Chapter 4 财务管理(英语)作业
大连海事,财务管理研究生公司理财chapter04
Revenues Equity 600
Costs
2000 1600
Total 1000 Total 1000 Net Income
400
4-7
Example: Pro Forma Income Statement
• Initial Assumptions
• Revenues will grow at 15% (2000*1.15)
4-6
Example: Historical Financial Statements
Gourmet Coffee Inc. Balance Sheet
December 31, 2004 Assets 1000 Debt 400
Gourmet Coffee Inc.
Income Statement For Year Ended
• Understand the financial planning process and how decisions are interrelated
• Be able to develop a financial plan using the percentage of sales approach
because they depend on management decisions about capital structure • The change in the retained earnings portion of equity will come from the dividend decision
• Plug Variable – determined by management decisions about what type of financing will be used (makes the balance sheet balance)
罗斯《公司理财》英文习题答案DOCchap004
公司理财习题答案第四章Chapter 4: Net Present Value4.1 a. $1,000 ⨯ 1.0510 = $1,628.89b. $1,000 ⨯ 1.0710 = $1,967.15c. $1,000 ⨯ 1.0520 = $2,653.30d. Interest compounds on the I nterest already earned. Therefore, the interest earnedin part c, $1,653.30, is more than double the amount earned in part a, $628.89.4.2 a. $1,000 / 1.17 = $513.16b. $2,000 / 1.1 = $1,818.18c. $500 / 1.18 = $233.254.3 You can make your decision by computing either the present value of the $2,000 that youcan receive in ten years, or the future value of the $1,000 that you can receive now.Present value: $2,000 / 1.0810 = $926.39Future value: $1,000 ⨯ 1.0810 = $2,158.93Either calculation indicates you should take the $1,000 now.4.4 Since this bond has no interim coupon payments, its present value is simply the presentvalue of the $1,000 that will be received in 25 years. Note: As will be discussed in the next chapter, the present value of the payments associated with a bond is the price of that bond.PV = $1,000 /1.125 = $92.304.5 PV = $1,500,000 / 1.0827 = $187,780.234.6 a. At a discount rate of zero, the future value and present value are always the same.Remember, FV = PV (1 + r) t. If r = 0, then the formula reduces to FV = PV.Therefore, the values of the options are $10,000 and $20,000, respectively. Youshould choose the second option.b. Option one: $10,000 / 1.1 = $9,090.91Option two: $20,000 / 1.15 = $12,418.43Choose the second option.c. Option one: $10,000 / 1.2 = $8,333.33Option two: $20,000 / 1.25 = $8,037.55Choose the first option.d. You are indifferent at the rate that equates the PVs of the two alternatives. Youknow that rate must fall between 10% and 20% because the option you wouldchoose differs at these rates. Let r be the discount rate that makes you indifferentbetween the options.$10,000 / (1 + r) = $20,000 / (1 + r)5(1 + r)4 = $20,000 / $10,000 = 21 + r = 1.18921r = 0.18921 = 18.921%4.7 PV of Joneses’ offer = $150,000 / (1.1)3 = $112,697.22Since the PV of Joneses’ offer is less than Smiths’ offer, $115,000, you should chooseSmiths’ offer.4.8 a. P0 = $1,000 / 1.0820 = $214.55b. P10 = P0 (1.08)10 = $463.20c. P15 = P0 (1.08)15 = $680.594.9 The $1,000 that you place in the account at the end of the first year will earn interest for sixyears. The $1,000 that you place in the account at the end of the second year will earninterest for five years, etc. Thus, the account will have a balance of$1,000 (1.12)6 + $1,000 (1.12)5 + $1,000 (1.12)4 + $1,000 (1.12)3= $6,714.614.10 PV = $5,000,000 / 1.1210 = $1,609,866.184.11 a. The cost of investment is $900,000.PV of cash inflows = $120,000 / 1.12 + $250,000 / 1.122 + $800,000 / 1.123= $875,865.52Since the PV of cash inflows is less than the cost of investment, you should notmake the investment.b. NPV = -$900,000 + $875,865.52= -$24,134.48c. NPV = -$900,000 + $120,000 / 1.11 + $250,000 / 1.112 + $800,000 / 1.113= $-4,033.18Since the NPV is still negative, you should not make the investment.4.12 NPV = -($340,000 + $10,000) + ($100,000 - $10,000) / 1.1+ $90,000 / 1.12 + $90,000 / 1.13 + $90,000 / 1.14 + $100,000 / 1.15= -$2,619.98Since the NPV is negative, you should not buy it.If the relevant cost of capital is 9 percent,NPV = -$350,000 + $90,000 / 1.09 + $90,000 / 1.092 + $90,000 / 1.093+ $90,000 / 1.094 + $100,000 / 1.095= $6,567.93Since the NPV is positive, you should buy it.4.13 a. Profit = PV of revenue - Cost = NPVNPV = $90,000 / 1.15 - $60,000 = -$4,117.08No, the firm will not make a profit.b. Find r that makes zero NPV.$90,000 / (1+r)5 - $60,000 = $0(1+r)5 = 1.5r = 0.08447 = 8.447%4.14 The future value of the decision to own your car for one year is the sum of the trade-invalue and the benefit from owning the car. Therefore, the PV of the decision to own thecar for one year is$3,000 / 1.12 + $1,000 / 1.12 = $3,571.43Since the PV of the roommate’s offer, $3,500, is lower than the aunt’s offer, you shouldaccept aunt’s offer.4.15 a. $1.000 (1.08)3 = $1,259.71b. $1,000 [1 + (0.08 / 2)]2 ⨯ 3 = $1,000 (1.04)6 = $1,265.32c. $1,000 [1 + (0.08 / 12)]12 ⨯ 3 = $1,000 (1.00667)36 = $1,270.24d. $1,000 e0.08 ⨯ 3 = $1,271.25公司理财习题答案第四章e. The future value increases because of the compounding. The account is earninginterest on interest. Essentially, the interest is added to the account balance at theend of every compounding period. During the next period, the account earnsinterest on the new balance. When the compounding period shortens, the balancethat earns interest is rising faster.4.16 a. $1,000 e0.12 ⨯ 5 = $1,822.12b. $1,000 e0.1 ⨯ 3 = $1,349.86c. $1,000 e0.05 ⨯ 10 = $1,648.72d. $1,000 e0.07 ⨯ 8 = $1,750.674.17 PV = $5,000 / [1+ (0.1 / 4)]4 ⨯ 12 = $1,528.364.18 Effective annual interest rate of Bank America= [1 + (0.041 / 4)]4 - 1 = 0.0416 = 4.16%Effective annual interest rate of Bank USA= [1 + (0.0405 / 12)]12 - 1 = 0.0413 = 4.13%You should deposit your money in Bank America.4.19 The price of the consol bond is the present value of the coupon payments. Apply theperpetuity formula to find the present value. PV = $120 / 0.15 = $8004.20 Quarterly interest rate = 12% / 4 = 3% = 0.03Therefore, the price of the security = $10 / 0.03 = $333.334.21 The price at the end of 19 quarters (or 4.75 years) from today = $1 / (0.15 ÷ 4) = $26.67The current price = $26.67 / [1+ (.15 / 4)]19 = $13.254.22 a. $1,000 / 0.1 = $10,000b. $500 / 0.1 = $5,000 is the value one year from now of the perpetual stream. Thus,the value of the perpetuity is $5,000 / 1.1 = $4,545.45.c. $2,420 / 0.1 = $24,200 is the value two years from now of the perpetual stream.Thus, the value of the perpetuity is $24,200 / 1.12 = $20,000.4.23 The value at t = 8 is $120 / 0.1 = $1,200.Thus, the value at t = 5 is $1,200 / 1.13 = $901.58.4.24 P = $3 (1.05) / (0.12 - 0.05) = $45.004.25 P = $1 / (0.1 - 0.04) = $16.674.26 The first cash flow will be generated 2 years from today.The value at the end of 1 year from today = $200,000 / (0.1 - 0.05) = $4,000,000.Thus, PV = $4,000,000 / 1.1 = $3,636,363.64.4.27 A zero NPV-$100,000 + $50,000 / r = 0-r = 0.54.28 Apply the NPV technique. Since the inflows are an annuity you can use the present valueof an annuity factor.NPV = -$6,200 + $1,200 8A1.0= -$6,200 + $1,200 (5.3349)= $201.88Yes, you should buy the asset.4.29 Use an annuity factor to compute the value two years from today of the twenty payments.Remember, the annuity formula gives you the value of the stream one year before the first payment. Hence, the annuity factor will give you the value at the end of year two of the stream of payments. Value at the end of year two = $2,000 20A08.0= $2,000 (9.8181)= $19,636.20The present value is simply that amount discounted back two years.PV = $19,636.20 / 1.082 = $16,834.884.30 The value of annuity at the end of year five= $500 15A = $500 (5.84737) = $2,923.6915.0The present value = $2,923.69 / 1.125 = $1,658.984.31 The easiest way to do this problem is to use the annuity factor. The annuity factor must beequal to $12,800 / $2,000 = 6.4; remember PV =C A t r. The annuity factors are in theappendix to the text. To use the factor table to solve this problem, scan across the rowlabeled 10 years until you find 6.4. It is close to the factor for 9%, 6.4177. Thus, the rate you will receive on this note is slightly more than 9%.You can find a more precise answer by interpolating between nine and ten percent.10% ⎤ 6.1446 ⎤a ⎡ r ⎥bc ⎡ 6.4 ⎪ d⎣ 9% ⎦⎣ 6.4177 ⎦By interpolating, you are presuming that the ratio of a to b is equal to the ratio of c to d.(9 - r ) / (9 - 10) = (6.4177 - 6.4 ) / (6.4177 - 6.1446)r = 9.0648%The exact value could be obtained by solving the annuity formula for the interest rate.Sophisticated calculators can compute the rate directly as 9.0626%.公司理财习题答案第四章4.32 a. The annuity amount can be computed by first calculating the PV of the $25,000which you need in five years. That amount is $17,824.65 [= $25,000 / 1.075].Next compute the annuity which has the same present value.$17,824.65 = C 5A.007$17,824.65 = C (4.1002)C = $4,347.26Thus, putting $4,347.26 into the 7% account each year will provide $25,000 fiveyears from today.b. The lump sum payment must be the present value of the $25,000, i.e., $25,000 /1.075 = $17,824.65The formula for future value of any annuity can be used to solve the problem (seefootnote 14 of the text).4.33The amount of loan is $120,000 ⨯ 0.85 = $102,000.20C A= $102,000.010The amount of equal installments isC = $102,000 / 20A = $102,000 / 8.513564 = $11,980.8810.04.34 The present value of salary is $5,000 36A = $150,537.53.001The present value of bonus is $10,000 3A = $23,740.42 (EAR = 12.68% is used since.01268bonuses are paid annually.)The present value of the contract = $150,537.53 + $23,740.42 = $174,277.944.35 The amount of loan is $15,000 ⨯ 0.8 = $12,000.C 48A = $12,0000067.0The amount of monthly installments isC = $12,000 / 48A = $12,000 / 40.96191 = $292.960067.04.36 Option one: This cash flow is an annuity due. To value it, you must use the after-taxamounts. The after-tax payment is $160,000 (1 - 0.28) = $115,200. Value all except the first payment using the standard annuity formula, then add back the first payment of$115,200 to obtain the value of this option.Value = $115,200 + $115,200 30A10.0= $115,200 + $115,200 (9.4269)= $1,201,178.88Option two: This option is valued similarly. You are able to have $446,000 now; this is already on an after-tax basis. You will receive an annuity of $101,055 for each of the next thirty years. Those payments are taxable when you receive them, so your after-taxpayment is $72,759.60 [= $101,055 (1 - 0.28)].Value = $446,000 + $72,759.60 30A.010= $446,000 + $72,759.60 (9.4269)= $1,131,897.47Since option one has a higher PV, you should choose it.4.37 The amount of loan is $9,000. The monthly payment C is given by solving the equation: C 60008.0A = $9,000 C = $9,000 / 47.5042 = $189.46In October 2000, Susan Chao has 35 (= 12 ⨯ 5 - 25) monthly payments left, including the one due in October 2000.Therefore, the balance of the loan on November 1, 2000 = $189.46 + $189.46 34008.0A = $189.46 + $189.46 (29.6651) = $5,809.81Thus, the total amount of payoff = 1.01 ($5,809.81) = $5,867.91 4.38 Let r be the rate of interest you must earn. $10,000(1 + r)12 = $80,000 (1 + r)12 = 8 r = 0.18921 = 18.921%4.39 First compute the present value of all the payments you must make for your children’s education. The value as of one year before matriculation of one child’s education is$21,000 415.0A= $21,000 (2.8550) = $59,955. This is the value of the elder child’s education fourteen years from now. It is the value of the younger child’s education sixteen years from today. The present value of these is PV = $59,955 / 1.1514 + $59,955 / 1.1516 = $14,880.44You want to make fifteen equal payments into an account that yields 15% so that the present value of the equal payments is $14,880.44. Payment = $14,880.44 / 1515.0A = $14,880.44 / 5.8474 = $2,544.804.40 The NPV of the policy isNPV = -$750 306.0A - $800306.0A / 1.063 + $250,000 / [(1.066) (1.0759)] = -$2,004.76 - $1,795.45 + $3,254.33= -$545.88 Therefore, you should not buy the policy.4.41 The NPV of the lease offer isNPV = $120,000 - $15,000 - $15,000 908.0A - $25,000 / 1.0810= $105,000 - $93,703.32 - $11,579.84 = -$283.16 Therefore, you should not accept the offer.4.42 This problem applies the growing annuity formula. The first payment is $50,000(1.04)2(0.02) = $1,081.60. PV = $1,081.60 [1 / (0.08 - 0.04) - {1 / (0.08 - 0.04)}{1.04 / 1.08}40]= $21,064.28 This is the present value of the payments, so the value forty years from today is $21,064.28 (1.0840) = $457,611.46公司理财习题答案第四章4.43 Use the discount factors to discount the individual cash flows. Then compute the NPV ofthe project. Notice that the four $1,000 cash flows form an annuity. You can still use the factor tables to compute their PV. Essentially, they form cash flows that are a six year annuity less a two year annuity. Thus, the appropriate annuity factor to use with them is 2.6198 (= 4.3553 - 1.7355).Year Cash Flow Factor PV 1 $700 0.9091 $636.37 2 900 0.8264 743.76 3 1,000 ⎤ 4 1,000 ⎥ 2.6198 2,619.80 5 1,000 ⎥ 6 1,000 ⎦ 7 1,250 0.5132 641.50 8 1,375 0.4665 641.44 Total $5,282.87NPV = -$5,000 + $5,282.87 = $282.87 Purchase the machine.4.44 Weekly inflation rate = 0.039 / 52 = 0.00075 Weekly interest rate = 0.104 / 52 = 0.002 PV = $5 [1 / (0.002 - 0.00075)] {1 – [(1 + 0.00075) / (1 + 0.002)]52 ⨯ 30} = $3,429.384.45 Engineer:NPV = -$12,000 405.0A + $20,000 / 1.055 + $25,000 / 1.056 - $15,000 / 1.057- $15,000 / 1.058 + $40,000 2505.0A / 1.058= $352,533.35 Accountant:NPV = -$13,000 405.0A + $31,000 3005.0A / 1.054= $345,958.81 Become an engineer.After your brother announces that the appropriate discount rate is 6%, you can recalculate the NPVs. Calculate them the same way as above except using the 6% discount rate. Engineer NPV = $292,419.47 Accountant NPV = $292,947.04Your brother made a poor decision. At a 6% rate, he should study accounting.4.46 Since Goose receives his first payment on July 1 and all payments in one year intervalsfrom July 1, the easiest approach to this problem is to discount the cash flows to July 1 then use the six month discount rate (0.044) to discount them the additional six months. PV = $875,000 / (1.044) + $650,000 / (1.044)(1.09) + $800,000 / (1.044)(1.092) + $1,000,000 / (1.044)(1.093) + $1,000,000/(1.044)(1.094) + $300,000 / (1.044)(1.095)+ $240,000 1709.0A / (1.044)(1.095) + $125,000 1009.0A / (1.044)(1.0922) = $5,051,150Remember that the use of annuity factors to discount the deferred payments yields the value of the annuity stream one period prior to the first payment. Thus, the annuity factor applied to the first set of deferred payments gives the value of those payments on July 1 of 1989. Discounting by 9% for five years brings the value to July 1, 1984. The use of the six month discount rate (4.4%) brings the value of the payments to January 1, 1984. Similarly, the annuity factor applied to the second set of deferred payments yields the value of those payments in 2006. Discounting for 22 years at 9% and for six months at 4.4% provides the value at January 1, 1984.The equivalent five-year, annual salary is the annuity that solves: $5,051,150 = C 509.0A C = $5,051,150/3.8897C = $1,298,596The student must be aware of possible rounding errors in this problem. The differencebetween 4.4% semiannual and 9.0% and for six months at 4.4% provides the value at January 1, 1984. 