, which is approximately equal to 2.718.FV = C0⨯ e rT= $1,000 ⨯ e0.08⨯3= $1,271.25The future value is $1,271.25.e. The future value of an investment increases as the compounding period shortens becauseinterest is earned on previously accrued interest payments. The shorter the compoundingperiod, the more frequently interest is paid, resulting in a larger future value.4.17Continuous compounding is the limiting case of compounding. The future value is a function ofthe constant, e, which is approximately equal to 2.718.a. FV = C0⨯ e rT= $1,000 ⨯ e0.12⨯5= $1,822.12The future value is $1,822.12.b. FV = $1,000 ⨯ e0.10⨯3= $1,349.86The future value is $1,349.86.c. FV = $1,000 ⨯ e0.05⨯10= $1,648.72The future value is $1,648.72.d. FV = $1,000 ⨯ e0.07⨯8= $1,750.67The future value is $1,750.67.4.18Convert the stated annual interest rate to the effective annual yield, EAY. The EAY is theappropriate discount rate because it captures the effect of compounding periods. Next, discountthe cash flow at the EAY.EAY = [1+(r / m)]m– 1= [1+(0.10 / 4)]4– 1= 0.10381Discount the cash flow back 12 periods.PV(C12) = C12 / (1+EAY)12= $5,000 / (1.10381)12= $1,528.36The problem could also have been solved in a single calculation:PV(C12) = C T / [1+(r / m)]mT= $5,000 / [1+(0.10 / 4)]4 12= $1,528.36The PV of the cash flow is $1,528.36.4.19Deposit your money in the bank that offers the highest effective annual yield, EAY. The EAY isthe rate of return you will receive after taking into account compounding. Convert each bank’sstated annual interest rate into an EAY.EAY(Bank America) = [1+(r / m)]m– 1= [1+(0.041 / 4)]4– 1= 0.0416 = 4.16%EAY(Bank USA) = [1+(r / m)]m– 1= [1+(0.0405 / 12)]12– 1= 0.0413 = 4.13%You should deposit your money in Bank America since it offers a higher EAY (4.16%) than Bank USA offers (4.13%).4.20The price of any bond is the present value of its coupon payments. Since a consol pays the samecoupon every year in perpetuity, apply the perpetuity formula to find the present value.PV = C1 / r= $120 / 0.15= $800The price of the consol is $800.4.21 a. Apply the perpetuity formula, discounted at 10 percent.PV = C1 / r= $1,000 / 0.1= $10,000The PV is $10,000.b.Remember that the perpetuity formula yields the present value of a stream of cash flowsone period before the initial payment. Therefore, applying the perpetuity formula to astream of cash flows that begins two years from today will generate the present value ofthat perpetuity as of the end of year 1. Next, discount the PV as of the end of 1 year backone year, yielding the value today, year 0.PV = [C2 / r] / (1+r)= [$500 / 0.1] / (1.1)= $4,545.45The PV is $4,545.45.c.Applying the perpetuity formula to a stream of cash flows that begins three years fromtoday will generate the present value of that perpetuity as of the end of year 2. Thus, usethe perpetuity formula to find the PV as of the end of year 2. Next, discount that valueback two years to find the value today, year 0.PV = [C3 / r] / (1+r)2= [$2,420 / 0.1] / (1.1)2= $20,000The PV is $20,000.4.22Applying the perpetuity formula to a stream of cash flows that starts at the end of year 9 willgenerate the present value of that perpetuity as of the end of year 8.PV8= [C9 / r]= [$120 / 0.1]= $1,200To find the PV of the cash flows as of the end of year 5, discount the PV of the perpetuity as of the end of year 8 back three years.PV5= PV8 / (1+r)3= $1,200 / (1.1)3= $901.58The PV as of the end of year 5 is $901.58.4.23Use the growing perpetuity formula. Since Harris Inc.’s last dividend was $3, the next dividend(occurring one year from today) will be $3.15 (= $3 1.05). Do not take into account thedividend paid yesterday.PV = C1 / (r – g)= $3.15 / (0.12 – 0.05)= $45The price of the stock is $45.4.24Use the growing perpetuity formula to find the PV of the dividends. The PV is the maximum youshould be willing to pay for the stock.PV = C1 / (r – g)= $1 / (0.1 – 0.04)= $16.67The maximum you should pay for the stock is $16.67.4.25The perpetuity formula yields the present value of a stream of cash flows one period before theinitial payment. Apply the growing perpetuity formula to the stream of cash flows beginning two years from today to calculate the PV as of the end of year 1. To find the PV as of today, year 0,discount the PV of the perpetuity as of the end of year 1 back one year.PV = [C2 / (r – g)] / (1+r)= [$200,000 / (0.1 – 0.05)] / (1.1)= $3,636,363.64The PV of the technology is $3,636,363.64.4.26Barrett would be indifferent when the NPV of the project is equal to zero. Therefore, set the netpresent val ue of the project’s cash flows equal to zero. Solve for the discount rate, r.NPV = Initial Investment + Cash Flows0 = -$100,000 + $50,000 / r0.5= rThe discount rate at which Barrett is indifferent to the project is 50%.4.27Because the cash flows occur quarterly, they must be discounted at the rate applicable for a quarterof a year. Since the stated annual interest rate is given in terms of quarterly periods, and thepayments are given in terms of quarterly periods, simply divide the stated annual interest rate byfour to calculate the quarterly interest rate.Quarterly Interest Rate = Stated Annual Interest Rate / Number of Periods= 0.12 / 4= 0.03 = 3%Use the perpetuity formula to find the PV of the security’s cash flows.PV = C1 / r= $10 / 0.03= $333.33The price of the security is $333.33.4.28The two steps involved in this problem are a) calculating the appropriate discount rate and b)calculating the PV of the perpetuity.Since the payments occur quarterly, the cash flows must be discounted at the interest rate applicable for a quarter of a year.Quarterly Interest Rate = Stated Annual Interest Rate / Number of Periods= 0.15 / 4= 0.0375 = 3.75%Remember that the perpetuity formula provides the present value of a stream of cash flows oneperiod before the initial payment. Therefore, applying the perpetuity formula to a stream of cashflows that begins 20 periods from today will generate the present value of that perpetuity as of the end of period 19. Next, discount that value back 19 periods, yielding the price today, year 0.PV= [C20 / r] / (1+r)19= [$1 / 0.0375] / (1.0375)19= $13.25The price of the stock is $13.25.4.29Calculate the NPV of the asset. Since the cash inflows form an annuity, you can use the presentvalue of an annuity factor. The annuity factor is referred to as A T r, where T is the number ofpayments and r is the interest rate.PV(Investment) = -$6,200PV(Cash Inflows) = C A T r= $1,200 A80.1= $6,401.91The NPV of the asset is the sum of the initial investment (-$6,200) and the PV of the cash inflows ($6,401.91).NPV = -Initial Investment + Cash Flows= -$6,200 + $6,401.91= $201.91Since the asset has a positive NPV, $201.91, you should buy it.4.30There are 20 payments for an annuity beginning in year 3 and ending in year 22. Apply theannuity formula to this stream of 20 annual payments.PV(End of Year 2) = C A T r= $2,000 A200.08= $19,636.29Since the first cash flow is received at the end of year 3, applying the annuity formula to the cash flows will yield the PV as of the end of year 2. To find the PV as of today, year 0, discount thatamount back two years.PV(Year 0) = PV(End of Year 2) / (1+r)T= $19,636.29 / (1.08)2= $16,834.95The PV of the cash flows is $16,834.95.4.31There are 15 payments for an annuity beginning in year 6 and ending in year 20. Apply theannuity formula to this stream of 15 annual payments.PV(End of Year 5) = C A T r= $500 A150.15= $2,923.69Since the first cash flow is received at the end of year 6, applying the annuity formula to the cash flows will yield the PV as of the end of year 5. To find the PV as of today, year 0, discount thatamount back five years at 12 percent.PV(Year 0) = PV(End of Year 5)/ (1.12)5= $2,923.69 / (1.12)5= $1,658.98The PV of the annuity is $1,658.98.4.32Set the price of the note equal to the present value of the annuity of $2,000 per year.P = C A T r$12,800 = $2,000 A10rThe problem can be solved by using a calculator to find the appropriate discount rate.6.4= A10r0.090626= rThe problem can also be solved by using table A.2 in the back of the textbook. In table A.2, scanacross the row for 10-year annuity factors until one approximates 6.4. 6.4177, corresponding to arate of 9%, is close to the above factor, 6.4. Thus, the rate received is slightly more than 9%.The rate received is 9.0626%.4.33 a. To calculate the necessary annual payments, first find the PV of the $25,000 which youwill need in five years.PV = C5 / (1+r)5= $25,000 / (1.07)5= $17,824.65Next, compute the annuity that will yield the same PV as calculated above. Solve for thedeposit you will make each year.PV = C A T r$17,824.65= C A50.07$17,824.65 / A50.07= $4,347.27Depositing $4,347.27 into the 7% account each year will provide $25,000 five yearsfrom today.b.The lump sum payment must be the present value of the $25,000 you will need five yearsfrom today.PV = C5 / (1+r)5= $25,000 / (1.07)5= $17,824.65You must deposit $17,824.65 as a lump sum to have $25,000 in the account at theend of five years.4.34First, determine the balance of the loan Nancy must pay.Balance = $120,000 (0.85)= $102,000Apply the annuity formula since Nancy will pay the balance of the loan in 20 equal, end-of-year,payments. Set the present value of the annuity equal to the balance of the loan. Solve for theannual payment, C.Balance = C A T r$102,000 = C A200.1$102,000 / A200.1= C$11,980.88= CThe equal installments are $11,980.88.4.35 a. The cash flows form a 31-year annuity where the first payment is received today.Remember to use the after-tax cash flows. The first payment of a standard annuity isreceived one year from today. Therefore, value all after-tax cash flows except thefirst after-tax payment using the standard annuity formula. Then add back the firstafter-tax payment to obtain the value of the option. Since the first payment is treatedseparately from the other payments, the annuity has 30 periods instead of 31 periods.PV = (1 – T c) C1 A T r + (1 – T c) C0= (1 – 0.28) $160,000 A300.1 + (1 – 0.28) $160,000= $1,201,180.55b.This option pays $446,000, after-tax, immediately. The remaining money is received as a30-year annuity that pays $101,055, annually before tax. Find the PV of the annuity,discounted at 10 percent. Remember to apply taxes to the annuity.PV = (1 – T c) C1 A T r + C0= (1 – 0.28) $101,055 A300.1 + $446,000= $1,131,898.53Choose the first option with a PV of $1,201,180.55 since it has a higher PV than the secondoption, $1,131.898.53.4.36First, use the standard annuity formula to compute the present value of all the payments you mustmake for each of your children’s educations.PV(Each Child’s Education) = C A T r= $21,000 A40.15= $59,954.55The annuity formula values any annuity as of one year before