4.47 PV = $10,000 + ($35,000 + $3,500) [1 / (0.12 - 0.04)] [1 - (1.04 / 1.12) 25 ]= $415,783.604.48 NPV = -$40,000 + $10,000 [1 / (0.10 - 0.07)] [1 - (1.07 / 1.10)5 ] = $3,041.91 Revise the textbook.4.49The amount of the loan is $400,000 (0.8) = $320,000 The monthly payment is C = $320,000 / 3600067.0.0A = $ 2,348.10 Thirty years of payments $ 2,348.10 (360) = $ 845,316.00 Eight years of payments $2,348.10 (96) = $225,417.60 The difference is the balloon payment of $619,898.404.50 The lease payment is an annuity in advanceC + C 2301.0A = $4,000 C (1 + 20.4558) = $4,000 C = $186.424.51 The effective annual interest rate is[ 1 + (0.08 / 4) ] 4 – 1 = 0.0824The present value of the ten-year annuity is PV = 900 100824.0A = $5,974.24 Four remaining discount periodsPV = $5,974.24 / (1.0824) 4 = $4,352.43公司理财习题答案第四章4.52The present value of Ernie’s retirement incomePV = $300,000 20A / (1.07) 30 = $417,511.5407.0The present value of the cabinPV = $350,000 / (1.07) 10 = $177,922.25The present value of his savingsPV = $40,000 10A = $280,943.26.007In present value terms he must save an additional $313,490.53 In future value termsFV = $313,490.53 (1.07) 10 = $616,683.32He must saveC = $616.683.32 / 20A = $58,210.5407.0。
国际财务管理作业Chapter 4 - Test Bank
Chapter 4—Exchange Rate Determination1. The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the Australian dollarwas $0.69. The Australian dollar ____ by ____%.a. depreciated; 5.80b. depreciated; 4.00c. appreciated; 5.80d. appreciated; 4.00SOLUTION: ($0.73 − $0.69)/$0.69 = 5.80%2. If a currency's spot rate market is ____, its exchange rate is likely to be ____ to a single large purchaseor sale transaction.a. liquid; highly sensitiveb. illiquid; insensitivec. illiquid; highly sensitived. none of the above.3. ____ is not a factor that causes currency supply and demand schedules to change.a. Relative inflation ratesb. Relative interest ratesc. Relative income levelsd. Expectationse. All of the above are factors that cause currency supply and demand schedules to change.4. A large increase in the income level in Mexico along with no growth in the U.S. income level isnormally expected to cause (assuming no change in interest rates or other factors) a(n) ____ inMexican demand for U.S. goods, and the Mexican peso should ____.a. increase; appreciateb. increase; depreciatec. decrease; depreciated. decrease; appreciate5. An increase in U.S. interest rates relative to German interest rates would likely ____ the U.S. demandfor euros and ____ the supply of euros for sale.a. reduce; increaseb. increase; reducec. reduce; reduced. increase; increase6. Investors from Germany, the United States, and the U.K. frequently invest in each other basedon prevailing interest rates. If British interest rates increase, German investors are likely to buy ____ dollar-denominated securities, and the euro is likely to ____ relative to the dollar.a. fewer; depreciateb. fewer; appreciatec. more; depreciated. more; appreciate7. When the "real" interest rate is relatively low in a given country, then the currency of that country istypically expected to be:a. weak, since the country's quoted interest rate would be high relative to the inflation rate.b. strong, since the country's quoted interest rate would be low relative to the inflation rate.c. strong, since the country's quoted interest rate would be high relative to the inflation rate.d. weak, since the country's quoted interest rate would be low relative to the inflation rate.8. Assume that the inflation rate becomes much higher in the U.K. relative to the U.S. This will place____ pressure on the value of the British pound. Also, assume that interest rates in the U.K. begin to rise relative to interest rates in the U.S. The change in interest rates will place ____ pressure on the value of the British pound.a. upward; downwardb. upward; upwardc. downward; upwardd. downward; downward9. In general, when speculating on exchange rate movements, the speculator will borrow the currencythat is expected to appreciate and invest in the country whose currency is expected to depreciate.a. Trueb. False10. Baylor Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to$.50. The following annual interest rates apply:Currency Lending Rate Borrowing RateDollars 7.10% 7.50%New Zealand dollar (NZ$) 6.80% 7.25%Baylor Bank has the capacity to borrow either NZ$10 million or $5 million. If Baylor Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?a. $521,325.b. $500,520.c. $104,262.d. $413,419.e. $208,044.SOLUTION:1. Borrow $5 million.2. Convert to NZ$: $5,000,000/$.48 = NZ$10,416,667.3. Invest the NZ$ at an annualized rate of 6.80% over five days.NZ$10,416,667 × [1 + 6.80% (5/360)]= NZ$10,426,5054. Convert the NZ$ back to dollars:NZ$10,426,505 × $.50 = $5,213,2525. Repay the dollars borrowed. The repayment amount is:$5,000,000 × [1 + 7.5% (5/360)]= $5,000,000 × [1.00104]= $5,005,2086. After repaying the loan, the remaining dollar profit is:$5,213,252 − $5,005,208 = $208,04411. Assume the following information regarding U.S. and European annualized interest rates:Currency Lending Rate Borrowing RateU.S. Dollar ($) 6.73% 7.20%Euro (€) 6.80% 7.28%Trensor Bank can borrow either $20 million or €20 million. The current spot rate of the euro is $1.13.Furthermore, Trensor Bank expects the spot rate of the euro to be $1.10 in 90 days. What is Trensor Bank's dollar profit from speculating if the spot rate of the euro is indeed $1.10 in 90 days?a. $579,845.b. $583,800.c. $588,200.d. $584,245.e. $980,245.SOLUTION:1. Borrow €20 million.2. Convert the €20 million to €20,000,000 × $1.13 = $22,600,000.3. Invest the $22,600,000 at an annualized rate of 6.73% for 90 days.$22,600,000 × [1 + 6.73% (90/360)]= $22,980,2454. Determine euros owed: €20,000,000 × [1 + 7.28% (90/360)] = €20,364,000.5. Determine dollars needed to repay euro loan: €20,364,000 × $1.10 = $22,400,400.6. The dollar profit is $22,980,245 − $22,400,400 = $579,845.12. The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 per pound:a. U.S. demand for pounds would exceed the supply of pounds for sale and there would be ashortage of pounds in the foreign exchange market.b. U.S. demand for pounds would be less than the supply of pounds for sale and there wouldbe a shortage of pounds in the foreign exchange market.c. U.S. demand for pounds would exceed the supply of pounds for sale and there would be asurplus of pounds in the foreign exchange market.d. U.S. demand for pounds would be less than the supply of pounds for sale and there wouldbe a surplus of pounds in the foreign exchange market.e. U.S. demand for pounds would be equal to the supply of pounds for sale and there wouldbe a shortage of pounds in the foreign exchange market.13. Assume that Swiss investors have francs available to invest in securities, and they initially view U.S.and British interest rates as equally attractive. Now assume that U.S. interest rates increase while British interest rates stay the same. This would likely cause:a. the Swiss demand for dollars to decrease and the dollar will depreciate against the pound.b. the Swiss demand for dollars to increase and the dollar will depreciate against the Swissfranc.c. the Swiss demand for dollars to increase and the dollar will appreciate against the Swissfranc.d. the Swiss demand for dollars to decrease and the dollar will appreciate against the pound.14. The real interest rate adjusts the nominal interest rate for:a. exchange rate movements.b. income growth.c. inflation.d. government controls.e. none of the above15. If U.S. inflation suddenly increased while European inflation stayed the same, there would be:a. an increased U.S. demand for euros and an increased supply of euros for sale.b. a decreased U.S. demand for euros and an increased supply of euros for sale.c. a decreased U.S. demand for euros and a decreased supply of euros for sale.d. an increased U.S. demand for euros and a decreased supply of euros for sale.16. If inflation in New Zealand suddenly increased while U.S. inflation stayed the same, there would be:a. an inward shift in the demand schedule for NZ$ and an outward shift in the supplyschedule for NZ$.b. an outward shift in the demand schedule for NZ$ and an inward shift in the supplyschedule for NZ$.c. an outward shift in the demand schedule for NZ$ and an outward shift in the supplyschedule for NZ$.d. an inward shift in the demand schedule for NZ$ and an inward shift in the supply schedulefor NZ$.17. If the U.S. and Japan engage in substantial financial flows but little trade, ____ directly influencestheir exchange rate the most. If the U.S. and Switzerland engage in much trade but little financial flows, ____ directly influences their exchange rate the most.a. interest rate differentials; interest rate differentialsb. inflation and interest rate differentials; interest rate differentialsc. income and interest rate differentials; inflation differentialsd. interest rate differentials; inflation and income differentialse. inflation and income differentials; interest rate differentials18. If inflation increases substantially in Australia while U.S. inflation remains unchanged, this is expectedto place ____ pressure on the value of the Australian dollar with respect to the U.S. dollar.a. upwardb. downwardc. either upward or downward (depending on the degree of the increase in Australianinflation)d. none of the above; there will be no impact19. Assume that British corporations begin to purchase more supplies from the U.S. as a result of severallabor strikes by British suppliers. This action reflects:a. an increased demand for British pounds.b. a decrease in the demand for British pounds.c. an increase in the supply of British pounds for sale.d. a decrease in the supply of British pounds for sale.20. The exchange rates of smaller countries are very stable because the market for their currency is veryliquid.a. Trueb. False21. The phrase "the dollar was mixed in trading" means that:a. the dollar was strong in some periods and weak in other periods over the last month.b. the volume of trading was very high in some periods and low in other periods.c. the dollar was involved in some currency transactions, but not others.d. the dollar strengthened against some currencies and weakened against others.22. Assume that the U.S. places a strict quota on goods imported from Chile and that Chile does notretaliate. Holding other factors constant, this event should immediately cause the U.S. demand for Chilean pesos to ____ and the value of the peso to ____.a. increase; increaseb. increase; declinec. decline; declined. decline; increase23. Any event that increases the U.S. demand for euros should result in a(n) ____ in the value of the eurowith respect to ____, other things being equal.a. increase; U.S. dollarb. increase; nondollar currenciesc. decrease; nondollar currenciesd. decrease; U.S. dollar24. Any event that reduces the U.S. demand for Japanese yen should result in a(n) ____ in the value of theJapanese yen with respect to ____, other things being equal.a. increase; U.S. dollarb. increase; nondollar currenciesc. decrease; nondollar currenciesd. decrease; U.S. dollar25. Any event that increases the supply of British pounds to be exchanged for U.S. dollars should result ina(n) ____ in the value of the British pound with respect to ____, other things being equal.a. increase; U.S. dollarb. increase; nondollar currenciesc. decrease; nondollar currenciesd. decrease; U.S. dollar26. Any event that reduces the supply of Swiss francs to be exchanged for U.S. dollars should result in a(n)____ in the value of the Swiss franc with respect to ____, other things being equal.a. increase; U.S. dollarb. increase; nondollar currenciesc. decrease; nondollar currenciesd. decrease; U.S. dollar27. Assume that the U.S. experiences a significant decline in income, while Japan's income remains steady.This event should place ____ pressure on the value of the Japanese yen, other things being equal.(Assume that interest rates and other factors are not affected.)a. upwardb. downwardc. nod. upward and downward (offsetting)28. News of a potential surge in U.S. inflation and zero Chilean inflation places ____ pressure on the valueof the Chilean peso. The pressure will occur ____.a. upward; only after the U.S. inflation surgesb. downward; only after the U.S. inflation surgesc. upward; immediatelyd. downward; immediately29. Assume that Canada places a strict quota on goods imported from the U.S. and that the U.S. does notretaliate. Holding other factors constant, this event should immediately cause the supply of Canadian dollars to be exchanged for U.S. dollars to ____ and the value of the Canadian dollar to ____.a. increase; increaseb. increase; declinec. decline; declined. decline; increase30. Assume that Japan places a strict quota on goods imported from the U.S. and the U.S. places a strictquota on goods imported from Japan. This event should immediately cause the U.S. demand forJapanese yen to ____, and the supply of Japanese yen to be exchanged for U.S. dollars to ____.a. increase; increaseb. increase; declinec. decline; declined. decline; increase31. Which of the following is not mentioned in the text as a factor affecting exchange rates?a. relative interest rates.b. relative inflation rates.c. government controls.d. expectations.e. all of the above are mentioned in the text as factors affecting exchange rates.32. If a country experiences high inflation relative to the U.S., its exports to the U.S. should ____, itsimports should ____, and there is ____ pressure on its currency's equilibrium value.a. decrease; increase; upwardb. decrease; decrease; upwardc. increase; decrease; downwardd. decrease; increase; downwarde. increase; decrease; upward33. If a country experiences an increase in interest rates relative to U.S. interest rates, the inflow of U.S.funds to purchase its securities should ____, the outflow of its funds to purchase U.S. securities should ____, and there is ____ pressure on its currency's equilibrium value.a. increase; decrease; downwardb. decrease; increase; upwardc. increase; decrease; upwardd. decrease; increase; downwarde. increase; increase; upward34. An increase in U.S. inflation relative to Singapore inflation places upward pressure on the Singaporedollar.a. Trueb. False35. When expecting a foreign currency to depreciate, a possible way to speculate on this movement is toborrow dollars, convert the proceeds to the foreign currency, lend in the foreign country, and use the proceeds from this investment to repay the dollar loan.a. Trueb. False36. Since supply and demand for a currency are constant (primarily due to government intervention),currency values seldom fluctuate.a. Trueb. False37. Relatively high Japanese inflation may result in an increase in the supply of yen for sale and areduction in the demand for yen.a. Trueb. False38. The main effect of interest rate movements on exchange rates is through their effect on internationaltrade.a. Trueb. False39. Country X frequently engages in trade flows with the U.S. (such as imports and exports). Country Yfrequently engages in capital flows with the U.S. (such as financial investments). Everything else held constant, an increase in U.S. interest rates would affect the exchange rate of Country X's currency more than the exchange rate of Country Y's currency.a. Trueb. False40. Increases in relative income in one country vs. another result in an increase in the first country'scurrency value.a. Trueb. False41. Trade-related foreign exchange transactions are more responsive to news than financial flowtransactions.a. Trueb. False42. Signals regarding future actions of market participants in the foreign exchange market sometimesresult in overreactions.a. Trueb. False43. The markets that have a smaller amount of foreign exchange trading for speculatory purposes than fortrade purposes will likely experience more volatility than those where trade flows play a larger role.a. Trueb. False44. Liquidity of a currency can affect the extent to which speculation can impact the currency's value.a. Trueb. False45. Forecasting a currency's future value is difficult, because it is difficult to identify how the factorsaffecting the currency value will change, and how they will interact to impact the currency's value.a. Trueb. False46. The standard deviation should be applied to values rather than percentage movements when comparingvolatility among currencies.a. Trueb. False47. Movements of foreign currencies tend to be more volatile for shorter time horizons.a. Trueb. False48. If a currency's spot market is ____, its exchange rate is likely to be ____ to a single large purchase orsale transaction.a. liquid; highly sensitiveb. illiquid; insensitivec. liquid; insensitived. none of the above49. The value of euro was $1.30 last week. During last week the euro depreciated by 5%. What is thevalue of euro today?a. $1.365b. $1.235c. $1.330d. $1.30SOLUTION: $1.3 × (1 − .05) = $1.23550. Government controls can only affect the supply of a given currency for sale and not the demand.a. Trueb. False51. If one foreign currency will appreciate against the dollar, then all foreign currencies will appreciateagainst the dollar but by different degrees.a. Trueb. False52. Assume that the income levels in U.K. start to rise, while U.S. income levels remain unchanged. Thiswill place ____ pressure on the value of British pound. Also, assume that U.S. interest rates rise, while the British pound remains unchanged. This will place ____ pressure on the value of British pound.a. downward; downwardb. upward; downwardc. upward; upwardd. downward; upward53. If the Fed announces that it will decrease the U.S. interest rates, and European Central Bank takes noaction, then the value of euro will ____ against the value of U.S. dollar. The Fed's action is called ____ intervention.a. appreciate; directb. depreciate; directc. appreciate; indirectd. depreciate; indirect54. Assume that the total value of investment transactions between U.S. and Mexico is minimal. Alsoassume that total dollar value of trade transactions between these two countries is very large. Now assume that Mexico's inflation has suddenly increased, and Mexican interest rates have suddenlyincreased. Overall, this would put ____ pressure on the value of Mexican peso. The inflation effect should be ____ pronounced than the interest rate effect.a. downward; moreb. upward; morec. downward; lessd. upward; less55. If U.S. experiences a sudden surge in inflation and surge in interest rates while Japanese inflation andinterest rates remain unchanged, the value of Japanese yen will ____ against the U.S. dollar.a. appreciateb. depreciatec. remain unchangedd. cannot be determined from the information provided.56. If the Japanese yen is expected to appreciate against the U.S. dollar and interest rates in the U.S. andJapan are similar, banks may try speculating on this anticipated exchange rate movement by borrowing ____ and investing in ____.a. yen; dollarsb. yen; yenc. dollars; yend. dollars; dollars57. British investors frequently invest in the U.S. or Italy, depending on the prevailing interest rates. IfItalian interest rates suddenly rise high above U.S. rates, the investors will ____ the supply of pounds to be exchanged for dollars and thus put ____ pressure on the value of the pound against the U.S.dollar.a. increase; downwardb. decrease; upwardc. increase; upwardd. decrease; downward58. The equilibrium exchange rate of the Swiss franc is $0.90. At an exchange rate $.83:a. U.S. demand for Swiss francs would exceed the supply of francs for sale and there wouldbe a shortage of francs in the foreign exchange market.b. U.S. demand for Swiss francs would be less than the supply of francs for sale and therewould be a shortage of francs in the foreign exchange market.c. U.S. demand for Swiss francs would exceed the supply of francs for sale and there wouldbe a surplus of francs in the foreign exchange market.d. U.S. demand for Swiss francs would be less than the supply of francs for sale and therewould be a surplus of Swiss francs in the foreign exchange market.59. Financial flow foreign exchange transactions are more responsive to news than trade-relatedtransactions.a. Trueb. False60. Assume that the British government eliminates all controls on imports by British companies. Otherthings being equal, the U.S. demand for pounds would ____, the supply of pounds for sale would ____, and the equilibrium value of the pound would ____.a. increase; increase; increaseb. decrease; increase; decreasec. remain unchanged; increase; decreased. remain unchanged; increase; increase61. Country X frequently engages in trade flows with the U.S. (such as imports and exports). Country Yfrequently engages in capital flows with the U.S. (such as financial investments). Everything else held constant, an increase in U.S. inflation would affect the exchange rate of Country Y's currency more than the exchange rate of Country X's currency.a. Trueb. False62. Assume that U.S. inflation is expected to surge in the near future. The expectation of surge in inflationwill most likely place ____ pressure on U.S. dollar immediately.a. upwardb. downwardc. nod. cannot be determined63. When the Japanese yen appreciates against the U.S. dollar, this means that the U.S. dollar isstrengthening relative to the yen.a. Trueb. False64. Illiquid currencies tend to exhibit less volatile exchange rate movements than liquid currencies.a. Trueb. False65. The supply curve for a currency is downward sloping since U.S. corporations would be encouraged topurchase more foreign goods when the foreign currency is worth less.a. Trueb. False66. Relatively high Japanese inflation may result in an increase in the supply of yen for sale and areduction in the demand for yen, other things being equal.a. Trueb. False67. If the British government desires an appreciation in its currency with respect to the U.S. dollar, itwould consider intervening in the foreign exchange market by buying dollars with pounds.a. Trueb. False68. Country X frequently engages in trade flows with the U.S. (such as imports and exports). Country Yfrequently engages in financial flows with the U.S. (such as financial investments). Everything else held constant, an increase in U.S. interest rates would affect the exchange rate of Country X's currency more than the exchange rate of Country Y's currency.a. Trueb. False69. Illiquid currencies tend to exhibit ____ volatile exchange rate movements, as the equilibrium prices oftheir currencies adjust to ____ changes in supply and demand conditions.a. less; even minorb. less; only largec. more; even minord. more; only largee. none of the above70. Which of the following is not mentioned in the text as a factor affecting exchange rates?a. Relative interest ratesb. Relative inflation ratesc. Government controlsd. Expectationse. All of the above are mentioned in the text as factors affecting exchange rates.71. Which of the following events would most likely result in an appreciation of the U.S. dollar?a. U.S. inflation is very high.b. The Fed indicates that it will raise U.S. interest rates.c. Future U.S. interest rates are expected to decline.d. Japan is expected to increase interest rates in the near future.72. Which of the following interactions will likely have the least effect on the dollar's value? Assumeeverything else is held constant.a. A reduction in U.S. inflation accompanied by an increase in real U.S. interest ratesb. A reduction in U.S. inflation accompanied by an increase in nominal U.S. interest ratesc. An increase in U.S. inflation accompanied by an increase in nominal, but not real, U.S.interest ratesd. An increase in Singapore's inflation accompanied by an increase in real U.S. interest ratese. An increase in Singapore's interest rates accompanied by an increase in U.S. inflation.73. If a country experiences high inflation relative to the U.S., its exports to the U.S. should ____, itsimports should ____, and there is ____ pressure on its currency's equilibrium value.a. decrease; increase; upwardb. decrease; decrease; upwardc. increase; decrease; downwardd. decrease; increase; downwarde. increase; decrease; upward74. If a country experiences an increase in interest rates relative to U.S. interest rates, the inflow of U.S.funds to purchase its securities should ____, the outflow of its funds to purchase U.S. securities should ____, and there is ____ pressure on its currency's equilibrium value.a. increase; decrease; downwardb. decrease; increase; upwardc. increase; decrease; upwardd. decrease; increase; downwarde. increase; increase; upward。
ContemporaryFinancialManagement10th现代财务管理英文版全套习题
ContemporaryFinancialManagement10th现代财务管理英文版全套习题Contemporary Financial Management 10th现代财务管理英文版全套习题ContentsChapter 1 The Role and Objective of Financial Management 1 Chapter 2 The Domestic and International Financial Marketplace 13 Appendix 2A Taxes 26Chapter 3 Evaluation of Financial Performance 31Chapter 4 Financial Planning and Forecasting 51Chapter 5 The Time Value of Money 66Appendix 5A Continuous Compounding and Discounting 95 Chapter 6 Analysis of Risk and Return 99Chapter 7 Fixed Income Securities: Characteristics and Valuation 127 Chapter 8 Common Stock: Characteristics, Valuation, and Issuance 153 Chapter 9 Capital Budgeting and Cash Flow Analysis 179 Chapter 10 Capital Budgeting: Decision Criteria and Real Option Considerations 202 Appendix 10A Mutually Exclusive Investments Having Unequal Lives 221 Chapter 11 Capital Budgeting and Risk 228Chapter 12 The Cost of Capital 246Chapter 13 Capital Structure Concepts 270Chapter 14 Capital Structure Management in Practice 285 Chapter 15 Dividend Policy 306Chapter 16 Working Capital Policy and Short-Term Financing 327 Chapter 17 The Management of Cash and Marketable Securities 344 Chapter18 Management of Accounts Receivable and Inventories 360 Chapter 19 Lease and Intermediate-Term Financing 376 Chapter20 Financing with Derivatives 388Appendix 20B Bond Refunding Analysis 404Chapter 21 Risk Management 408Chapter 22 International Financial Management 415Chapter 23 Corporate Restructuring 425Chapter 1The Role and Objective of Financial ManagementMULTIPLE CHOICE1. The primary objective of the firm is:a. Shareholder wealth maximizationb. Social responsibilityc. Long run survivald. Profit maximizationANS: A OBJ: TYPE: Fact TOP: A Foundation Concept2. The limitations of the profit maximization goal include:a. It lacks a time dimension (i.e., it is static)b. It fails to consider riskc. The definition of profit is ambiguousd. All the above are limitationsANS: D OBJ: TYPE: FactTOP: Maximization of shareholder wealth: Managerial strategies3. The shareholder wealth maximization goal states that management should seek tomaximize the _______ of the expected future returns to the owners of the firm.a. Future valueb. Compound valuec. Percentage valued. Present valueANS: D OBJ: TYPE: Fact TOP: A Foundation Concept4. Shareholder returns can take the form ofa. Periodic dividend paymentsb. Proceeds from the sale of the stockc. Periodic interest paymentsd. Periodic dividend payments and proceeds from the sale of the stockANS: D OBJ: TYPE: Fact TOP: A Foundation Concept5. Shareholder wealth is measured by the ________ of the shareholders' common stockholdings.a. Book valueb. Market valuec. Historic valued. Compound valueANS: B OBJ: TYPE: Fact TOP: A Foundation Concept6. The objective of maximizing shareholder wealth, as measured by the market value of thefirm's stocka. does not consider the timing of the