the first cash flow. Since the firstpayment for each child is made when the child enters college, the above value represents the cost of the older child’s education 14 years from now and of the younger child’s education 16 yearsfrom now. To find the PV of the children’s education at year 0, discount the above PV back 14years and 16 years for both the older and younger child, respectively.PV(Older Child) = PV(Education) / (1+r)14= $59,954.55 / (1.15)14= $8,473.30PV(Younger Child) = $59,954.55 / (1.15)16= $6,407.03PV(Total Cost) = PV(Older Child)+ PV(Younger Child)= $8,473.30 + $6,407.03= $14,880.32You will make 15 payments, since your first payment is made one year from today and the lastpayment is made when your first child enters college, 15 years from now. To find the amount ofeach payment, set the total PV of the childre n’s education costs equal to a 15-year annuity,discounted at 15 percent. Solve for the annual payment, C.PV(Total Cost) = C A T r$14,880.32 = C A150.15$14,880.32 / A150.15= C$2,544.79 = CThe annual payment that will allow you to pay for the total cost of your children’s collegeeducations in 15 years is $2,544.79.4.37To determine whether or not the policy is worth buying, calculate the NPV of the policy. Theparent’s six payments are cash outflows and the insurance company’s payment is a cash inflow.The PV of the parent’s payments can be calculated by applying the annuity formula, discounted at six percent, to both the first three payments (each $750) and the last three payments (each $800).PV(First 3 Payments) = C1 A T r= -$750 A30.06= -$2,004.76The annuity formula calculates the PV as of one period prior to the first cash flow. Since the first$800 payment occurs four years from today, the PV of the annuity of the last three payments mustbe discounted back three years.PV(Last 3 Payments) = [C4 A T r] / (1+r)3= [-$800 A30.06] / (1.06)3= -$1,795.45Discount the insurance company’s payment back 65 years. Take note that the discount rate is sixpercent for years 1 through 6 and seven percent for years 7 through 65.PV(Insurance Payment) = C65 / [(1+r)Year 1 - 6 (1+r)Year 7 – 65]= $250,000 / [(1.06)6 (1.07)59]= $3,254.33NPV = PV(First3 Payments) + PV(Last 3 Payments) + PV(Insurance Payment)= -$2,004.76 + -$1,795.45 + $3,254.33= -$545.88Since the NPV of the policy is negative, -$545.88, it is not worth buying.4.38Calculate the present value of the lease offer. An annuity in advance is a stream of cash flowsbeginning today. Since the annual lease payments form an annuity in advance, value all payments except the one made today using the standard annuity formula. Add back the payment made today.The immediate payment is not discounted because it occurs today, year 0. Because the firstpayment is treated separately, the annuity has nine periods instead of 10 periods.PV(Payments) = C0 + C1 A T r= -$15,000 + -$15,000 A90.08= -$108,703.32PV(Purchase Option) = C T / (1+r)T= -$25,000 / (1.08)10= -$11,579.84PV(Lease) = PV(Payments) + PV(Purchase Option)= -$108,703.32 - $11,579.84= -$120,283.16Since the PV of the lease offer is greater than $120,000, the cost of the machine, you shouldnot accept the offer.4.39Remember that your salary grows by four percent each year, and you just received a $50,000salary payment. Thus, your salary next year will be $52,000 (=$50,000 1.04). Two percent ofnext year’s salary will be deposited into the account.C = (Last Year’s Salary) (1+g) (Percent Deposited)= ($50,000) (1.04) (0.02)= $1,040.00Since your salary will continue to grow at four percent annually, your deposits will also grow at this rate. Apply the growing annuity formula, discounted at eight percent, to calculate the PV of your retirement account. PV = C GA T r,g * = $1,040.00 GA 400.08, 0.04 = $20,254.12To determine how much will be in the account at your retirement in 40 years, calculate the future value.FV = PV (1+r)T= $20,254.12 (1.08)40 = $440,011.02At the time of your retirement, the account will have $440,011.02.The notation GA T r, g represents a growing annuity consisting of T payments growing at a rate of g per payment, discounted at r .4.40Discount the individual cash flows to compute the NPV of the project. The cash flow, C 0, is the initial investment.PV(C 0) = -$5,000PV(C 1) = $700 / (1.1) = $636.36PV(C 2) = $900 / (1.1)2 = $743.80PV(C 3) = $1,000 / (1.1)3 = $751.32PV(C 4) = $1,000 / (1.1)4 = $683.01PV(C 5) = $1,000 / (1.1)5 = $620.92PV(C 6) = $1,000 / (1.1)6 = $564.47PV(C 7) = $1,250 / (1.1)7 = $641.45PV(C 8) = $1,375 / (1.1)8 = $641.45NPV = -$5,000 + $636.36 + $743.80 + $751.32 + $683.01 + $620.92 + $564.47 +$641.45 + $641.45= $282.78Purchase the machine since it has a positive NPV.4.41 a. Engineer:Apply the annuity formula, discounted at five percent, to calculate the PV of his undergraduate education.PV(Undergraduate) = C A T r= -$12,000 A 40.05 = -$42,551.41To find the PV of his practical experience in years 5 and 6, discount the two cash flows by five years and six years, respectively.PV(Experience) = $20,000 / (1.05)5 + $25,000 / (1.05)6= $34,325.90 Discount the corresponding two cash flows for the master’s degree by seven years andeight years.。

Corporate Finance 第7版答案Ch017

Chapter 17: Valuation and Capital Budgeting for the Levered Firm17.1 a. The maximum price that Hertz should be willing to pay for the fleet of cars with all-equity fundingis the price that makes the NPV of the transaction equal to zero.NPV = -Purchase Price + PV[(1- T C )(Earnings Before Taxes and Depreciation)] +PV(Depreciation Tax Shield)Let P equal the purchase price of the fleet.NPV = -P + (1-0.34)($100,000)A50.10 + (0.34)(P/5)A50.10Set the NPV equal to zero.0 = -P + (1-0.34)($100,000)A50.10 + (0.34)(P/5)A50.10P = $250,191.93 + (P)(0.34/5)A50.10P = $250,191.93 + 0.2578P0.7422P = $250,191.93P = $337,095Therefore, the most that Hertz should be willing to pay for the fleet of cars with all-equityfunding is $337,095.b. The adjusted present value (APV) of a project equals the net present value of the project if it werefunded completely by equity plus the net present value of any financing side effects. In Hertz’scase, the NPV of financing side effects equals the after-tax present value of the cash flowsresulting from the firm’s debt.APV = NPV(All-Equity) + NPV(Financing Side Effects)NPV(All-Equity)NPV = -Purchase Price + PV[(1- T C )(Earnings Before Taxes and Depreciation)] +PV(Depreciation Tax Shield)Hertz paid $325,000 for the fleet of cars. Because this fleet will be fully depreciated over fiveyears using the straight-line method, annual depreciation expense equals $65,000 (= $325,000/5).NPV = -$325,000 + (1-0.34)($100,000)A50.10 + (0.34)($65,000)A50.10= $8,968NPV(Financing Side Effects)The net present value of financing side effects equals the after-tax present value of cash flowsresulting from the firm’s debt.NPV(Financing Side Effects) = Proceeds – After-Tax PV(Interest Payments) – PV(PrincipalPayments)Given a known level of debt, debt cash flows should be discounted at the pre-tax cost of debt (r B),8%.NPV(Financing Side Effects) = $200,000 – (1 – 0.34)(0.08)($200,000)A50.08– [$200,000/(1.08)5]= $21,720APVAPV = NPV(All-Equity) + NPV(Financing Side Effects)= $8,968 + $21,720= $30,688Therefore, if Hertz uses $200,000 of five-year, 8% debt to fund the $325,000 purchase, theAdjusted Present Value (APV) of the project is $30,688.17.2 The adjusted present value of a project equals the net present value of the project under all-equityfinancing plus the net present value of any financing side effects. In Gemini’s case, the NPV offinancing side effects equals the after-tax present value of the cash flows resulting fr om the firm’sdebt.APV = NPV(All-Equity) + NPV(Financing Side Effects)NPV(All-Equity)NPV = -Initial Investment + PV[(1-T C)(Earnings Before Taxes and Depreciation)] +PV(Depreciation Tax Shield)Since the initial investment of $2.1 million will be fully depreciated over three years using thestraight-line method, annual depreciation expense equals $700,000 (= $2,100,000 / 3).NPV = -$2,100,000 + (1-0.30)($900,000)A30.18 + (0.30)($700,000)A30.18= -$273,611NPV(Financing Side Effects)The net present value of financing side effects equals the after-tax present value of cash flowsresulting from the firm’s debt.NPV(Financing Side Effects) = Proceeds, net of flotation costs – After-Tax PV(InterestPayments) – PV(Principal Payments) + PV(Flotation Cost Tax Shield)Given a known level of debt, debt cash flows should be discounted at the pre-tax cost of debt (r B),12.5%. Since $21,000 in flotation costs will be amortized over the three-year life of the loan,$7,000 = ($21,000 / 3) of flotation costs will be expensed per year.NPV(Financing Side Effects) = ($2,100,000 - $21,000) – (1 – 0.30)(0.125)($2,100,000)A30.125–[$2,100,000/(1.125)3] + (0.30)($7,000)A30.125= $171,532APVAPV = NPV(All-Equity) + NPV(Financing Side Effects)= -$273,611 + $171,532= -$102,079Since the adjusted present value (APV) of the project is negative, Gemini should notundertake the project.17.3 The adjusted present value of a project equals the net present value of the project under all-equityfinancing plus the net present value of any financing side effects.According to Modigliani-Miller Proposition II with corporate taxes:r S = r0 + (B/S)(r0– r B)(1 – T C)where r0= the required return on the equity of an unlevered firmr S= the required return on the equity of a levered firmr B= the pre-tax cost of debtT C= the corporate tax rateB/S = the firm’s debt-to-equity ratioIn this problem:r S= 0.18r B= 0.10T C = 0.40B/S = 0.25Solve for MVP’s unlevered cost of capital (r0):r S= r0 + (B/S)(r0– r b)(1 – T C)0.18 = r0 + (0.25)(r0– 0.10)(1 – 0.40)r0 = 0.17The cost of MVP’s unlevered equity is 17%.APV = NPV(All-Equity) + NPV(Financing Side Effects)NPV(All-Equity)NPV = PV(Unlevered Cash Flows)= -$15,000,000 + $4,000,000/1.17 + $8,000,000/(1.17)2 + $9,000,000/(1.17)3= -$117,753NPV(Financing Side Effects)The net present value of financing side effects equals the after-tax present value of cash flows resulting from the firm’s debt.NPV(Financing Side Effects) = Proceeds– After-Tax PV(Interest Payments) – PV(PrincipalPayments)Y ear1234+ O utstanding D ebt at the Start of the Y ear (B)$6,000,000$4,000,000$2,000,000$0 D ebt Repayment at the E nd of the Y ear$2,000,000$2,000,000$2,000,000$0Given a known level of debt, debt cash flows should be discounted at the pre-tax cost of debt (r B), 10%.NPV(Financing Side Effects) = $6,000,000 – (1 – 0.40)(0.10)($6,000,000) / (1.10) –$2,000,000/(1.10) – (1 – 0.40)(0.10)($4,000,000)/(1.10)2–$2,000,000/(1.10)2– (1 – 0.40)(0.10)($2,000,000)/(1.10)3–$2,000,000/(1.10)3= $410,518APVAPV = NPV(All-Equity) + NPV(Financing Side Effects)= -$117,753 + $410,518= $292,765Since the adjusted present value (APV) of the