benefits receivedb. provides a way to consider the risk of the returns being offeredc. benefits only certain stockholdersd. neither considers the timing of the benefits received norbenefits only certainstockholdersANS: B OBJ: TYPE: Fact TOP: A Foundation Concept7. The two most important disciplines on which financial management relies area. accounting and productionb. accounting and marketingc. economics and marketingd. accounting and economicsANS: D OBJ: TYPE: Fact TOP: Financial management and other disciplines8. The most widely accepted objective of the firm is toa. minimize riskb. maximize profitsc. maximize shareholder wealthd. maximize earnings per shareANS: C OBJ: TYPE: Fact TOP: A Foundation Concept9. The ______ the risk of receiving future cash flows, the ______ will be the present valueof those cash flows.a. greater, greaterb. greater, lowerc. lower, lowerd. lower, greaterANS: B OBJ: TYPE: Fact TOP: Risk10. A major advantage of using the maximization of shareholder wealth as the primary goalof the firm is that this goal considersa. the timing and the risk of the expected benefits to be receivedb. the investor's consumption utilityc. the value of closely held partnershipsd. all the aboveANS: A OBJ: TYPE: Fact TOP: A Foundation Concept11. The primary reason for the divergence between the shareholder wealth maximization goaland the actual goals pursued by management has been attributed toa. separation of social responsibility and stakeholders' concernsb. separation of ownership and controlc. separation of personal welfare and long-run profit goalsd. the granting of "golden parachute" contractsANS: B OBJ: TYPE: Fact TOP: Divergent objectives12. Giving top management _______ is one method that ensures managers will act in theinterest of shareholders in merger decisions.a. "golden parachute" contractsb. excellent payc. executive perksd. job securityANS: A OBJ: TYPE: Fact TOP: Divergent objectives13. _____ arise from the divergent objectives between owners and managers.a. Shareholder relationshipsb. Stakeholder problemsc. Creditor problemsd. Agency problemsANS: D OBJ: TYPE: Fact TOP: Agency problems14. Agency costs include all of the following except:a. expenditures to monitor management's actionsb. providing stock as part of management's compensationc. flotation costsd. bonding expendituresANS: C OBJ: TYPE: Fact TOP: Stockholders and managers15. A potential agency conflict can arise betweenstockholders and creditors because ownersmaya. increase the risk of a firm's investmentsb. decrease the amount of debt outstandingc. decrease the risk of a firm's investmentsd. increase the firm's net worthANS: A OBJ: TYPE: Fact TOP: Stockholders and creditors16. When KKR acquired RJR Nabisco, the ______ in the debt ratio, resulted in a(n) ______in the value of the firm's outstanding bonds.a. decrease, increaseb. increase, increasec. decrease, declined. increase, declineANS: D OBJ: TYPE: Fact TOP: Stockholders and creditors17. Agency problems may give rise to costs that ______ the market value of firms.a. increaseb. decreasec. do not affectd. are not important toANS: B OBJ: TYPE: Fact TOP: Stockholders and managers18. All of the following are problems with the microeconomic profit maximization modelexcept:a. the absence of a time dimensionb. offers financial managers insights to a wide range of problemsc. does not consider the risk of alternative decisionsd. the problem of defining profitsANS: B OBJ: TYPE: FactTOP: Maximization of shareholder wealth: Managerial strategies19. ________ are largely outside of the direct control of managers.a. investment strategiesb. economic environment factorsc. major policy decisionsd. dividend policiesANS: B OBJ: TYPE: Fact TOP: Managerial actions to influence value20. The success of a firm is linked to its stakeholders. This group includes:a. community neighborsb. suppliersc. employeesd. all the aboveANS: D OBJ: TYPE: Fact TOP: Social responsibility concerns21. Techniques identified by John Casey that managers could keep in mind when addressingthe ethical dimensions of a business problem include all of the following except:a. collect all the facts bearing on the problemb. clarify the parameters of the problemc. involve all parties with a financial interest in the outcomed. seek equity for those who may be affectedANS: C OBJ: TYPE: FactTOP: Ethical issues: the practice of financial management22. Many small business owners are _________ diversified with respect to their personalwealth.a. poorlyb. highlyc. welld. 90%ANS: A OBJ: TYPE: FactTOP: Entrepreneurial finance issues: Shareholder wealth maximizat23. __________ deals with economic decisions of individuals, households, and firms.a. Economic accountingb. Microeconomicsc. Blue Chip econometricsd. MacroeconomicsANS: B OBJ: TYPE: Fact TOP: Economics24. Financial management draws heavily on the following related disciplines:a. accountingb. macroeconomicsc. microeconomicsd. all of the aboveANS: D OBJ: TYPE: Fact TOP: Financial management and other disciplines25. The chief financial officer (CFO) normally has responsibilityfor all the following except:a. advertising strategyb. managing interest rate riskc. trading foreign currenciesd. accounting functionsANS: A OBJ: TYPE: Fact TOP: Organization of the financial management function26. The controller normally has responsibility for all _______ related activities, while thetreasurer is normally concerned with ________.a. acquisition, data processingb. tax, cost accountingc. tax, financial accountingd. accounting, expenditure of fundsANS: D OBJ: TYPE: Fact TOP: Organization of the financial management function27. According to the shareholder wealth maximization goal, management should seek tomaximize the __________ of the __________ to owners.a. present value; expected pretax cash flowsb. future value; expected pretax cash flowsc. present value; expected future returnsd. future value; expected future returnsANS: C OBJ: TYPE: Fact TOP: A foundation concept28. Shareholder wealth is measured by the __________.a. book value of the shareholders' common stock holdingsb. market value of the shareholders' common stock holdingsc. book value of the company's assetsd. market value of the company's assetsANS: B OBJ: TYPE: Fact TOP: Determinants of value29. Among the most important agency relationships in the context of finance is (are) therelationship(s) between __________.a. stockholders and creditorsb. management and workersc. stockholders and creditors, and management and workersd. management and creditorsANS: A OBJ: TYPE: Fact TOP: Agency problems30. Protective covenants in a company's bond indentures are used in agency relationshipsinvolving __________.a. stockholders and managersb. stockholders and creditorsc. management and workersd. management and creditorsANS: B OBJ: TYPE: Fact TOP: Stockholders and creditors31. The chief financial officer (CFO) of a corporation normally reports to the_______________________ of the company.a. chairman of the board of directorsb. chief operating officerc. controllerd. chief executive officerANS: D OBJ: TYPE: Fact TOP: Organization of the financial management function32. The ___________ has a goal of serving as a bridge between academic study of financeand the application of financial principles by financial managers.a. Financial Executives Instituteb. Financial Management Associationc. American Finance Associationd. Institution of Financial AnalystsANS: B OBJ: TYPE: Fact TOP: Professional finance affiliation33. All of the following economic environment factors affectstock prices except:a. investment strategiesb. competitionc. tax ratesd. currency exchange ratesANS: A OBJ: TYPE: Fact TOP: Managerial actions to influence value34. The major factors that determine the market value of a company's shares of stock includethe __________ .a. risk of its cash flowsb. timing of its cash flowsc. book value of its assetsd. risk of its cash flows and the timing of its cash flowsANS: D OBJ: TYPE: Fact TOP: Determinants of value35. There is often a divergence between the shareholder wealth maximization goal and theactual goals pursued by management. The primary reason for this is __________.a. geographical dispersion of shareholdersb. separation of ownership and controlc. age differences between managers and shareholdersd. that both have their own agendasANS: B OBJ: TYPE: Fact TOP: Divergent objectives36. The existence of divergent objectives between owners and managers is one example of aclass of problems arising from __________.a. social responsibility concernsb. age differences between managers and ownersc. agency relationshipsd. union-management relationsANS: C OBJ: TYPE: Fact TOP: Agency problems37. The activities of the treasurer include all of the following except:a. financial planningb. tax preparationc. credit analysisd. pension fund managementANS: B OBJ: TYPE: Fact TOP: Organization of the financial management function38. The most important managerial objective is to:a. make MC=MRb. maximize profitsc. minimize agency costsd. none of the aboveANS: D OBJ: TYPE: Fact TOP: A foundation concept39. _______ are important because the financial health of a firm depends on the firm beingable to generate sufficient cash to pay its creditors, employees, suppliers, and owners.a. cash salesb. cash flowsc. cash profitsd. net profitsANS: B OBJ: TYPE: Fact TOP: A foundation concept40. One method of decreasing the cash outflows of a firm is toa. decrease depreciationb. increase capital expendituresc. decrease dividendsd. increase debt repaymentANS: C OBJ: TYPE: Fact TOP: Cash flow41. If a firm shows an accounting net income, thena. it will not have a cash flow problemb. it will not have a problem obtaining a bank loanc. it will be able to repay all current liabilities on timed. none of the aboveANS: D OBJ: TYPE: Fact TOP: Cash flow42. Cash flow concepts are _____ but generally accepted accounting principles are ______ inthe determination of a firm's net income.a. unambiguous, ambiguousb. ambiguous, unambiguousc. ambiguous, also ambiguousd. unambiguous, straightforwardANS: A OBJ: TYPE: Fact TOP: Importance of cash flow43. Accounting-based measures of performance include all the following excepta. return on equityb. cash flowc. return on assetsd. market shareANS: B OBJ: TYPE: Fact TOP: Cash flows and shareholder wealth44. Accounting-based measures of performance _____ subject to short-term manipulation bymanagers; cash flows ______ subject to short-term manipulation.a. are, are notb. are not, arec. are, are alsod. are not, also are notANS: A OBJ: TYPE: Fact TOP: Cash flows and shareholder wealth45. The net present value rule provides appropriate guidance for financial decision makerswhen costs are incurred immediately buta. future cash flows are not known with certaintyb. marginal costs are equal to marginal revenuec. result in a stream of benefits over several future time periodsd. marginal costs are greater then marginal revenueANS: C OBJ: TYPE: Fact TOP: Net present value rule46. Corporate officers normally include all the following except:a. Secretaryb. Chief operating officerc. Treasurerd. Financial analystANS: D OBJ: TYPE: Fact TOP: Corporate organization47. The difference between a firm's annual after-tax operating profit and its total annual costof capital is known as:a. earned incomeb. Economic Value Addedc. Managerial Value Addedd. operating incomeANS: B OBJ: TYPE: Fact TOP: Divergent objectives48. ____ equals the number of shares outstanding times the market price per share.a. Book valueb. Stakeholders wealthc. Total shareholder wealthd. Economic valueANS: C OBJ: TYPE: Fact TOP: A Foundation Concept49. Which of the following companies requires that its top officers own common stock in thecompany that is at least equal to their annual salary.a. Ford Motor Companyb. Tucson Electric Power Companyc. Panhandle Easternd. Anheuser-BuschANS: A OBJ: TYPE: Fact TOP: Divergent Objectives50. The net present value of an investment made by a firm represents the contribution of thatinvestment to the ____ of the firm.a. book valueb. profitc. valued. cash flowANS: C OBJ: TYPE: Fact TOP: Net present value rule51. A major advantage of the corporate form of business over both sole proprietorships andpartnerships is thea. limited liabilityb. reduction in taxesc. ease of formationd. ability to maintain ownershipANS: A OBJ: TYPE: Fact TOP: Corporation52. Which of the following is not an advantage that thecorporate form of business has overeither the sole proprietorship or partnership?a. ability to raise capitalb. ease of changing ownershipc. limited liabilityd. elimination of double taxesANS: D OBJ: TYPE: Fact TOP: Corporation53. A major disadvantage of a sole proprietorship is the fact thata. it is expensive to establishb. the owner has unlimited personal liabilityc. it is easy to finance growthd. the owner pays taxes on all the incomeANS: B OBJ: TYPE: Fact TOP: Sole proprietorship54. In a limited partnership, the limited partners may limit their:a. tax liabilityb. liabilityc. tax write-offd. ability to attract new productsANS: B OBJ: TYPE: Fact TOP: Partnership55. Corporate securities represent claims against thea. corporate officers of the firmb. agents of the corporationc. liabilities and net worth of the firmd. assets and future earnings of the firmANS: D OBJ: TYPE: Fact TOP: Corporate securities56. _________ is (are) referred to as a residual form of ownershipin a corporation.。
财务管理专业英语 -Bond and Stock
2. Basic elements of bond
Bond(债券) Par value (面值) Coupon rate(券面利率) Coupon payment(利息支付) Maturity date(到期日) Time to maturity(到期时间) Yield to maturity(到期收益率)
– Dividends are not a liability of the firm and stockholders have no legal recourse if dividends are not paid
– An all equity firm can not go bankrupt
The Bond Indenture(债券契约)
2020/3/21
Equity
– Ownership interest
– Common stockholders vote for the board of directors and other issues
– Dividends are not considered a cost of doing business and are not tax deductible
If YTM > coupon rate, then par value > bond price
– Why? – Selling at a discount, called a discount bond
If YTM < coupon rate, then par value < bond price
Present value = 1000/(1+0.10)10 = 385.5 Second, the ﹩100 coupons continue for ten years;
财务管理专业英语unite+4
Wisdom
If you cannot measure it, you cannot improve it.