project is positive, MVP should proceed withthe expansion.17.4 The adjusted present value of a project equals the net present value of the project under all-equityfinancing plus the net present value of any financing side effects. In the joint venture’s case, theNPV of financing side effects equals the after-tax present value of cash flows resulting from thefirms’ debt.APV = NPV(All-Equity) + NPV(Financing Side Effects)NPV(All-Equity)NPV = -Initial Investment + PV[(1 – T C)(Earnings Before Interest, Taxes, and Depreciation )] +PV(Depreciation Tax Shield)Since the initial investment of $20 million will be fully depreciated over five years using thestraight-line method, annual depreciation expense equals $4,000,000 (= $20,000,000/5).NPV = -$20,000,000 + [(1-0.25)($3,000,000)A200.12] + (0.25)($4,000,000)A50.12= $411,024NPV(Financing Side Effects)The NPV of financing side effects equals the after-tax present value of cash flows resulting fromthe firms’ debt.Given a known level of debt, debt cash flows should be discounted at the pre-tax cost of debt (r B),10%.NPV(Financing Side Effects) = Proceeds – After-tax PV(Interest Payments) – PV(PrincipalRepayments)= $10,000,000 – (1 – 0.25)(0.05)($10,000,000)A150.09–[$10,000,000/((1.09)15]= $4,231,861APVAPV = NPV(All-Equity) + NPV(Financing Side Effects)= $411,024 + $4,231,861= $4,642,885The Adjusted Present Value (APV) of the project is $4,642,885.17.5 a. In order to value a firm’s equity using the Flow-to-Equity approach, discount the cash flowsavailable to equity holders at the co st of the firm’s levered equity (r S).O ne Restaurant M ilano Pizza ClubSales$1,000,000$3,000,000Cost of G oods Sold($400,000)($1,200,000)G eneral and Administrative Costs($300,000)($900,000)Interest E xpense($25,650)($76,950)Pre-T ax Income$274,350$823,050T axes at 40%($109,740)($329,220)Cash Flow Available to E quity H olders$164,610$493,830Since this cash flow will remain the same forever, the present value of cash flows available to thefirm’s equity holders is a perpetuity of $493,830, discounted at 21%.PV(Flows-to-Equity) = $493,830 / 0.21= $2,351,571The value of Milano Pizza Club’s equity is $2,351,571.b.The value of a firm is equal to the sum of the market values of its debt and equity.V L = B + SThe market value of Milano Pizza Club’s equity (S) is $2,351,571 (see part a).The problem states that the firm has a debt-to-equity ratio of 30%, which can be writtenalgebraically as:B / S = 0.30Since S = $2,351,571:B / $2,351,571 = 0.30B = $705,471The market value of Milano Pizza Club’s debt is $705,471, and the value of the firm is $3,057,042(= $705,471 + $2,351,571).The value of Milano Pizza Club is $3,057,042.17.6 a. In order to determine the cost of the firm’s debt (r B), solve for the discount rate that makes thepresent value of the bond’s future cash flows equal to the bond’s current price.Since WWI’s one-year, $1,000 par value bonds carry a 7% coupon, bond holders will receive apayment of $1,070 =[$1,000 + (0.07)($1,000)] in one year.$972.73 = $1,070/ (1+ r B)r B = 0.10Therefore, the cost of W WI’s debt is 10%.b. Use the Capital Asset Pricing Model to find the return on WWI’s unlevered equity (r0).According to the Capital Asset Pricing Model:r0 = r f+ βUnlevered(r m– r f)where r0= the cost of a firm’s unlevered equityr f= the risk-free rater m= the expected return on the market portfolioβUnlevered= the firm’s beta under all-equity financingIn this problem:r f= 0.08r m= 0.16βUnlevered = 0.9r0 = r f+ βUnlevered(r m– r f)= 0.08 + 0.9(0.16-0.08)= 0.152The cost of WWI’s unlevered equity is 15.2%.Next, find the cost of WWI’s levered equity.According to Modigliani-Miller Proposition II with corporate taxesr S = r0 + (B/S)(r0– r B)(1 – T C)where r0= the cost of a firm’s unlevered equi tyr S= the cost of a firm’s levered equityr B= the pre-tax cost of debtT C= the corporate tax rateB/S = the firm’s target debt-to-equity ratioIn this problem:r0= 0.152r B= 0.10T C = 0.34B/S = 0.50The cost of WWI’s levered equity is:r S= r0 + (B/S)(r0– r B)(1 – T C)= 0.152 + (0.50)(0.152-0.10)(1 – 0.34)= 0.1692The cost of WWI’s levered equity is 16.92%.c. In a world with corporate taxes, a firm’s weighted average cos t of capital (r wacc) is equal to:r wacc = {B / (B+S)}(1 – T C) r B + {S / (B+S)}r Swhere B / (B+S) = the firm’s debt-to-value ratioS / (B+S) = the firm’s equity-to-value ratior B= the pre-tax cost of debtr S= the cost of equityT C= the corporate tax rateThe problem does not provide either WWI’s debt-to-value ratio or WWI’s equity-to-value ratio.However, the firm’s debt-to-equity ratio of 0.50 is given, which can be written algebraically as:B / S = 0.50Solving for B:B = (0.5 * S)A firm’s debt-to-value ratio is:B / (B+S)Since B = (0.5 * S):WWI’s debt-to-value ratio = (0.5 * S) / { (0.5 * S) + S}= (0.5 * S) / (1.5 * S)= 0.5 / 1.5= 1/3WWI’s deb t-to-value ratio is 1/3.A firm’s equity-to-value ratio is: S / (B+S)Since B = (0.5 * S):WWI’s equity-to-value ratio = S / {(0.5*S) + S}= S / (1.5 * S)= (1 / 1.5)= 2/3WWI’s equity-to-value ratio is 2/3.Thus, in this problem:B / (B+S) = 1/3S / (B+S) = 2/3r B= 0.10r S= 0.1692T C= 0.34r wacc = {B / (B+S)}(1 – T C) r B + {S / (B+S)}r S= (1/3)(1 – 0.34)(0.10) + (2/3)(0.1692)= 0.1348WWI’s weighted average co st of capital is 13.48%.17.7 a. Bolero has a capital structure with three parts: long-term debt, short-term debt, and equity.i. Book Value Weights:T ype of Financing B ook V alue W eight C ostLo ng-term debt$5,000,00025%10%Sho rt-term debt$5,000,00025%8%C o mmo n Sto ck$10,000,00050%15%T o tal$20,000,000100%Since interest payments on both long-term and short-term debt are tax-deductible, multiply thepre-tax costs by (1-T C) to determine the after-tax costs to be used in the weighted average cost ofcapital calculation.r wacc= (Weight LT D)(Cost LTD)(1-T C) + (Weight STD)(Cost STD)(1-T C) + (Weight Equity)(Cost Equity) = (0.25)(0.10)(1-0.34) + (0.25)(0.08)(1-0.34) + (0.50)(0.15)= 0.1047If Bolero uses book value weights, the firm’s weighted average cost of capital would be10.47%.ii.Market Value Weights:Type of Financing Market Value Weight CostLong-term debt $2,000,000 10% 10%Short-term debt $5,000,000 25% 8%Common Stock $13,000,000 65% 15%Total $20,000,000 100%Since interest payments on both long-term and short-term debt are tax-deductible, multiply thepre-tax costs by (1-T C) to determine the after-tax costs to be used in the weighted average cost ofcapital calculation.r wacc= (Weight LT D)(Cost LTD)(1-T C) + (Weight STD)(Cost STD)(1-T C) + (Weight Equity)(Cost Equity) = (0.10)(0.10)(1-0.34) + (0.25)(0.08)(1-0.34) + (0.65)(0.15)= 0.1173If Bole ro uses market value weights, the firm’s weighted average cost of capital would be11.73%.iii.Target Weights:If Bolero has a target debt-to-equity ratio of 100%, then both the target equity-to-value and targetdebt-to-value ratios must be 50%. Since the target values of long-term and short-term debt areequal, the 50% of the capital structure targeted for debt would be split evenly between long-termand short-term debt (25% each).T ype of Financing T arget W eight C ostLo ng-term debt25%10%Sho rt-term debt25%8%C o mmo n Sto ck50%15%T o tal100%Since interest payments on both long-term and short-term debt are tax-deductible, multiply thepre-tax costs by (1-T C) to determine the after-tax costs to be used in the weighted average cost ofcapital calculation.r wacc= (Weight LT D)(Cost LTD)(1-T C) + (Weight STD)(Cost STD)(1-T C) + (Weight Equity)(Cost Equity)= (0.25)(0.10)(1-0.34) + (0.25)(0.08)(1-0.34) + (0.50)(0.15)= 0.1047If Bolero uses target weights, the firm’s weighted average cost of capital would be 10.47%.b. The differences in the WACCs are due to the different weighting schemes. The fir m’s WACCwill most closely resemble the WACC calculated using target weights since future projects will befinanced at the target ratio. Therefore, the WACC computed with target weights should be usedfor project evaluation.17.8 a. In a world with cor porate taxes, a firm’s weighted average cost of capital (r wacc) equals:r wacc = {B / (B+S)}(1 – T C) r B + {S / (B+S)}r Swhere B / (B+S) = the firm’s debt-to-value ratioS / (B+S) = the firm’s equity-to-value ratior B= the pre-tax cost of debtr S= the cost of equityT C= the corporate tax rateThe market value of Neon’s debt is $24 million, and the market value of the firm’s equity is $60million (= 4 million shares * $15 per share).Therefore, Neon’s current debt-to-value ratio is 28.57% [= $24 / ($24 + $60)], and the firm’scurrent equity-to-value ratio is 71.43% [= $60 / ($24 + $60)].Since Neon’s CEO believes its current capital structure is optimal, these values can be used as thetarget weights in the firm’s w eighted average cost of capital calculation.Neon’s bonds yield 11% per annum. Since the yield on a firm’s bonds is equal to its pre-tax costof debt, r B equals 11%.Use the Capital Asset Pricing Model to determine Neon’s cost of equity.According to the Capital Asset Pricing Model:r S = r f+ βEquity(r m– r f)where r S= the cost of a firm’s equityr f= the risk-free rater m- r f = the expected market risk premiumβEquity= the firm’s equity betaβEquity = [Covariance(Stock Returns, Market Returns)] / Variance(Market Returns)The covariance between Neon’s stock returns and returns on the market portfolio is 0.031. Thestandard deviation of market returns is 0.16.The variance of returns is equal to the standard deviation of those returns squared. The variance ofthe returns on the market portfolio is 0.0256 [= (0.16)2].Neon’s equity beta is 1.21 (= 0.031 / 0.0256).The inputs to the CAPM in this problem are:r f= 0.07r m- r f = 0.085βEquity = 1.21r S = r f+ βEquity(r m– r f)= 0.07 + 1.21(0.085)= 0.1729The cost of Neon’s equity (r S) is 17.29%.The inputs for the weighted average cost of capital calculation are:B / (B+S) = 0.2857S / (B+S) = 0.7143r B= 0.11r S= 0.1729T C= 0.34r wacc = {B / (B+S)}(1 – T C) r B + {S / (B+S)}r S= (0.2857)(1 – 0.34)(0.11) + (0.7143)(0.1729)= 0.1442Neon’s weighted average cost of capital is 14.42%,Use the weighted average cost of capital to discount Neon’s expect ed unlevered cash flows.NPV = -$27,500,000 + $9,000,000A50.1442= $3,088,379Since the NPV of the equipment is positive, Neon should make the purchase.b. The weighted average cost of capital used in part a will not change if the firm chooses to fund theproject entirely with debt. It will remain 14.42%. The weighted average cost of capital is basedon target capital structure weights. Since the current capital structure is optimal, all-debt fundingfor the project simply implies that the firm will have to use more equity in the future to bring thecapital structure back towards the target.17.9 a. In a world with corporate taxes, a firm’s weighted average cost of capital (r wacc) equals:r wacc = {B / (B+S)}(1 – T C) r B + {S / (B+S)}r Swhere B / (B+S) = the firm’s debt-to-value ratioS / (B+S) = the firm’s equity-to-value ratior B= the pre-tax cost of debtr S= the cost of equityT C= the corporate tax rateSince the firm’s target debt-to-equity ratio is 200%, the firm’s target debt-to-value ratio is 2/3, andthe firm’s target equity-to-value ratio is 1/3.The inputs to the WACC calculation in this problem are:B / (B+S) = 2/3S / (B+S) = 1/3r B= 0.10r S= 0.20T C= 0.34r wacc = {B / (B+S)}(1 – T C) r B + {S / (B+S)}r S= (2/3)(1 – 0.34)(0.10) + (1/3)(0.20)= 0.1107NEC’s weighted average cost of capital is 11.07%.Use the weighted average cost of capital to discount NEC’s unlevered cash flows.NPV = -$20,000,000 + $8,000,000 / 0.1107= $52,267,389Since the NPV of the project is positive, NEC should proceed with the expansion.17.10 a. ABC was an all-equity firm prior to its recapitalization. The value of A BC as an all-equity firmequals the present value of after-tax cash flows, discounted at the cost of the firm’s unleveredequity of 18%.V U= [(Pre-Tax Earnings)(1 – T C)] / r0= [($30,000,000)(1 – 0.34)] / 0.18= $110,000,000The value of ABC before the recapitalization is announced is $110 million.Since A BC is an all-equity firm, the value of A BC’s equity before the announcement is also $110million.ABC has 1 million shares of common stock outstanding. The price per share before theannouncement is $110 (= $110 million / 1 million shares)b. The adjusted present value of a firm equals it value under all-equity financing (V U) plus the netpresent value of any financing side effects. In ABC’s case, the NPV of financing side effectsequals the after-tax present value of cash flows resulting from the firm’s d ebt.APV = V U + NPV(Financing Side Effects)From part a:V U = $110,000,000NPV(Financing Side Effects)The NPV of financing side effects equals the after-tax present value of cash flows resulting fromthe firms’ debt.Given a known level of debt, debt cash flows should be discounted at the pre-tax cost of debt (r B),10%.NPV(Financing Side Effects) = Proceeds – After-tax PV(Interest Payments)= $50,000,000 – (1 – 0.34)(0.10)($50,000,000)/0.10= $17,000,000APVAPV = V U + NPV(Financing Side Effects)= $110,000,000 + $17,000,000= $127,000,000The value of ABC after the recapitalization plan is announced is $127 million.Since A BC has not yet issued the debt, the value of ABC’s equity after the announcement is also $127 million.ABC has 1 million shares of common stock outstanding. The price per share after theannouncement is $127 (= $127 million / 1 million shares).c. ABC will receive $50 million in cash as a result of the debt issue. Since the firm’s stock is w orth$127 per share, A BC will repurchase 393,701 shares (= $50,000,000 / $127 per share). After the repurchase, the firm will have 606,299 (= 1,000,000 – 393,701) shares of common stockoutstanding.Since the value of A BC is $127 million and the firm h as $50 million of debt, the value of A BC’s equity after the recapitalization is $77 million (= $127 million - $50 million).ABC has 606,299 shares of common stock outstanding after the recapitalization. The price pershare after the repurchase is $127 (= $77 million / 606,299 shares).d. In order to value a firm’s equity using the Flow-to-Equity approach, discount the cash flowsavailable to equity holders at the cost of the firm’s levered equity (r S).According to Modigliani-Miller Proposition II with corporate taxesr S = r0 + (B/S)(r0– r B)(1 – T C)where r0= the required return on the equity of an unlevered firmr S= the required return on the equity of a levered firmr B= the pre-tax cost of debtT C= the corporate tax rateB = the market value of the firm’s debtS = the market value of the firm’s equityIn this problem:r0= 0.18r B= 0.10T C = 0.34B = $50,000,000S = $77,000,000The required return on ABC’s levered equit y after the recapitalization is:r S= r0 + (B/S)(r0– r B)(1 – T C)= 0.18 + ($50,000,000 / $77,000,000)(0.18 – 0.10)(1 – 0.34)= 0.2143The required return on ABC’s levered equity after the recapitalization is 21.43%.Since A BC has $50,000,000 of 10% debt, the firm will make interest payments of $5,000,000(= $50,000,000 * 0.10) at the end of each year.Cash Flow s to E quityE BIT$30,000,000Interest5,000,000Pre-T ax E arnings25,000,000T axes at 34%8,500,000After-T ax E arnings16,500,000Since the firm pays all of its after-tax earnings out as dividends at the end of each year, equityholders will receive $16,500,000 of cash flow per year in perpetuity.S = Cash Flows Available to Equity Holders / r S= $16,500,000 / 0.2143= $77 millionNote: the unrounded cost of equity of 21.42857143% must be used to calculate the exact answer.The va lue of ABC’s equity after the recapitalization is $77 million.17.11 a. If Mojito were financed entirely by equity, the value of the firm would be equal to the presentvalue of its unlevered after-tax earnings, discounted at its unlevered cost of capital of 16%.M ojito M int CompanySales Revenue$19,740,000V ariable Costs11,844,000E BIT7,896,000T axes at 40%3,158,400U nlevered After-T ax E arnings4,737,600V U= $4,737,600 / 0.16= $29,610,000Therefore, Mojito Mint Company would be worth $29,610,000 as an unlevered firm.b. According to Modigliani-Miller Proposition II with corporate taxes:r S = r0 + (B/S)(r0– r B)(1 – T C)where r0= the required return on the equity of an unlevered firmr S= the required return on the equity of a levered firmr B= the pre-tax cost of debtT C= the corporate tax rateB/S = the firm’s debt-to-equity ratioIn this problem:r0= 0.16r B= 0.10T C = 0.40B/S = 2/3The required return on Mojito’s levered equity is:r S= r0 + (B/S)(r0– r B)(1 – T C)= 0.16 + (2/3)(0.16 – 0.10)(1 – 0.40)= 0.184The required return on Mojito’s lever ed equity (r S) is 18.4%.c. In a world with corporate taxes, a firm’s weighted average cost of capital (r wacc) equals:r wacc = {B / (B+S)}(1 – T C) r B + {S / (B+S)}r Swhere B / (B+S) = the firm’s debt-to-value ratioS / (B+S) = the firm’s e quity-to-value ratior B= the pre-tax cost of debtr S= the cost of equityT C= the corporate tax rateThe problem does not provide either Mojito’s debt-to-value ratio or Mojito’s equity-to-value ratio.However, the firm’s debt-to-equity ratio of 2/3 is given, which can be written algebraically as:B / S = 2/3Solving for B:B = (2/3)(S)A firm’s debt-to-value ratio is:B / (B+S)Since B = (2/3)(S):Mojito’s debt-to-value ratio = (2/3)(S) / { (2/3)(S) + S}= (2/3)(S) / (5/3)(S)= (2/3)/(5/3)= 2/5Mojito’s debt-to-value ratio is 2/5.A firm’s equity-to-value ratio is: S / (B+S)Since B = (2/3)(S):Mojito’s equity-to-value ratio= S / {(2/3)(S) + S}= S / (5/3)(S)= (1 / (5/3))= 3/5Mojito’s equity-to-value ratio is 3/5.The inputs to the WACC calculation are:B / (B+S) = 2/5S / (B+S) = 3/5r B= 0.10r S= 0.184T C= 0.40r wacc = {B / (B+S)}(1 – T C) r B + {S / (B+S)}r S= (2/5)(1 – 0.40)(0.10) + (3/5)(0.184)= 0.1344Mojito’s weighted average cost of capital is 13.44%.Use the weighted average cost of capital to discount the firm’s unlevered after-tax earnings.V L= $4,737,600 / 0.1344= $35,250,000Therefore, the value of Mojito Mint Company is $35,250,000.Since the firm’s equity-to-value ratio is 3/5, the value of Mojito’s equity is $21,150,000{= (3/5)($35,250,000)}.Since the firm’s debt-to-value ratio is 2/5, the v alue of Mojito’s debt is $14,100,000{= (2/5)( $35,250,000)}.d. In order to value a firm’s equity using the Flow-to-Equity approach, discount the cash flowsavailable to equity holders at the cost of the firm’s levered equity (r S).Since the pre-tax cost of the firm’s debt is 10%, and the firm has $14,100,000 of debt outstanding, Mojito must pay $1,410,000 (= 0.10 * $14,100,000) in interest at the end of each year.M ojito M int CompanySales Revenue19,740,000V ariable Costs11,844,000E BIT7,896,000Interest1,410,000Pre-T ax E arnings6,486,000T axes at 40%2,594,400After-T ax E arnings3,891,600Since the firm pays all of its after-tax earnings out as dividends at the end of each year, equityholders will receive $3,891,600 of cash flow per year in perpetuity.S = Cash Flows Available to Equity Holders / r S= $3,891,600 / 0.184= $21,150,000The value of Mojito’s equity is $21,150,000.17.12 a. Since Lone Star is currently an all-equity firm, its value equals the present value of its unleveredafter-tax earnings, discounted at its unlevered cost of capital of 20%.Lone Star IndustriesE BIT$152.00T axes at 40%$60.80U nlevered After-T ax E arnings$91.20V U= $91.20/ 0.20= $456Lone Star Industries is worth $456 as an unlevered firm.b. The adjusted present value of a firm equals its value under all-equity financing (V U) plus the netpresent value of any financing side effects. In ABC’s case, the NPV of financing side effectsequals the after-tax present value of cash flows resulting from debt.APV = V U + NPV(Financing Side Effects)From part a:V U = $456NPV(Financing Side Effects)The NPV of financing side effects equals the after-tax present value of cash flows resulting fromthe firms’ debt.Given a known level of debt, debt cash flows should be discounted at the pre-tax cost of debt (r B),10%.NPV(Financing Side Effects) = Proceeds – After-tax PV(Interest Payments)= $500 – (1 – 0.40)(0.10)($500)/0.10= $200APVAPV = V U + NPV(Financing Side Effects)= $456 + $200= $656The value of Lone Star Industries is $656 with leverage.Since Lone Star has $500 of debt, the value of the firm’s equity is $156 = ($656 - $500).c. According to Modigliani-Miller Proposition II with corporate taxesr S = r0 + (B/S)(r0– r B)(1 – T C)where r0= the required return on the equity of an unlevered firmr S= the required return on the equity of a levered firmr B= the pre-tax cost of debtT C= the corporate tax rateB = the market value of the firm’s debtS = the market value of the firm’s equity。

Corporate_Finance_第7版_答案Ch007