——Lord Kelvin(1824-1907)
无法衡量就无法改善。
Core Financial Ratio
Liquidity Ratios:
Liquidity Ratios measure the company’s ability to meet
Window dressing is an unfair way of attracting customers. 粉饰帐目不是吸引客户的公正方式。
Text study
4.1 Financial Ratio Analysis 4.2 Liquidity Ratios 4.3 Debt Management Ratios 4.4 Asset Management Ratios 4.5 Profitability Ratios 4.6 Market Value Ratios 4.7 Uses and Limitations of Financial Ratio Analysis
valuation, may affect its current ratio. In an inflationary environment , firms that use last-in,
first-out (LIFO) inventory valuation will likely have lower current ratios than firms that use first-in, first-out (FIFO).
Debt ratio
资产负债比率
Debt –to –equity ratio 产权比率
4章 Bonds and Their Valuation 学习课件,财务管理英文版
What’s “yield to maturity”?
YTM is the rate of return earned on a bond held to maturity. Also called “promised yield.”
What’s the YTM on a 10-year, 9% annual coupon, $1,000 par value bond
Assuming that interest rates remain constant at 5 percent for the next 14 years,what would happen to the value of an MicroDrive bond?
Bonds value at year 1 and year 2 after they were issued:
The value of a premium bond would decrease to $1,000.
The value of a discount bond would increase to $1,000.
A par bond stays at $1,000 if kd remains constant.
+
1+ kd 10
+
1 +
k 10 d
INPUTS 10 N
OUTPUT
-887 I/YR PV 10.91
90 PMT
1000 FV
If coupon rate < kd, bond sells at a discount.
If coupon rate = kd, bond sells at its par value.
Forensic and Investigative Accounting (4)
Court-Appointed Trustee
Forensic accountants are being used by the court – appointed trustees (Irving Picard and Securities Investor Protection Corporation) to reconstruct the books of Bernard L. Madoff Investment Securities (BLMIS). According to Picard, there were paper records, microfilm, and microfiche. But there was nothing that was electronic. Every customer statement was fiction, so the first task is to reconstruct the books and records of BLMIS. One of the early projects was to digitize the records so they are easier to compare, including customer statements, incoming letters, faxes, and bank records. The forensic accountant will use records from third parties and customers. Every customer account must be reconstructed from the ground up. Stephen Harbeck, President of Securities Investor Protection Corporation, stated that the forensic accountants “are working as quickly as possible to catalog all the farreaching aspects of the Madoff scheme and to recover money for investors to the extent possible by law.” The cost of the Ponzi scheme may be as high as $65 billion.
财务管理专业英语练习及答案
The following information is available for T om, a limited liability company:Summarized income statement for the year ended 31 December 2010.$’000Profit from operations 3,650Finance cost (loan note interest) (300)3,350Income tax expense (700)Net profit for the period 2,650Notes:1.The additional loan notes were issued on 1 January 2010. Interest was paid on 30 June2010 and 31 December 2010.2.Dividends paid during the year amounted to $750,000.RequiredPrepare the company’s cash flow statement for the year ended 31 December 2010.Cash flow statement for the year ended 31 December 2010$’000 Net profit 2,650 Add: depreciation [5,600-4,800] 800 Operating profit before working capital changes 3,450 Decrease in inventories (3,400-3,800) 400 Increase in receivables (3,800-2,900) (900) Increase in payables (3,700-3,200) 500 Increase in accruals (700-600) 100 Cash generated from operations 3,550Cash flows from investing activitiesPayments to acquire non-current assets (5,400-3,200+800) (3,000) Net cash used in investing activities (3,000)Cash flow from financing activitiesProceeds from issue of loan notes (3,000-2,000) 1,000 Dividends paid (750) Net cash from financing activities 250 Net increase in cash 800 Cash at 1 January 2010 400 Cash at 31 December 2010 1,200Below are the most recent financial statements for Wildhack. Based on the balance sheet and income statement, calculate the following ratios for 2010:(1)Current ratio; (2) Quick ratio; (3) Cash ratio; (4) Debt ratio; (5) Long-term debt ratio;(6) Times interest earned; (7) Cash flow coverage ratio; (8) Accounts receivable turnover ratio; (9) Inventory turnover ratio; (10) Accounts payable turnover ratio; (11) T otal asset turnover ratio; (12) Gross profit margin; (13) Net profit margin; (14) ROA (use net income in the numerator); (15) ROEWildhack Corporation2010 Income StatementWildhack CorporationBalance Sheet as of December 31, 2009 and 20101、Current ratio=648/1183=0.552、Quick ratio=(88+192)/1183=0.243、Cash ratio=88/1183=0.074、Debt ratio=(1183+2077)/6002=0.545、Long-term debt ratio=2077/6002=0.356、Times interest earned=813/613=1.337、Cash flow coverage ratio=(813+490)/613=2.138、Accounts receivable turnover ratio=2*3756/(224+192)=18.069、Inventory turnover ratio=2*2453/(424+368)=6.1910、Accounts payable turnover ratio=2*2453/(124+144)=18.3111、T otal assets turnover ratio=2*3756/(5996+6002)=0.6312、Gross profit margin=(3756-2453)/3756=0.3513、Net profit margin=132/3756=0.0414、ROA=2*132/(5996+6002)=0.0215、ROE=2*132/(2656+2742)=0.05Gross Sales 销售总额Less: Sales Returns and Allowances 销售退回及折让Sales Discounts 销售折扣Net Sales 销售净额Less: Cost of Goods Sold 销售成本Gross Profit on Sales 销售毛利Net Sales=Net Cash Sale + Net Credit Sale销售净额=现销净额+赊销净额。
Contemporary Financial Management 10th现代财务管理英文版全套习题
Contemporary Financial Management 10th现代财务管理英文版全套习题ContentsChapter 1 The Role and Objective of Financial Management 1 Chapter 2 The Domestic and International Financial Marketplace 13 Appendix 2A Taxes 26Chapter 3 Evaluation of Financial Performance 31Chapter 4 Financial Planning and Forecasting 51Chapter 5 The Time Value of Money 66Appendix 5A Continuous Compounding and Discounting 95 Chapter 6 Analysis of Risk and Return 99Chapter 7 Fixed Income Securities: Characteristics and Valuation 127 Chapter 8 Common Stock: Characteristics, Valuation, and Issuance 153 Chapter 9 Capital Budgeting and Cash Flow Analysis 179 Chapter 10 Capital Budgeting: Decision Criteria and Real Option Considerations 202 Appendix 10A Mutually Exclusive Investments Having Unequal Lives 221 Chapter 11 Capital Budgeting and Risk 228Chapter 12 The Cost of Capital 246Chapter 13 Capital Structure Concepts 270Chapter 14 Capital Structure Management in Practice 285 Chapter 15 Dividend Policy 306Chapter 16 Working Capital Policy and Short-Term Financing 327 Chapter 17 The Management of Cash and Marketable Securities 344 Chapter18 Management of Accounts Receivable and Inventories 360 Chapter 19 Lease and Intermediate-Term Financing 376 Chapter 20 Financing with Derivatives 388Appendix 20B Bond Refunding Analysis 404Chapter 21 Risk Management 408Chapter 22 International Financial Management 415Chapter 23 Corporate Restructuring 425Chapter 1The Role and Objective of Financial ManagementMULTIPLE CHOICE1. The primary objective of the firm is:a. Shareholder wealth maximizationb. Social responsibilityc. Long run survivald. Profit maximizationANS: A OBJ: TYPE: Fact TOP: A Foundation Concept2. The limitations of the profit maximization goal include:a. It lacks a time dimension (i.e., it is static)b. It fails to consider riskc. The definition of profit is ambiguousd. All the above are limitationsANS: D OBJ: TYPE: FactTOP: Maximization of shareholder wealth: Managerial strategies3. The shareholder wealth maximization goal states that management should seek tomaximize the _______ of the expected future returns to the owners of the firm.a. Future valueb. Compound valuec. Percentage valued. Present valueANS: D OBJ: TYPE: Fact TOP: A Foundation Concept4. Shareholder returns can take the form ofa. Periodic dividend paymentsb. Proceeds from the sale of the stockc. Periodic interest paymentsd. Periodic dividend payments and proceeds from the sale of the stockANS: D OBJ: TYPE: Fact TOP: A Foundation Concept5. Shareholder wealth is measured by the ________ of the shareholders' common stockholdings.a. Book valueb. Market valuec. Historic valued. Compound valueANS: B OBJ: TYPE: Fact TOP: A Foundation Concept6. The objective of maximizing shareholder wealth, as measured by the market value of thefirm's stocka. does not consider the timing of the benefits receivedb. provides a way to consider the risk of the returns being offeredc. benefits only certain stockholdersd. neither considers the timing of the benefits received norbenefits only certainstockholdersANS: B OBJ: TYPE: Fact TOP: A Foundation Concept7. The two most important disciplines on which financial management relies area. accounting and productionb. accounting and marketingc. economics and marketingd. accounting and economicsANS: D OBJ: TYPE: Fact TOP: Financial management and other disciplines8. The most widely accepted objective of the firm is toa. minimize riskb. maximize profitsc. maximize shareholder wealthd. maximize earnings per shareANS: C OBJ: TYPE: Fact TOP: A Foundation Concept9. The ______ the risk of receiving future cash flows, the ______ will be the present valueof those cash flows.a. greater, greaterb. greater, lowerc. lower, lowerd. lower, greaterANS: B OBJ: TYPE: Fact TOP: Risk10. A major advantage of using the maximization of shareholder wealth as the primary goalof the firm is that this goal considersa. the timing and the risk of the expected benefits to be receivedb. the investor's consumption utilityc. the value of closely held partnershipsd. all the aboveANS: A OBJ: TYPE: Fact TOP: A Foundation Concept11. The primary reason for the divergence between the shareholder wealth maximization goaland the actual goals pursued by management has been attributed toa. separation of social responsibility and stakeholders' concernsb. separation of ownership and controlc. separation of personal welfare and long-run profit goalsd. the granting of "golden parachute" contractsANS: B OBJ: TYPE: Fact TOP: Divergent objectives12. Giving top management _______ is one method that ensures managers will act in theinterest of shareholders in merger decisions.a. "golden parachute" contractsb. excellent payc. executive perksd. job securityANS: A OBJ: TYPE: Fact TOP: Divergent objectives13. _____ arise from the divergent objectives between owners and managers.a. Shareholder relationshipsb. Stakeholder problemsc. Creditor problemsd. Agency problemsANS: D OBJ: TYPE: Fact TOP: Agency problems14. Agency costs include all of the following except:a. expenditures to monitor management's actionsb. providing stock as part of management's compensationc. flotation costsd. bonding expendituresANS: C OBJ: TYPE: Fact TOP: Stockholders and managers15. A potential agency conflict can arise between stockholders and creditors because ownersmaya. increase the risk of a firm's investmentsb. decrease the amount of debt outstandingc. decrease the risk of a firm's investmentsd. increase the firm's net worthANS: A OBJ: TYPE: Fact TOP: Stockholders and creditors16. When KKR acquired RJR Nabisco, the ______ in the debt ratio, resulted in a(n) ______in the value of the firm's outstanding bonds.a. decrease, increaseb. increase, increasec. decrease, declined. increase, declineANS: D OBJ: TYPE: Fact TOP: Stockholders and creditors17. Agency problems may give rise to costs that ______ the market value of firms.a. increaseb. decreasec. do not affectd. are not important toANS: B OBJ: TYPE: Fact TOP: Stockholders and managers18. All of the following are problems with the microeconomic profit maximization modelexcept:a. the absence of a time dimensionb. offers financial managers insights to a wide range of problemsc. does not consider the risk of alternative decisionsd. the problem of defining profitsANS: B OBJ: TYPE: FactTOP: Maximization of shareholder wealth: Managerial strategies19. ________ are largely outside of the direct control of managers.a. investment strategiesb. economic environment factorsc. major policy decisionsd. dividend policiesANS: B OBJ: TYPE: Fact TOP: Managerial actions to influence value20. The success of a firm is linked to its stakeholders. This group includes:a. community neighborsb. suppliersc. employeesd. all the aboveANS: D OBJ: TYPE: Fact TOP: Social responsibility concerns21. Techniques identified by John Casey that managers could keep in mind when addressingthe ethical dimensions of a business problem include all of the following except:a. collect all the facts bearing on the problemb. clarify the parameters of the problemc. involve all parties with a financial interest in the outcomed. seek equity for those who may be affectedANS: C OBJ: TYPE: FactTOP: Ethical issues: the practice of financial management22. Many small business owners are _________ diversified with respect to their personalwealth.a. poorlyb. highlyc. welld. 