Chapter 7: Net Present Value and Capital Budgeting 7.3Cash Flow Chart:Year 0 Year 1 Year 2 Year 3 Year 41. Sales revenue - $7,000 $7,000 $7,000 $7,0002. Operating costs - 2,000 2,000 2,000 2,0003. Depreciation - 2,500 2,500 2,500 2,5004. Income before tax[1-(2+3)]- 2,500 2,500 2,500 2,5005. Taxes at 34% - 850 850 850 8506. Net income[4-5]0 1,650 1,650 1,650 1,6507. Cash flow fromoperation[1-2-5]0 4,150 4,150 4,150 4,1508. Initial Investment -$10,000 - - - -9. Changes in net workingcapital-200 -50 -50 100 20010. Total cash flow frominvestment[9+10]-10,200 -50 -50 100 20011. Total cash flow[7+10]-$10,200 $4,100 $4,100 $4,250 $4,350a. Incremental Net Income [from 6]:Year 0 0 Year 1$1,650Year 2$1,650Year 3$1,650Year 4$1,650b. Incremental cash flow [from 11]:Year 0 -$10,200 Year 1$4,100Year 2$4,100Year 3$4,250Year 4$4,350c. The present value of each cash flow is simply the amount of that cas h flow discounted back from thedate of payment to the present. For example, discount the cash flow in Year 1 by 1 period (1.12), anddiscount the cash flow that occurs in Year 2 by 2 periods (1.12)2. Note that since the Year 0 cash flowoccurs today, its present value does not need to be adjusted.PV(C0) = -$10,200PV(C1) = $4,100 / (1.12) = $3,661PV(C2) = $4,100 / (1.12)2 = $3,268PV(C3) = $4,250 / (1.12)3 = $3,025PV(C4) = $4,350 / (1.12)4 = $2,765NPV = PV(C0) + PV(C1) + PV(C2) + PV(C3) + PV(C4) = $2,519These calculations could also have been performed in a single step:NPV = -$10,200 + $4,100 / (1.12) + $4,100 / (1.12)2 + $4,250 / (1.12)3 + $4,350 / (1.12)4= $2,519The NPV of the project is $2,519.7.36Find the net present value (NPV) of each option. The firm will choose the option with the higher NPV. Remember to take into account both the maintenance costs and depreciation tax shields associated with both the old and new machines. Note that the replacement machine will be bought in five years regardless of the option chosen and therefore is not incremental to this decision.Option 1Sell old machine and purchase new machine now.To find the cash flow from selling the old machine, consider both the sales price an d the net book value of the machine. Since the firm will be selling the old machine ($2,000,000) for more than its net book value ($1,000,000), the resultant capital gain will be subject to corporate taxes.After-Tax Salvage Value = Sale Price – T C(Sale Price – Net Book Value)= $2,000,000 – 0.34($2,000,000 - $1,000,000)= $1,660,000PV(Salvage Value) = $1,660,000The new machine is purchased today (year 0) and does not need to be di scounted.PV(New Machine) = -$3,000,000To find th e present value of the new machine’s maintenance costs, use a five-year annuity, discounted at 12 percent. Remember to account for taxes.PV(Maintenance Costs) = (1 – 0.34)(-$500,000)A50.12= -$1,189,576The firm will also recognize a depreciation tax shield from the new machine. The annual depreciation expense is $600,000 (= $3,000,000 / 5 years).Annual Depreciation Tax Shield = T C * Depreciation per year= 0.34 * $600,000= $204,000The present value of the depreciation tax shields can be found by using a five-year annuity, discounted at 12 percent.PV(Depreciation Tax Shield) = C1 A T r= $204,000 A50.12= $735,374The new machine will be sold at the end of its economic life. Since the resale price ($500,000) is higher than the net book value ($0), the sale of the machine is subject to capital gains taxes. Since the sale occurs at the end of year 5, discount the after-tax salvage value back 5 periods.After-Tax Salvage Value = Sale Price – T C(Sale Price – Net Book Value)= $500,000 – 0.34($500,000 – 0)= $330,000PV(Salvage Value) = $330,000 / (1.12)5= $187,251NPV(Option 1) = $1,660,000 - $3,000,000 - $1,189,576 + $735,374 + $187,251= -$1,606,950The net present value (NPV) of selling the old machine and purchasing the new machine now is-$1,606,950.Sell old machine in five years and purchase new machine in five years.The company will have to make the scheduled maintenance costs for the old machine. Use a five-yearannuity, discounted at 12 percent to find the present value of the costs. Remember to account for taxes.PV(Maintenance Costs) = (1 – 0.34)(-$400,000)A50.12= -$951,661The firm will continue to recognize depreciation on the old machine. The annual depreciation expense is $200,000 per year, and the firm will recognize a depreciation tax shield. The present value of the tax shield is found by using a five-year annuity, discounted at 12 percent.Annual Depreciation Tax Shield = 0.34 * $200,000= $68,000PV(Depreciation Tax Shield) = $68,000 A50.12= $245,125The salvage value at the end of the old machine’s economic life of five years will be $200,000. Since the machine will have been depreciated to $0, the firm must pay capital gains taxes on the sale. To find thepresent value, discount the after-tax salvage value by five periods.After-Tax Salvage Value = Sale Price – T C(Sale Price – Net Book Value)= $200,000 – 0.34($200,000 – 0)= $132,000PV(Salvage Value) = $132,000 / (1.12)5= $74,900NPV(Option 2) = -$951,661 + $245,125 + $74,900= -631,636The net present value (NPV) of selling the old machine and purchasing the new machine in five years is -631,636.Since the NPV of Option 2 is higher than the NPV of Option 1, the firm will choose to sell the oldequipment and purchase new equipment in five years.7.41Klious needs to compare the equivalent annual cost (EA C) of the new machine to the cost incurred by keeping the old autoclave one additional year. First, find the EA C of the new autoclave. Next, find the total one-year cost, including the opportunity cost of not selling the old autoclave at the beginning of that particular year. If the EA C of the new autoclave is higher than the one-year total cost of keeping the existing autoclave, then Klious should not replace the old machine. If the total one-year cost of the existing autoclave is higher than the EAC of the new machine, Klious should replace.The first step of the problem is to calculate the NPV of the new machine. The initial investment is notdiscounted because it occurs today (year 0).PV(Initial Investment) = -$3,000Each year, the autoclave generates $20 of maintenance costs. Apply the five-year annuity formula,discounted at 0.10 to calculate the PV of the maintenance costs.PV(Maintenance Costs) = C1 A T r= -$20 A50.10= -$76The autoclave has a salvage value of $1,200 at the end of its economic life. Remember that the cash flow occurs at the end of year 5, and therefore must be discounted back five years.PV(Salvage Value) = C5 / (1 + r)5= $1,200 / (1.10)5= $745The NPV of the autoclave is the combination of the above cash flows.NPV = -Initial Investment - PV(Maintenance Costs) + PV(Salvage Value)= -$3,000 - $76 + $745= -$2,331In order to calculate the equivalent annual cost of the new autoclave, set the NPV equal to an annuity with the same economic life. Since the autoclave has an economic life of five years, set the NPV equal to a five-year annuity, discounted at 10 percent.-$2,331 = EA C * A50.10EA C = -$615The equivalent annual cost of the new autoclave is $615.To make its decision, Klious must compare the total yearly cost from keeping the old autoclave with the $615 yearly cost of the new autoclave. The matrix below illustrates the relevant costs of keeping the existing autoclave.Replacement Date/Year Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Keep through Year 1 -900 -200850- - - -Keep through Year 2 - --850 -275775- - -Keep through Year 3 - - --775 -325700- -Keep through Year 4 - - - --700 -450600-Keep through Year 5 - - - - --600 -500 500Compute the total end-of-year cost of the old autoclave for an additional year. Remember to state the costs in terms of end-of-year dollars. This is necessary because the EAC of the new machine is stated in terms of end-of-year dollars.Keeping the old autoclave through Year 1:The foregone resale value is already stated as of the beginning of the year, and therefore does not need further discounting.PV(Foregone Resale Value) = -$900Both the maintenance cost and the realizable resale value must be discounted back one year s ince these cash flows occur at the end of the year.PV(Maintenance Costs) = -$200 / (1.10)1= -$182PV(Resale Value) = $850 / (1.10)1= $773The NPV of keeping the old autoclave through the first year is the combination of the above cash flows.NPV = -$900 – $182 + $773= -$309Because the EAC of the new machine is expressed in terms of end-of-year dollars, multiply the NPV of the old machine’s costs by the di scount rate in order to find its future value as of the end of year 1.FV = (-$309) (1.10)= -$340The cost of the old autoclave in terms of end-of-year 1 dollars is $340.Since it is cheaper to operate the old autoclave ($340) than to purchase the new one ($615), Klious should continue to operate the old machine in year 1.Keeping the old autoclave through Year 2:The foregone resale value is already stated as of the beginning of the year, and therefore does not need further discounting.PV(Foregone Resale Value) = -$850Both the maintenance cost and the realizable resale value must be discounted back one year since they occur at the end of the year.PV(Maintenance Costs) = -$275 / (1.10)1= -$250PV(Resale Value) = $775 / (1.10)1= $705The NPV of keeping the old autoclave through the second year is the combination of the above cash flows.NPV = -$850 – $250 + $705= -$395Because the EAC of the new machine is expressed in terms of end-of-year dollars, multiply the NPV of the old machine’s costs by the di sco unt rate in order to find its future value as of the end of year 2.FV = (-$395) (1.10)= -$435The cost of the old autoclave in terms of end-of-year 2 dollars is $435.Since it is cheaper to operate the old autoclave ($435) than to purchase the new one ($615), Klious should continue to operate the old machine in year 2.Keeping the old autoclave through Year 3:The foregone resale value is already stated as of the beginning of the year, and therefore does not need further discounting.PV(Foregone Resale Value) = -$775Both the maintenance cost and the realizable resale value must be discounted back one year since they occur at the end of the year.PV(Maintenance Costs) = -$325 / (1.10)1= -$295PV(Resale Value) = $700 / (1.10)1= $636The NPV of keeping the old autoclave through the third year is the combination of the above cash flows.NPV = -$775 – $295 + $636= -$434Because the EAC of the new machine is expressed in terms of end-of-year dollars, multiply the NPV of the old machine’s costs by the di scount rate in order to find its future value in terms of end-of-year 3 dollars.FV = (-$434) (1.10)= -$477The cost of the old autoclave in terms of end-of-year 3 dollars is $477.Since it is cheaper to operate the old autoclave ($477) than to purchase the new one ($615), Klious should continue to operate the old machine in year 3.Keeping the old autoclave through Year 4:The foregone resale value is already stated as of the beginning of the year, and therefore does not need further discounting.PV(Foregone Resale) = -$700Both the maintenance cost and the realizable resale value must be discounted back one year since they occur at the end of the year.PV(Maintenance) = -$450 / (1.10)1= -$409PV(Resale Value) = $600 / (1.10)1= $545The NPV of keeping the old autoclave through the fourth year is the combination of the above cash flows.NPV = -$700 – $409 + $545= -$564Because the EAC of the new machine is expressed in terms of end-of-year dollars, multiply the NPV of the old machine’s costs by the di scount rate in order to find its future value as of the end of year 4.FV = (-$564) (1.10)= -$620The cost of the old autoclave in terms of end-of-year 4 dollars is $620.Since it is more expensive to operate the old autoclave ($620) than to purchase the new one ($615), Klious should purchase the new autoclave at the end of year 3.Case Study: I.Q. Inc.