90%ANS: A OBJ: TYPE: FactTOP: Entrepreneurial finance issues: Shareholder wealth maximizat23. __________ deals with economic decisions of individuals, households, and firms.a. Economic accountingb. Microeconomicsc. Blue Chip econometricsd. MacroeconomicsANS: B OBJ: TYPE: Fact TOP: Economics24. Financial management draws heavily on the following related disciplines:a. accountingb. macroeconomicsc. microeconomicsd. all of the aboveANS: D OBJ: TYPE: Fact TOP: Financial management and other disciplines25. The chief financial officer (CFO) normally has responsibilityfor all the following except:a. advertising strategyb. managing interest rate riskc. trading foreign currenciesd. accounting functionsANS: A OBJ: TYPE: Fact TOP: Organization of the financial management function26. The controller normally has responsibility for all _______ related activities, while thetreasurer is normally concerned with ________.a. acquisition, data processingb. tax, cost accountingc. tax, financial accountingd. accounting, expenditure of fundsANS: D OBJ: TYPE: Fact TOP: Organization of the financial management function27. According to the shareholder wealth maximization goal, management should seek tomaximize the __________ of the __________ to owners.a. present value; expected pretax cash flowsb. future value; expected pretax cash flowsc. present value; expected future returnsd. future value; expected future returnsANS: C OBJ: TYPE: Fact TOP: A foundation concept28. Shareholder wealth is measured by the __________.a. book value of the shareholders' common stock holdingsb. market value of the shareholders' common stock holdingsc. book value of the company's assetsd. market value of the company's assetsANS: B OBJ: TYPE: Fact TOP: Determinants of value29. Among the most important agency relationships in the context of finance is (are) therelationship(s) between __________.a. stockholders and creditorsb. management and workersc. stockholders and creditors, and management and workersd. management and creditorsANS: A OBJ: TYPE: Fact TOP: Agency problems30. Protective covenants in a company's bond indentures are used in agency relationshipsinvolving __________.a. stockholders and managersb. stockholders and creditorsc. management and workersd. management and creditorsANS: B OBJ: TYPE: Fact TOP: Stockholders and creditors31. The chief financial officer (CFO) of a corporation normally reports to the_______________________ of the company.a. chairman of the board of directorsb. chief operating officerc. controllerd. chief executive officerANS: D OBJ: TYPE: Fact TOP: Organization of the financial management function32. The ___________ has a goal of serving as a bridge between academic study of financeand the application of financial principles by financial managers.a. Financial Executives Instituteb. Financial Management Associationc. American Finance Associationd. Institution of Financial AnalystsANS: B OBJ: TYPE: Fact TOP: Professional finance affiliation33. All of the following economic environment factors affect stock prices except:a. investment strategiesb. competitionc. tax ratesd. currency exchange ratesANS: A OBJ: TYPE: Fact TOP: Managerial actions to influence value34. The major factors that determine the market value of a company's shares of stock includethe __________ .a. risk of its cash flowsb. timing of its cash flowsc. book value of its assetsd. risk of its cash flows and the timing of its cash flowsANS: D OBJ: TYPE: Fact TOP: Determinants of value35. There is often a divergence between the shareholder wealth maximization goal and theactual goals pursued by management. The primary reason for this is __________.a. geographical dispersion of shareholdersb. separation of ownership and controlc. age differences between managers and shareholdersd. that both have their own agendasANS: B OBJ: TYPE: Fact TOP: Divergent objectives36. The existence of divergent objectives between owners and managers is one example of aclass of problems arising from __________.a. social responsibility concernsb. age differences between managers and ownersc. agency relationshipsd. union-management relationsANS: C OBJ: TYPE: Fact TOP: Agency problems37. The activities of the treasurer include all of the following except:a. financial planningb. tax preparationc. credit analysisd. pension fund managementANS: B OBJ: TYPE: Fact TOP: Organization of the financial management function38. The most important managerial objective is to:a. make MC=MRb. maximize profitsc. minimize agency costsd. none of the aboveANS: D OBJ: TYPE: Fact TOP: A foundation concept39. _______ are important because the financial health of a firm depends on the firm beingable to generate sufficient cash to pay its creditors, employees, suppliers, and owners.a. cash salesb. cash flowsc. cash profitsd. net profitsANS: B OBJ: TYPE: Fact TOP: A foundation concept40. One method of decreasing the cash outflows of a firm is toa. decrease depreciationb. increase capital expendituresc. decrease dividendsd. increase debt repaymentANS: C OBJ: TYPE: Fact TOP: Cash flow41. If a firm shows an accounting net income, thena. it will not have a cash flow problemb. it will not have a problem obtaining a bank loanc. it will be able to repay all current liabilities on timed. none of the aboveANS: D OBJ: TYPE: Fact TOP: Cash flow42. Cash flow concepts are _____ but generally accepted accounting principles are ______ inthe determination of a firm's net income.a. unambiguous, ambiguousb. ambiguous, unambiguousc. ambiguous, also ambiguousd. unambiguous, straightforwardANS: A OBJ: TYPE: Fact TOP: Importance of cash flow43. Accounting-based measures of performance include all the following excepta. return on equityb. cash flowc. return on assetsd. market shareANS: B OBJ: TYPE: Fact TOP: Cash flows and shareholder wealth44. Accounting-based measures of performance _____ subject to short-term manipulation bymanagers; cash flows ______ subject to short-term manipulation.a. are, are notb. are not, arec. are, are alsod. are not, also are notANS: A OBJ: TYPE: Fact TOP: Cash flows and shareholder wealth45. The net present value rule provides appropriate guidance for financial decision makerswhen costs are incurred immediately buta. future cash flows are not known with certaintyb. marginal costs are equal to marginal revenuec. result in a stream of benefits over several future time periodsd. marginal costs are greater then marginal revenueANS: C OBJ: TYPE: Fact TOP: Net present value rule46. Corporate officers normally include all the following except:a. Secretaryb. Chief operating officerc. Treasurerd. Financial analystANS: D OBJ: TYPE: Fact TOP: Corporate organization47. The difference between a firm's annual after-tax operating profit and its total annual costof capital is known as:a. earned incomeb. Economic Value Addedc. Managerial Value Addedd. operating incomeANS: B OBJ: TYPE: Fact TOP: Divergent objectives48. ____ equals the number of shares outstanding times the market price per share.a. Book valueb. Stakeholders wealthc. Total shareholder wealthd. Economic valueANS: C OBJ: TYPE: Fact TOP: A Foundation Concept49. Which of the following companies requires that its top officers own common stock in thecompany that is at least equal to their annual salary.a. Ford Motor Companyb. Tucson Electric Power Companyc. Panhandle Easternd. Anheuser-BuschANS: A OBJ: TYPE: Fact TOP: Divergent Objectives50. The net present value of an investment made by a firm represents the contribution of thatinvestment to the ____ of the firm.a. book valueb. profitc. valued. cash flowANS: C OBJ: TYPE: Fact TOP: Net present value rule51. A major advantage of the corporate form of business over both sole proprietorships andpartnerships is thea. limited liabilityb. reduction in taxesc. ease of formationd. ability to maintain ownershipANS: A OBJ: TYPE: Fact TOP: Corporation52. Which of the following is not an advantage that the corporate form of business has overeither the sole proprietorship or partnership?a. ability to raise capitalb. ease of changing ownershipc. limited liabilityd. elimination of double taxesANS: D OBJ: TYPE: Fact TOP: Corporation53. A major disadvantage of a sole proprietorship is the fact thata. it is expensive to establishb. the owner has unlimited personal liabilityc. it is easy to finance growthd. the owner pays taxes on all the incomeANS: B OBJ: TYPE: Fact TOP: Sole proprietorship54. In a limited partnership, the limited partners may limit their:a. tax liabilityb. liabilityc. tax write-offd. ability to attract new productsANS: B OBJ: TYPE: Fact TOP: Partnership55. Corporate securities represent claims against thea. corporate officers of the firmb. agents of the corporationc. liabilities and net worth of the firmd. assets and future earnings of the firmANS: D OBJ: TYPE: Fact TOP: Corporate securities56. _________ is (are) referred to as a residual form of ownershipin a corporation.a. Common stockb. Preferred stockc. Bondsd. DividendsANS: A OBJ: TYPE: Fact TOP: Corporate securities57. The advantages of the corporate form of organization over both sole proprietorships andpartnerships include ________.a. limited liabilityb. permanencyc. limited liability and permanencyd. lower tax ratesANS: C OBJ: TYPE: Fact TOP: Corporation58. Although this type of business generates less than 6% of the total U.S. business revenue,_____ make up approximately 75% of all businesses.a. general partnershipsb. corporationsc. limited partnershipsd. sole-proprietorshipsANS: D OBJ: TYPE: Fact TOP: Sole proprietorship59. Which of the following is not an advantage of the corporate form of businessorganization:a. unlimited lifeb. unlimited liabilityc. flexibility in ownership changed. ability to raise capitalANS: B OBJ: TYPE: Fact TOP: Corporation60. There are problems with using the “profit maximization” criterion. Which of thefollowing is/are correct?I. Profit maximization has an ambiguous definition of “maximizing profits”.II. Profit maximization fails to consider risk.a. I onlyb. II onlyc. Both I and IId. Neither I nor IIANS: C OBJ: TYPE: Fact TOP: Foundation concept61. Which of the following statements is/are correct?I. Shareholders elect the Chairman of the BoardII. The board of directors has no control over whether or not dividends will be paid.a. I onlyb. II onlyc. Both I and IId. Neither I nor IIANS: D OBJ: TYPE: Fact TOP: Corporate organization62. There are three major factors that determine the market value ofa company’s share ofstock. All of the following are factors EXCEPT:a. Cash flowsb. Sales generatedc. Timing of cash flowsd. Risk taken to generate cash flowsANS: B OBJ: TYPE: Fact TOP: Determinants of value63. Which of the following is an economic principle used in finance?a. Full utilization of data processingb. Marginal analysis where marginal costs are set equal to marginal revenues.c. Accrual basis of recognizing revenues and expensesd. Target capital structureANS: B OBJ: TYPE: Fact TOP: Financial management and otherdisciplines64. The definition of the marginal analysis principle is that financial decisions are made andactions are takena. within the global economic viewpoint.b. with regard to governmental laws and cultural effectiveness.c. when the added benefits exceed the added costs.d. based on the impact of public opinion.ANS: C OBJ: TYPE: FactTOP: Maximization of shareholder wealth: Managerial strategies65. There are three forms of business organization. Which of the following has unlimitedliability?I. CorporationII. General partnershipa. I onlyb. II onlyc. Both I and IId. Neither I nor IIANS: B OBJ: TYPE: Fact TOP: PartnershipESSAY1. Explain the chain of command in a corporation.ANS:The stockholders, who own a pro-rata share of the company, elect the board of directors. The board makes broad decisions affecting the direction of the company, leaving the day-to-day decisions to the corporate officers, who are elected by the board. Corporate officers are: the chairman of the board, the chief executive officer, the chief operating officer, chief financial officer, president, vice-president(s), treasurer and secretary.OBJ: TYPE: Fact TOP: Corporate organization2. There are five compe titive forces that influence an industry’s structure.ANS:1. The threat of new entrants.2. The threat of substitute products3. The bargaining power of buyers4. The bargaining power of suppliers5. The rivalry among current competitorsOBJ: TYPE: Fact TOP: Managerial actions to influence value3. What are the shortcomings in the profit maximization objective asa managerial strategy?ANS:1. Profit maximization lacks a time dimension.2. There are many definitions of profit for a firm. There is much latitude permitted inrecognizing and accounting for costs and revenues.3. There is a question as to which profit is to be maximized: total profit, rate of profit orEPS.4. There is no direct way to consider the risk associated with alternative decisions.OBJ: TYPE: Fact TOP: Maximization of shareholder wealth: Managerial strategiesChapter 2The Domestic and