(Unit: $Million) YearYear1Year2Year3Year4Year5 NPVInvestments:Capital equipment (1.000) 0.300Capital Gains taxes (0.034)Change in NW C (1.000) 1.000Revenue 8.600 9.939 11.486 13.274Costs 0.550 0.636 0.735 0.849SG&A$ 0.50 0.515 0.530 0.546Profits 7.550 8.788 10.221 11.878After-tax Profits 4.983 5.800 6.746 7.840Depreciation tax shield0.068 0.068 0.068 0.068Total Cash flow from project(2.000) 5.051 5.868 6.814 9.174PV 15% (CF) (2.000) 4.392 4.437 4.480 5.245 16.555 The project should be undertaken since it has a positive NPV.B-160Case Study: Jimmy’s Hot Dog StandsYear 0 Year1Year2Year3Year4Year5 NPVInvestments:Real Estate (400,000)Capital equipment (65,000)Change in NW C (20,000)Total cash flow from investments (465,000) (20,000) ––––Income:Revenue 510,000 510,000 510,000 510,000 510,000Labor Costs 96,000 96,000 96,000 96,000 96,000Raw Materials 157,080 157,080 157,080 157,080 157,080Depreciation 13,000 13,000 13,000 13,000 13,000Income before Taxes243,920 243,920 243,920 243,920 243,920Taxes 82,933 82,933 82,933 82,933 82,933Net Income 160,987 160,987 160,987 160,987 160,987Cash flow from operations:Net Income 160,987 160,987 160,987 160,987 160,987Depreciation 13,000 13,000 13,000 13,000 13,000Operating cash flow 173,987 173,987 173,987 173,987 173,987Total cash flow from project(465,000) 153,987 173,987 173,987 173,987 173,987PV 10% (CF) (465,000) 139,988 143,791 130,719 118,836 108,032 $176,367 The NPV of this investment is $176,367.B-161。

国际会计第七版课后答案(第五章) 作者：弗雷德里克综述

Chapter 5Reporting and DisclosureDiscussion Questions1. Accounting measurement is the process of assigning numerical symbols to events or objects.Disclosure, on the other hand, is the communication of accounting measurements to intended users. Advances in financial disclosure are likely to outpace those related to accounting measurement for a number of reasons. First, many would argue that financial disclosure is a less controversial area than accounting measurement. Second, changes in disclosure requirements are more rapidly implemented than changes in accounting measurement rules. Finally, whereas a single set of accounting measurement rules may not serve users equally well under different social, economic and legal systems, a company can disclose without necessarily sacrificing its accounting measurement system.2.Four reasons why multinational corporations are increasingly being held accountable toconstituencies other than traditional investor groups:a.The development and growth of the influence of trade unions.b.The growing recognition of the view that those who are significantly affected bydecisions made by institutions in general must be given the opportunity to influence thosedecisions.c.The rejection by many governments of classical economic premises such as the beliefthat the regulated pursuit of private gain maximizes society’s welfare.d.The increasing concern over the social and economic impact of multinationalcorporations in host countries.3.Arguments in favor of equal disclosure include:a.The absence of equal disclosure would create an unfair playing field for U.S. companies.Non-U.S. companies would have a competitive advantage in that they would not have todisclose the same information and so would not incur the costs involved in generatingand publishing it.b.Investors in non-U.S. companies have the same information needs as those who invest inU.S. companies. A market concerned with investor protection would make sure thatinvestors have timely and material information on all listed companies, not just thosedomiciled in the United States.c.Unequal disclosure might impede cross-company comparisons involving U.S. and non-U.S. companies.Possible reasons against equal disclosure include:a.The high cost of meeting equal disclosure requirements may deter foreign issuers fromlisting in the United States.b.The extra costs involved work against the benefits of listing to the foreign companies.Evaluation of arguments:All of these arguments have merit. There is no unambiguously correct answer as to what disclosure requirements should be imposed on foreign issuers, and there has been a contentious debate on this subject in the U.S. in recent years. In practice, fairness arguments often carry great weight in public debate, even when objective economic analysis does not support them.4.Managers in Continental Europe and in Japan have for many years strongly objected to disclosinginformation about business segment financial results. These managers have argued that the information can be used by their competitors. In addition, Continental Europe and Japan have had traditions of low disclosure.Requirements for disclosure about segment results have become more stringent in Japan, France, and Germany in response to strong investor and analyst demand for the information. More generally, the three countries are striving to improve the quality of their financial reporting standards in order to improve the reputation and credibility of their capital markets.5.The simple answer is that mandatory disclosures are corporate disclosures made in response toregulatory requirements (for example, rules issued by national regulators or stock exchanges), and that voluntary disclosures are purely discretionary in nature. The distinction between mandatory and voluntary disclosures can be ambiguous in some settings, however. For example, the requirement that U.S. companies must file Form 10-Ks with the U.S. Securities and Exchange Commission is straightforward. However, measurement and disclosure approaches for some of the items in the Form 10-K are not. Similarly, there are widely divergent views concerning what types of press announcements are mandatory versus voluntary.Two possible explanations for differences in managers’ voluntary disclosure practices are: (1) Managers in highly competitive industries may be less forthcoming than managers in less competitive industries due to the expected cost of releasing information of potential use to their competitors. (2) Managers are expected to be more forthcoming when there is good news to disclose, than when there is bad news, particularly when the news can be expected to affect share prices.Two explanations for differences in managers’ mandatory disclosure practices are: (1) Cross-jurisdictional differences in disclosure requirements. (2) Differences in the extent of compliance with disclosure rules due to cross-jurisdictional differences in enforcement.6. Triple bottom line reporting refers to reporting on a company’s eco nomic, social, andenvironmental performance. It is a form of social responsibility reporting designed to demonstrate good corporate citizenship. So-called “sustainability” reports are an increasingly popular means of triple bottom line reporting. There is substantial variation in social reporting today. More regulation would improve comparability, but it might also stifle reporting innovations. The usefulness of social reporting to outside parties, particularly investors, needs to be demonstrated before implementing more regulation for it.6.Often we expect to observe less voluntary disclosure by companies in emerging market countriesthan by those in developed countries:a.Equity markets are relatively less developed in many emerging market countries,resulting in lower total demand for company information by investors and analysts.b.In many emerging market countries, most financing is supplied by banks and insiderssuch as family groups. This also leads to less demand for timely, credible publicdisclosure, and in these markets enhanced disclosure may have limited benefits.8. In general, for the same reasons as in Discussion Question 7, we expect to observe fewerregulatory disclosure requirements in emerging market countries than in developed countries.The equity markets and disclosure requirements in many emerging market countries are not yet well developed, and accounting and auditing systems in emerging market countries are less well developed than in more developed market countries.9. The two broad objectives of investor-oriented equity markets are investor protection and marketquality. In the absence of investor protection, investors will not be willing to participate in a market. However, in the absence of market quality, markets will not function satisfactorily.Many would consider the objectives equally important.10. It certainly is possible that more required disclosure will further encourage investorparticipation in capital markets by providing more and better information on which to base investment decisions. Benefits of increased investor participation include increased liquidity, reduced transaction costs, and more accurate and efficient market pricing. However, it can also be argued that in some situations disclosure requirements are excessive. In markets where disclosure requirements are considered too stringent, companies may be deterred from publicly listing their shares, and may choose to use secondary markets (such as the over-the-counter market in the United States) that lack the investor protections of regulated stock exchanges, and which provide investors with lower liquidity and higher transaction costs. Thus, more required disclosure is not necessarily better than less.11. Forecasts of revenues and income are relatively uncommon because there can be legalrepercussions if forecasts are not met. Forecasts rely on subjective estimates of uncertain future events, making them unreliable in many situations. Vaguer forms of forward looking information are more common than precise forecasts. For example, directional forecasts (up or down) of revenues and income are more common than range forecasts which are, in turn, more common than precise forecasts of these amounts.12. Corporate governance refers to the structure of relationships and responsibilities amongshareholders, board members, and corporate managers. Investors and financial analysts use information about a company’s corporate governance (for example, whether an audit committee’s members are independ ent, and responsibilities and remuneration of board members) to better assess the level of investor protection (and therefore, expected cash flows to investors) at the company.Exercises1. a. Transparent financial reporting means that timely and accurate disclosures are made onall important matters affecting a company’s financial position and performance. Itimplies openness, communication, and accountability.b. Transparent financial reporting protects investors because nothing is hidden from them.Investors can better assess the risks of owning securities when information is truthfuland complete. Transparent financial reporting also improves market quality. Itenhances investor confidence. Open communication creates markets that are fair,orderly, efficient, and free from abuse and misconduct.c. The financial reporting requirements on the Hong Kong Exchange promote transparentfinancial reporting and they protect investors and promote market quality. For example,they require a complete set of audited financial statements, including a balance sheet,income statement, cash flow statement, and explanatory notes. Substantial disclosuresare also required, including segments and forward looking information discussed in thechapter. Reports must include a management discussion and analysis. Accountingprinciples may be either Hong Kong Financial Reporting Standards or InternationalFinancial Reporting Standards. Both sets of standards are known for their high quality.All reports must be in English. There are requirements on corporate governance.Timely disclosure of price sensitive information is required. Annual reports must bepublished within four months of year-end and half-yearly reports must be publishedwithin three months. Overall, the reporting requirements are substantial and complete. 