International Financial MarketplaceMULTIPLE CHOICE1. The difference between merchandise exports and imports is known as the __________.a. transaction exposureb. difference in purchasing powerc. merchandise trade balanced. import/export reserveANS: C OBJ: TYPE: Fact TOP: The global economy2. A multinational firm __________.a. has direct investments in manufacturing facilities in more than one countryb. exports finished goods for sale in another countryc. imports raw materials from another countryd. has a manufacturing representative in another countryANS: A OBJ: TYPE: Fact TOP: The global economy3. The interest rate at which banks in the Eurocurrency market lend to each other is knownas the __________ .a. Eurocurrency currency rate (ECR)b. London interbank offer ratec. exchange rated. interest rate parityANS: B OBJ: TYPE: Fact TOP: The Eurocurrency market4. If Japanese yen are deposited in a bank in Paris, the deposits would be called __________a. Eurofrancsb. European Currency Unitc. Eurobondd. EuroyenANS: D OBJ: TYPE: Fact TOP: The Eurocurrency market5. An exchange rate quoted as $1.47 per British pound is known as a __________ quote.a. hedgeb. directc. futuresd. indirectANS: B OBJ: TYPE: Fact TOP: Direct and indirect quotes6. If the spot rate for Swiss francs is $0.6658/franc and the 180-day forward rate is $0.6637,the market is indicating that the Swiss franc is expected toa. strengthen relative to the dollarb. weaken relative to the ECUc. lose value relative to the dollar over the next 6 monthsd. gain value relative to the dollar over the next 6 monthsANS: C OBJ: TYPE: Fact TOP: Forward rates7. Which of the following is not a correct statement about foreign currency futures?a. futures contracts have a standardized maturity dateb. futures contracts are an exchange-traded agreementc. futures contracts are not liquidd. futures contracts are "marked to market" dailyANS: C OBJ: TYPE: Fact TOP: Foreign currency futures8. The most important foreign currency futures market in the United States is the__________.a. Chicago Board of Tradeb. New York Mercantile Exchangec. Commodity Exchanged. Chicago Mercantile ExchangeANS: D OBJ: TYPE: Fact TOP: Foreign currency futures9. The buyer of a foreign currency call option has the __________ a fixed amount of aforeign currency.a. right to sellb. right but not the obligation to buyc. obligation to buy, only at expiration,d. obligation to buyANS: B OBJ: TYPE: Fact TOP: Foreign currency options10. Eurodollars are U.S. dollars that have been deposited ina. foreign banksb. foreign branches of U.S. banksc. foreign subsidiariesd. foreign banks and foreign branches of U.S. banksANS: D OBJ: TYPE: Fact TOP: The Eurocurrency market11. If the exchange rate from U.S. dollars to Canadian dollars is $0.80/Canadian dollar, thenthe exchange rate from Canadian dollars to U.S. dollars isa. 0.80 Canadian $/US dollarb. $1.25 Canadian $/US dollarc. $1.20 Canadian $/US dollard. $8.00 Canadian $/US dollarANS: B OBJ: TYPE: Fact TOP: Direct and indirect quotes12. If the exchange rate from U.S. dollars to Swiss francs is $0.20/franc, then the exchangerate from francs to dollars isa. 0.20 francs/dollarb. 0.80 francs/dollarc. 5.0 francs/dollard. 2.0 francs/dollarANS: C OBJ: TYPE: Fact TOP: Foreign currencies and exchange rates13. If the spot rate (in U.S. dollars) for Japanese Yen is 0.00703 and the 180 day forward rateis 0.00717, then the Yen is trading at a(n) ______.a. expected gainb. premiumc. reciprocald. discountANS: B OBJ: TYPE: Fact TOP: Foreign currencies and exchange rates14. If the forward (direct quote) exchange rate is lower than the spot rate, then the currency issaid to be trading at a ______.a. forward premiumb. forward gainc. forward discountd. forward lossANS: C OBJ: TYPE: Fact TOP: Foreign currencies and exchange rates15. Financial middlemen includea. securities brokersb. securities dealersc. investment bankersd. all of the aboveANS: D OBJ: TYPE: Fact TOP: An overview of the U.S. financialsystem16. The following are listed security exchanges in the United Sates:a. New York Stock Exchangeb. Pacific Exchangec. Cincinnati Exchanged. All the above are listed exchangesANS: D OBJ: TYPE: Fact TOP: Listed security exchanges17. The Standard and Poor's 500 Stock Price Index is a ____ index.a. price weightedb. market value weightedc. price averaged. none of these answers is correctANS: B OBJ: TYPE: Fact TOP: Stock Market Indexes18. Securities not listed on exchanges are said to be tradeda. on the AMEXb. as composite transactionsc. over the counterd. on the regional exchangesANS: C OBJ: TYPE: Fact TOP: Security exchanges and stock market indexes19. Financial intermediaries includea. securities brokersb. commercial banksc. securities dealersd. all of the aboveANS: B OBJ: TYPE: Fact TOP: An overview of the U.S. financial system20. _______ markets deal in long-term securities having maturities greater than one year.a. Creditb. Moneyc. Commodity futuresd. CapitalANS: D OBJ: TYPE: Fact TOP: Money and capital markets21. ______ markets deal in short-term securities having maturitiesof one year or less.a. Creditb. Moneyc. Capitald. Capital and creditANS: B OBJ: TYPE: Fact TOP: Money and capital markets22. Which of the following (if any) are not financial intermediaries?a. commercial bankb. thrift institutionc. securities brokerd. all are financial intermediariesANS: C OBJ: TYPE: Fact TOP: An overview of the U.S. financial system23. In the ________ market, the firm receives the proceeds from the sale of its securities.a. over-the-counterb. secondaryc. fully integratedd. primaryANS: D OBJ: TYPE: Fact TOP: Primary and secondary markets24. A savings and loan association is an example of which type of financial intermediary?。
财务管理双语课程作业(英文题目)
财务管理双语课程作业(英文题目)Book Values versus Market Values Understand accounting rules, it is possible for a company’s liabilities to exceed its assets. When this occurs, the owner’s equity is negative. Can this happen with market values? Why or why not?Financial Ration Analysis A financial ratio by itself tells us little about a company since financial ratios vary a great deal across industries. There are two basic methods for analyzing financial ratios for a company: time trend analysis and peer group analysis. Why might each of these analysis methods be useful? What does each tell you about the company’s financial health?Present Value Suppose two athletes sign 10-year contracts for $80 million. In one case, we’re told that the $80 million will be paid in 10 equal installments. In the other case, we’re told that the$80 million will be paid in 10 installments, but the installments will increase by 5 percent per year. Who got the better deal?Bond Prices versus Yieldsa.What is the relationship between the price of a bond and its YTM?b.Explain why some bonds sell at a premium over par value while other bonds sell at adiscount. What do you know about the relationship between the coupon rate and the YTM for premium bonds? What about for discount bonds? For bonds selling at par value?c.What is the relationship between the current yield and YTM for premium bonds?For discount bonds? For bonds selling at par value?Dividend Growth Model Under what two assumptions can we use the dividend growth model presented in the chapter to determine the value of a share of stock ? Comment on the reasonableness of these assumptions.6：Chapter 7, P193,Payback and Internal Rate of Return A project has perpetual cash flows of c per period, a cost of l, and a required return of R. Please defining: a)Payback periodb)Internal rate of returnc)Net present valueWhat is the relationship between the project’s payback and its IRR? What implications does your answer have for long-lived projects with relatively constant cash flows？7：Chapter8, P214, Q2Incremental Cash Flows Which of the following should be treated as an incremental cash flow when computing the NPV of an investment?a. A reduction of the sales of a company’s other products caused by the investment.b.An expenditure on plant and equipment that has not yet been made and will bemade only if the project is accepted.c.Costs of research and development undertaken in connection with the productduring the past three years.d.Annual depreciation expense from the investment.e.Dividend payments by the firm.f.The resale value of plant and equipment at the end of the project’s life.g.Salary and medical costs for production personnel who will be employed only if theproject is accepted.8：Chapter 8,Year 1 Year 2 Year 3 Year 4 Sales 7,000 7,000 7,000 7,000 Costs 2,000 2,000 2,000 2,000 Depreciation 2,500 2,500 2,500 2,500 EBTTax 850 850 850 850 Net incomeOCF 0Capital spending 10,000 0 0 0 0 Net WorkingCaptial –200 –250 –300 –200 950 Incremental cashflowb) Calculate the NPVc) Calculate the IRRd) Critically evaluate this project.9：Chapter 9,A company investment 1,500,000(＄) to a project in the first year, and the project canbe operated about 5 years. The revenue and the variable costs each year of thePessimistic Expected OptimisticRevenue 2,783,000 3,600,000 4,387,500 Variable costs 1,742,400 2,100,000 2,386,800 Fixed costs 850,000 800,000 750,000 Depreciation 300,000 300,000 300,000 EBTTax –43,760 160,000 380,280 Net incomeOCFSML Cost of Equity Estimation What are the advantages of using the SML approach to finding the cost of equity capital? What are the disadvantages? What are the specific pieces of information needed to use this method? Are all of these variable observable, or do they need to be estimated? What are some of the ways in which you could get these estimates?Efficient Market Hypothesis For each of the following scenarios, discuss whether profit opportunities exist from trading in the stock of the firm under the conditions that (1) the market is not weak form efficient, (2) the market is weak form but not semistrong form efficient, (3) the market is semistrong form but not strong form efficient, and (4) the market is strong form efficient.a.The stock price has risen steadily each day for the past 30 days.b.The financial statement for a company were released three days ago, and you believeyou’ve uncovered some anomalies in the company’s inventory and cost control reporting techniques that are causing the firm’s true liquidity strength to be understated.c.You observe that the senior management of a company has been buying a lot of thecompany’s stock on the open market over the past week.Use the following information for the next two questions:Technical analysis is a controversial investment practice. Technical analysis covers a wide array of techniques, which are all used in an attempt to predict the direction of a particular stock, or the market. Technical analysts look at two major types of information: historical stock prices and investor sentiment. A technical analyst would argue these two information sets provide information on the future direction of a particular stock, or the market as a whole.12：Chapter 15, P394, Q4Cost of debt What steps can stockholders take to reduce the cost of debt?13：Chapter 17, P448, Q3Sources and uses For the year just ended, you have gathered the following information on the Holly Corporation:a. A $200 dividend was paid.b.Accounts payable increased by $500.c.Fixed asset purchases were $900.d.Inventories increased by v625.e.Long-term debt decreased by $1,200.Label each as a source or use of cash and describe its effect on the firm’s cash balance.。
财务管理第四章BYRAINY
—销售额为S时的经营杠杆系数；
S—销售额；
VC—变动成本总额。
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财务管理第四章BYRAINY
4.2.2 经营风险与经营杠杆
3．经营杠杆系数与盈亏平衡分析 【例4—1】
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财务管理第四章BYRAINY
4.2.3 财务风险与财务杠杆
1．财务风险和财务杠杆的概念 一般来说，企业在经营中总会发生借入资 金。企业负债经营，不论利润多少，债务利 息是不变的。于是，当息税前利润（EBIT） 增大时，每一元息税前利润所负担的利息就 会相应地减少，从而给投资者收益带来更大 幅度的提高。这种债务对投资者收益的影响 称作财务杠杆。
资金结构是企业各种长期资金筹集来源的构成和比例关系，它由长 期债务资金和所有者权益资金构成。资金结构的合理性和最优化判断是 通过分析每股收益与资金成本的变化来衡量的。
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财务管理第四章BYRAINY
【例4—1】某企业生产高质量的自行车配件，销售单价 为50元/件。不论产销多少，企业每年的固定性生产经营成 本为100 000元，每件产品的变动经营成本为25元/件。
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财务管理第四章BYRAINY
4.2.3 财务风险与财务杠杆
2．财务杠杆系数
式中：DFL—财务杠杆系数； EPS—普通股每股收益变动额； EPS—变动前的普通股每股收益； EBIT—息税前利润变动额； EBIT—变动前的息税前利润。
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财务管理第四章BYRAINY
4.2.4 复合杠杆作用与复合杠杆系数
其他产销水平下的息税前利润和经营杠杆系数的计算结 果见表4—1。
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财务管理第四章BYRAINY
国际财务管理课后答案_10th edition_chapter04_杰夫·马杜拉著
1. Why did exchange rates change recently?
2. Show the class a current exchange rate table from a periodical—identify spot and forward quotations. Then show the class an exchange rate table from a date a month ago, or three months ago. The comparison of tables will illustrate how exchange rates change, and how forward rates of the earlier date will differ from the spot rate of the future date for a given currency.