2.Schering AG provides a qualitative forecast of one-year-ahead and two-year-ahead net sales.One-year-ahead net sales are expected to increase in the “mid to high single-digit” range. From this, an investor would likely infer growth of between 6 and 8 percent. Two-year-ahead sales are expected to increase further. Thus, this forecast is directional (up). There are similar forecasts of net sales for certain products and for certain regions. For example, Yasmin® is expected to experience “double-digit” growth, while Betaferon® is expected to grow at “high single-digit” rates. Net sales in Europe are expected to grow at “mid single-digit” rates, while those in the United States are forecast to be “above average.” Schering also forecasts an operating margin of 18 percent for the next year. This is a precise forecast. There is no forecast of net income.Investors should find this information useful, but specific growth percentages would be even useful. Investors are concerned about a company’s future prospects. Management’s expectations guide users’ own forecasts. Investors would also find a forecast of net income useful.3. IFRS 8 requires that the following items be disclosed for each reportable segment:a.Profit or loss.b.Assets.c.Particular income and expense items if such measures are regularly provided to the chiefoperating decision maker.d.Reconciliations of reportable segment revenues, profit or loss, assets, and liabilities toconsolidated totals.(A reportable segment is an operating segment about which separate financial information isavailable that is evaluated regularly by management in assessing segment performance and deciding how to allocate resources to operating segments.)In addition to the above items, information must also be disclosed about:a.Revenues derived from products or services.b.Revenues derived from countries.c.Major customers.d.How operating segments are determined.Lafarge discloses that its reportable segments are its four product lines. The company discloses all of the items required to be disclosed by reportable segment. Operating income, assets, and individual income and expense items are reported. Segment revenues, operating income, assets, and liabilities are reconciled to consolidated totals.Lafarge also discloses revenues by selected countries and regions of the world. In addition, capital expenditure and capital employed by selected countries and regions are disclosed. There is no information about major customers, but Lafarge may have a large, diversified customer base.Overall, Lafarge complies with the requirements of IFRS 8 and even goes beyond its requirements in some cases.4. a. Overall headcount has increased between the two years. Both of its divisions(pharmaceuticals and diagnostics) show increased levels of employment. With theexception of Latin America, all regions of the world also show increased levels ofemployment. Roche attributes these increases to the fact that it has been expanding fasterthan its competitors.b.“Regretted losses” refers to “fluctuations not initiated by Roche,” presumably employeeswho quit the company on their own accord. While the overall percentage of employeeslost (“fluctuation”)has increased between the two years, the percentage of regrettedlosses has decreased.c.Roche states that it “places a high value on diversity and seeks to benefit from it….”Roche seems to have had some success in improving diversity in the company. Rochenotes that it employs people from over 190 countries and that the 336 employees in itsCorporate Center come from 23 countries. General managers from the local country head60 percent of its affiliates, and the trend is rising. Data presented on women in theworkplace all show improvements.d.Outside investors may find this information useful because it speaks to the welfare ofcompany employees. For example, satisfied employees will work harder to achieve acompany’s goals than unsatisfied ones will. The information is also useful in judgingwhether companies comply with employment laws, such as those dealing withnondiscriminatory hiring.5. The overall conclusion is that Roche’s safety record worsened while its environmental recordimproved.Safety:Note that Roche’s total number of workdays increased by 17 percent, while the total number of employees grew by 6 percent. Accidents and other measures of safety can be expected to increase, but not at rates higher than these. Occupational accidents increased by 14 percent, while work-related accidents per million working hours decreased 3 percent. These measures suggest that accident rates are about the same between the two years. There were no work-related fatalities in either year. Workdays lost due to work-related accidents increased by 31 percent, occupational illnesses increased by 60 percent, illnesses per million working hour increased 36 percent, and workdays lost due to occupational illnesses increased 42 percent. These measures indicate a worsening safety record. Transport accident per metric ton transported decreased. In general, most measures got worse.Environmental:Energy consumption increased by 5 percent and TOC t/year increased 36 percent. However, the other pollution measures (such as CO2t/year and NO2t/year) decreased. Figures later in the disclosure compare eco-efficiency measures for 2005, 2004, and 1992. Long-term trends (92/05) of all measures beside the one for CO2show significant decreases. In genera l, Roche’s environmental record has improved.6. a. According to the Web site, the objective of the International Auditing and AssuranceStandards Board (IAASB) is to serve the public interest by:∙setting, independently and under its own authority, high quality standards on auditing, quality control, review, other assurance, and related services, and ∙facilitating the convergence of national and international standards,thereby enhancing the quality and uniformity of practice throughout the world andstrengthening public confidence in the global auditing and assurance profession.b.According to this Web site, auditing standards refer to the audit or review of historicalfinancial information, while assurance standards refer to engagements dealing withsubject matters other than historical financial information.c.PricewaterhouseCoopers states that Roche’s internal sustainability reporting guidelinesare properly applied, that its data collection system is functioning as designed, and that its“social dim ension reporting provides an appropriate basis for the disclosure of socialdimension information…” Thus, Roche has received a “clean opinion”on itssustainability reporting.7. a. Corporate social responsibility is about how companies conduct themselves in relation to“stakeholders,” such as workers, consumers, and the broader society in which firmsoperate.b.Some argue that “the business of business is business.” In conducting their business,companies provide huge and critical contributions to society. Among these areproductivity gains, innovation and research, employment, and human capitaldevelopment. In poor countries, companies often contribute critical capital, technology,and skills that reduce poverty. Companies that compete and prosper make society betteroff. Under this view, the proper guardian of the public interest is government, notbusiness. Another view is that social issues (and social responsibility) are not tangentialto business but fundamental to it. Companies that ignore public sentiment makethemselves vulnerable to attack. Ignoring social issues turns a blind eye to forces thatmay alter a company’s strategic future. Thus, companies ought to do more than the lawrequires since social issues ultimately feed into shareholder value.c.Whether companies ought to report on their social responsibility activities probablydepends on one’s view of corporate social responsibility. Nevertheless, a strong case canbe made that proactive disclosure of a company’s societal contribu tions can positivelyaffect its image and ultimately its bottom line.d.As noted in c., the relevance of CSR disclosures for outside investors is that a company’ssocietal contributions can positively affect its image and ultimately its bottom line.8. a. The performance indicators recommended in the GRI guidelines are as follows:Economic Performance IndicatorsCore IndicatorsAdditional IndicatorsDirect Economic ImpactsCustomersEC1. Net sales.EC2. Geographic breakdown of markets.For each product or product range, disclosenational market share by country where this is 25% or more. Disclose market share and sales for eachcountry where national sales represent 5% or moreof GDP.SuppliersEC3. Cost of all goods, materials, and servicespurchased.EC11. Supplier breakdown by Organization and country. List all suppliers from which purchases in the reporting period represent 10% or more of total purchases in that period. Also identify all countries where total purchasing represents 5% or more of GDP. EC4. Percentage of contracts that were paid in accordance with agreed terms, excluding agreed penalty arrangements. Terms may include conditions such as scheduling of payments, form of payment, or other conditions. This indicator is the percent of contracts that werepaid according to terms, regardless of the details ofthe terms.EmployeesEC5. Total payroll and benefits (including wages,pension, other benefits, and redundancy payments)broken down by country or region. This remuneration should refer to current payments andnot include future commitments.Providers of CapitalEC6. Distributions to providers of capital brokendown by interest on debt and borrowings, anddividends on all classes of shares, with any arrearsof preferred dividends to be disclosed. Thisincludes all forms of debt and borrowings, not only long-term debt.EC7. Increase/decrease in retained earnings at endof period.Public SectorEC8. Total sum of taxes of all types paid broken down by country. EC12. Total spent on non-core business infrastructure development. This is infrastructureEC9. Subsidies received broken down by country or region. This refers to grants, tax relief, and other types of financial benefits that do not represent a transaction of goods and services.Explain definitions used for types of groups.built outside the main business activities of the reporting entity such as a school, or hospital for employees and their families.E10. Donations to community, civil society, andother groups broken down in terms of cash and in-kind donations per type of group.Indirect Economic ImpactsEC13. The Organization’s indirect economicimpacts. Identify major externalities associated withthe reporting Organization’s products and services .Environmental Performance IndicatorsCore Indicators Additional IndicatorsMaterialsEN1. Total materials use other than water, by type.Provide definitions used for types of materials.Report in tons, kilograms, or volume.EN2. Percentage of materials used that are wastes(processed or unprocessed) from sources external to the reporting Organization. Refers to both post-consumer recycled material and waste fromindustrial sources. Report in tons, kilograms, orvolume.EnergyEN3. Direct energy use segmented by primary source. Report on all energy sources used by the reportingOrganization for its own operations as well as for the production and delivery of energy products (e.g., electricity or heat) to other Organizations. Report in joules.EN17. Initiatives to use renewable energy sources and to increase energy efficiency. EN18. Energy consumption footprint (i.e., annualized lifetime energy requirements) of major products. Report in joules. EN4. Indirect energy use. Report on all energy used to produce and deliver energy products purchased by the reporting Organization (e.g., electricity or heat). Report in joules.EN19. Other indirect (upstream/downstream) energy use and implications, such as Organizational travel, product lifecycle management, and use of energy-intensive materials. WaterEN5. Total water use. EN20. Water sources and relatedecosystems/habitats significantly affected by use ofwater. Include Ramsar-listed wetlands and theoverall contribution to resulting environmentaltrends.EN21. Annual withdrawals of ground and surfacewater as a percent of annual renewable quantity ofwater available from the sources. Breakdown byregion.EN22. Total recycling and reuse of water.Include wastewater and other used water (e.g.,cooling water).BiodiversityEN6. Location and size of land owned, leased, or managed in biodiversity-rich habitats. EN23. Total amount of land owned, leased, or managed for production activities or extractive use. EN24. Amount of impermeable surface as apercentage of land purchased or leased.EN7. Description of the major impacts onbiodiversity associated with activities and/or products and services in terrestrial, freshwater, and marine environments. EN25. Impacts of activities and operations on protected and sensitive areas (e.g., IUCN protectedarea categories 1-4, world heritage sites, and biosphere reserves).EN26. Changes to natural habitats resulting fromactivities and operations and percentage of habitatprotected or restored.Identify type of habitat affected and its status.EN27. Objectives, programs, and targets forprotecting and restoring native ecosystems andspecies in degraded areas.EN28. Number of IUCN Red List species withhabitats in areas affected by operations.EN29. Business units currently operating orplanning operations in or around protected orsensitive areas.Emissions, Effluents, and WasteEN8. Greenhouse gas emissions. (CO2, CH4, N2O, HFCs, PFCs, SF6). Report separate subtotals for each gas in tons and in tons of CO2 equivalent for the following: - direct emissions from sources owned or controlled by the reporting entity - indirect emissions from imported electricity heat or steamEN30. Other relevant indirect greenhouse gas emissions. (CO2, CH4, N2O, HFCs, PFCs, SF6). Refers to emissions that are a consequence of the activities of the reporting entity, but occur from sources owned or controlled by another entity Report in tons of gas and tons of CO2 equivalent. EN9. Use and emissions of ozone-depletingsubstances. Report each figure separately in accordance with Montreal Protocol Annexes A, B, C, and E in tons of CFC-11 equivalents (ozone-depleting potential).EN31. All production, transport, import, or export of any waste deemed “hazardous” under the terms of the Basel Convention Annex I, II, III, and VIII.EN10. NOx, SOx, and other significant air emissions by type. Include emissions of substances regulated under: - local laws and regulations - Stockholm POPs Convention (Annex A, B, and C) –persistent organic pollutants - Rotterdam Convention on Prior Informed Consent (PIC)- Helsinki, Sofia, and Geneva Protocols to the Convention on Long-Range Trans-boundary Air Pollution EN32. Water sources and related ecosystems/habitats significantly affected by discharges of water and runoff. Include Ramsar-listed wetlands and the overall contribution to resulting environmental trends. See GRI Water Protocol.EN11. Total amount of waste by type anddestination.“Destination” refers to the method by w hich wasteis treated, including composting, reuse, recycling,recovery, incineration, or land filling. Explain typeof classification method and estimation method.EN12. Significant discharges to water by type.EN13. Significant spills of chemicals, oils, and fuelsin terms of total number and total volume.Significance is defined in terms of both the size ofthe spill and impact on the surroundingenvironment.SuppliersEN33. Performance of suppliers relative toenvironmental components of programmer andprocedures described in response to GovernanceStructure and Management Systems section. Products and ServicesEN14. Significant environmental impacts ofprincipal products and services.Describe and quantify where relevant.EN15. Percentage of the weight of products soldthat is reclaimable at the end of the products’ usefullife and percentage that is actually reclaimed.ComplianceEN16. Incidents of and fines for non-compliancewith all applicable internationaldeclarations/conventions/treaties, and national, sub-national, regional, and local regulations associatedwith environmental issues. Explain in terms ofcountries of operationTransportEN34. Significant environmental impacts oftransportation used for logistical purposes.OverallEN35. Total environmental expenditures by type.。

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Chapter 5: How to Value Bonds and Stocks
5.10．The appropriate discount rate is the semiannual interest rate because the bond makes semiannual payments. Thus, calculate the appropriate semiannual interest rate for both bonds A and B. Semiannual Interest Rate = 0.12 / 2
= 0.06
a. The price of Bond A is the sum of the PVs of each of its cash flow streams. Apply the delayed annuity formula to calculate the PV of the 16 payments of $2,000 that begin in year 7 as well as to calculate the PV of the 12 payments of $2,500 that begin in year 15. Because the payments are made semiannually, the delayed annuities begin in periods 13 and 29, respectively. Applying the annuity formula will yield the PV of a stream as of one period prior to its first payment. Thus, applying the annuity formula will yield the PV of the streams as of periods 12 and 28, respectively. To find the PV as of today (year 0) discount those streams back 12 and 28 periods, respectively. Also, discount the payment made at maturity back 40 periods.
P A= C A T r / (1+r)12 + C A T r / (1+r)28 + F / (1+r)40
= $2,000 A160.06 / (1.06)12 + $2,500 A120.06 / (1.06)28 + $40,000 / (1.06)40
= $18,033.86
The price of Bond A is $18,033.86.
b. Discount Bond B’s face value back 40 periods at the semiannual int erest rate.
P B= $40,000 / (1.06)40
= $3,888.89
The price of Bond B is $3,888.89.
5.16．To find the number of shares you own, divide the total value of your shares ($100,000) by the price per share. The price of each share is the PV of its cash flows, which include after-tax dividend payments and capital gains. You will receive pre-tax dividend payments of $2 and $4 in years 1 and 2, respectively.
PV(Dividends) = (1 – T) Div1 / (1+r) + (1 – T) Div2 / (1+r)2
= (0.72) $2 / (1.15) + (0.72) $4 / (1.15)2
= $3.43
At the end of year 3, you will sell the stock at $50.
PV(Cap. Gain) = C / (1+r)3
= $50 / (1.15)3
= $32.88
The price per share is the sum of the PV of the dividend payments and the PV of the capital gain. P = (1 – T c) Div1 / (1+r) + (1 – T c) Div2 / (1+r)2 + C / (1+r)3
= (0.72) $2 / (1.15) + (0.72) $4 / (1.15)2 + $50 / (1.15)3
= $36.31
Divide the total value of your position by the price per share to find the number of shares held.
Shares = Total Value / Price Per Share
= $100,000 / $36.31
= 2,754You own 2,754 shares.
5.23．Discount each future dividend payment. The dividend payment at the end of year 1 is $5.99
(=$5.25 ⨯ 1.14). The dividend at the end of year 2 is $6.64 (=$5.25 ⨯ 1.14 ⨯ 1.11), and so on. After the annual dividend growth rate reaches 5 percent, apply the growing perpetuity formula to find the PV of the future payments. Remember to discount the value of the growing perpetuity back four periods because it values the stream as of one year before the first payment at date 5.
Div1= $5.25 ⨯ 1.14 = $5.99
Div2= $5.25 ⨯ 1.14 ⨯ 1.11 = $6.64
Div3= $5.25 ⨯ 1.14 ⨯ 1.11 ⨯ 1.08 = $7.17
Div4= $5.25 ⨯ 1.14 ⨯ 1.11 ⨯ 1.08 ⨯ 1.05 = $7.53
Div5= $5.25 ⨯ 1.14 ⨯ 1.11 ⨯ 1.08 ⨯ 1.05 ⨯ 1.05 = $7.91
P = Div1 / (1+r)1 + Div2 / (1+r)2 + Div3 / (1+r)3 + Div4 / (1+r)4
+ [Div5 / (r – g)] / (1+r)4
= ($5.99) / (1.14) + ($6.64) / (1.14)2 + ($7.17) / (1.14)3 + ($7.53) / (1.14)4 + [($7.91) / (0.14 – 0.05)] / (1.14)4
= $71.70A share of Webster stock is $71.70.
5.27．First, determine the annual dividend growth rate over the past four years. The following equation relates the dividend paid yesterday to the dividend paid four years ago. Solve for the growth rate, g.
Div0= Div-4 (1+g)4
$1.66 = $0.80 (1+g)4
g = 0.2002
For years 1 through 5, the dividend payment will grow at an annual rate of 20.02 percent. Dividends will grow at eight percent per year for the next two years.
Div7= Div0⨯ (1+g1-5)5⨯ (1+g6-7)2
= $1.66 ⨯ (1.2002)5⨯ (1.08)2
= $4.82
The dividend payment in year 7 is $4.82.。