duplicated, or posted to a publicly accessible website, in wholenge Rate Determination
Chapter Theme
This chapter provides an overview of the foreign exchange market. It is designed to illustrate (1) why a market exists, and (2) why exchange rates change over time.
Anticipation of Exchange Rate Movements Bank Speculation Based on Expected Appreciation Bank Speculation Based on Expected Depreciation Speculation by Individuals
财务管理双语课程作业(英文题目).doc
Book Values versus Market Values Understand accounting rules, it is possible for a company’s liabilities to exceed its assets. When this occurs, the owner’s equity is negative. Can this happen with market values? Why or why not?Financial Ration Analysis A financial ratio by itself tells us little about a company since financial ratios vary a great deal across industries. There are two basic methods for analyzing financial ratios for a company: time trend analysis and peer group analysis. Why might each of these analysis methods be useful? What does each tell you about the company’s financial health?Present Value Suppose two athletes sign 10-year contracts for $80 million. In one case, we’re told that the $80 million will be paid in 10 equal installments. In the other case, we’re told that the$80 million will be paid in 10 installments, but the installments will increase by 5 percent per year. Who got the better deal?Bond Prices versus Yieldsa.What is the relationship between the price of a bond and its YTM?b.Explain why some bonds sell at a premium over par value while other bonds sell at adiscount. What do you know about the relationship between the coupon rate and the YTM for premium bonds? What about for discount bonds? For bonds selling at par value?c.What is the relationship between the current yield and YTM for premium bonds? Fordiscount bonds? For bonds selling at par value?Dividend Growth Model Under what two assumptions can we use the dividend growth model presented in the chapter to determine the value of a share of stock ? Comment on the reasonableness of these assumptions.6：Chapter 7, P193,Payback and Internal Rate of Return A project has perpetual cash flows of c per period,a cost of l, and a required return of R. Please defining:a)Payback periodb)Internal rate of returnc)Net present valueWhat is the relationship between the project’s payback and its IRR? What implications does your answer have for long-lived projects with relatively constant cash flows？7：Chapter8, P214, Q2Incremental Cash Flows Which of the following should be treated as an incremental cash flow when computing the NPV of an investment?a. A reduction of the sales of a company’s other products caused by the investment.b.An expenditure on plant and equipment that has not yet been made and will be made onlyif the project is accepted.c.Costs of research and development undertaken in connection with the product during thepast three years.d.Annual depreciation expense from the investment.e.Dividend payments by the firm.f.The resale value of plant and equipment at the end of the project’s life.g.Salary and medical costs for production personnel who will be employed only if theproject is accepted.8：Chapter 8,The information of a project as following (i=10%) ,Year 1 Year 2 Year 3 Year 4 Sales 7,000 7,000 7,000 7,000 Costs 2,000 2,000 2,000 2,000 Depreciation 2,500 2,500 2,500 2,500 EBTTax 850 850 850 850 Net incomeOCF 0Capital spending 10,000 0 0 0 0 Net Working Captial –200 –250 –300 –200 950 Incremental cashflowPlease :a) Finish the tableb) Calculate the NPVc) Calculate the IRRd) Critically evaluate this project.9：Chapter 9,A company investment 1,500,000(＄) to a project in the first year, and the project can beoperated about 5 years. The revenue and the variable costs each year of the project as following (I=13%):Pessimistic Expected OptimisticRevenue 2,783,000 3,600,000 4,387,500 Variable costs 1,742,400 2,100,000 2,386,800 Fixed costs 850,000 800,000 750,000 Depreciation 300,000 300,000 300,000 EBTTax –43,760 160,000 380,280 Net incomeOCFThe company should accept the project?SML Cost of Equity Estimation What are the advantages of using the SML approach to finding the cost of equity capital? What are the disadvantages? What are the specific pieces of information needed to use this method? Are all of these variable observable, or do they need to be estimated? What are some of the ways in which you could get these estimates?Efficient Market Hypothesis For each of the following scenarios, discuss whether profit opportunities exist from trading in the stock of the firm under the conditions that (1) the market is not weak form efficient, (2) the market is weak form but not semistrong form efficient, (3) the market is semistrong form but not strong form efficient, and (4) the market is strong form efficient.a.The stock price has risen steadily each day for the past 30 days.b.The financial statement for a company were released three days ago, and you believeyou’ve uncovered some anomalies in the company’s inventory and cost control reporting techniques that are causing the firm’s true liquidity strength to be understated.c.You observe that the senior management of a company has been buying a lot of thecompany’s stock on the open market over the past week.Use the following information for the next two questions:Technical analysis is a controversial investment practice. Technical analysis covers a wide array of techniques, which are all used in an attempt to predict the direction of a particular stock, or the market. Technical analysts look at two major types of information: historical stock prices and investor sentiment. A technical analyst would argue these two information sets provide information on the future direction of a particular stock, or the market as a whole.12：Chapter 15, P394, Q4Cost of debt What steps can stockholders take to reduce the cost of debt?13：Chapter 17, P448, Q3Sources and uses For the year just ended, you have gathered the following information on the Holly Corporation:a. A $200 dividend was paid.b.Accounts payable increased by $500.c.Fixed asset purchases were $900.d.Inventories increased by v625.e.Long-term debt decreased by $1,200.Label each as a source or use of cash and describe its effect on the firm’s cash balance.。
财务管理 CHAPTER 4
CHAPTER 4Long-Term Financial Planning and Growth I. DEFINITIONSPLANNING HORIZONa 1. The long-range time period, usually the next two to five years, over which thefinancial planning process focuses is known as the:a. planning horizon.b. planning strategy.c. planning agenda.d. short-run.e. current financing period.AGGREGATIONb 2. The process by which smaller investment proposals of each of a firm’s operationalunits are added up and treated as one big project is known as:a. separation.b. aggregation.c. conglomeration.d. appropriation.e. striation.PRO FORMA STATEMENTSd 3. Pro forma financial statements are:a. statements recapping the performance of a firm for the past five years.b. accounting statements filed with the Securities and Exchange Commission.c. accounting statements filed with the Internal Revenue Service.d. projected accounting statements based on a sales forecast.e. the most-recently compiled accounting statements of a firm.PLUG VARIABLEe 4. The designated source of external financing required to make a pro forma balancesheet balance is called the:a. retained earnings account.b. common stock account.c. debt-equity ratio.d. cash flow variable.e. plug variable.PERCENTAGE OF SALES APPROACHa 5. The financial planning method in which accounts vary depending on a firm’spredicted sales level is called the _____ approach.a. percentage of salesb. sales dilutionc. sales reconciliationd. common-sizee. time-trendDIVIDEND PAYOUT RATIOc 6. The dividend payout ratio is calculated as:a. net income minus additions to retained earnings.b. cash dividends divided by the change in retained earnings.c. cash dividends divided by net income.d. net income minus cash dividends.e. one plus the retention ratio.RETENTION RATIOb 7. The retention ratio is calculated as:a. one plus the dividend payout ratio.b. the additions to retained earnings divided by net income.c. the additions to retained earnings divided by dividends paid.d. net income minus additions to retained earnings.e. net income minus cash dividends.CAPITAL INTENSITY RATIOd 8. The capital intensity ratio is calculated as:a. long-term debt multiplied by total assets.b. net fixed assets divided by net income.c. net fixed assets multiplied by total sales.d. total assets divided by total sales.e. total sales divided by total assets.INTERNAL GROWTH RATEc 9. The internal growth rate of a firm is best described as the:a. minimum growth rate achievable if the firm does not pay out any cash dividends.b. minimum growth rate achievable if the firm maintains a constant equity multiplier.c. maximum growth rate achievable without external financing of any kind.d. maximum growth rate achievable without using any external equity financing, andwhile maintaining a constant debt-equity ratio.e. maximum growth rate achievable without any limits on the level of debt financing.SUSTAINABLE GROWTH RATEd 10. The sustainable growth rate of a firm is best described as the:a. minimum growth rate achievable if the firm does not pay out any cash dividends.b. minimum growth rate achievable if the firm maintains a constant equity multiplier.c. maximum growth rate achievable without external financing of any kind.d. maximum growth rate achievable without using any external equity financing, andwhile maintaining a constant debt-equity ratio.e. maximum growth rate achievable without any limits on the level of debt financing. II. CONCEPTSFINANCIAL PLANNING ELEMENTSe 11. Which of the following are basic elements of financial planning for a corporation?I. dividend policyII. net working capital decisionIII. capital budgeting decisionIV. capital structure policya. I and IV onlyb. II and III onlyc. I, III, and IV onlyd. II, III,and IV onlye. I, II, III, and IVFINANCIAL PLANNINGb 12. Financial planning:a. is limited to projecting activities of a firm for the next twelve months.b. formulates the way in which financial goals are to be achieved.c. is formulated based primarily on a net income assumption.d. for capital acquisitions is done on a purely segregated basis.e. focuses solely on the assumptions that are most likely to occur.FINANCIAL PLANNINGd 13. Financial planning:a. encourages managers to separate their goals from their plans.b. is generally based solely on the best-case scenario.c. generally has been found ineffective.d. helps managers establish priorities.e. prevents firms from encountering surprise events.PLANNING HORIZONd 14. Managers of the Automotive Warehouse are currently in the process of updating theirfinancial plans and preparing revised pro forma statements. During this process, themanagers should focus primarily on which of the following future time periods?a. 6 to 12 monthsb. 1 to 3 yearsc. 1 to 6 yearsd. 2 to 5 yearse. 2 to 10 yearsAGGREGATIONb 15. One of the primary benefits of aggregation is gaining an understanding of the:a. interactions of the net working capital.b. total investment needs of the firm.c. trade-offs between debt and equity.d. trade-offs between the dividend policy and the plowback ratio.e. total asset turnover ratio.PERCENTAGE OF SALES APPROACHb 16. When utilizing the percentage of sales approach, managers:I. determine the level of sales required based on the desired profit margin percentage.II. need to identify which expenses are variable and which are fixed.III. need to determine the capital intensity ratio.IV. can ignore any projected dividends.a. I and II onlyb. II and III onlyc. III and IV onlyd I, II, and IV onlye. I, III, and IV onlySALES FORECASTSe 17. Sales forecasts are:I. frequently based on macroeconomic projections.II. often affected by industry forecasts.III. generally the output from most pro forma statements.IV. generally the basis for projecting future asset requirements.a. I and II onlyb. III and IV onlyc. II and III onlyd. I, II, and III onlye. I, II, and IV onlyPRO FORMA STATEMENTSa 18. When constructing a pro forma statement, net working capital generally varies:a. directly with sales.b. with the level of capacity utilization.c. directly with the growth rate of fixed assets.d. based upon the financial leverage employed.e. as necessary to get the balance sheet to balance.PRO FORMA STATEMENTSd 19. When fixed assets on a pro forma statement are projected to increase at a rateequivalent to the projected rate of sales growth, it can be assumed that the firm is:a. projected to grow at the internal rate of growth.b. projected to grow at the sustainable rate of growth.c. creating excess capacity.d. currently operating at full capacity.e. retaining all of its projected net income.PRO FORMA STATEMENTSb 20. A firm is currently operating at full capacity. Net working capital, costs, and all assetsvary directly with sales. The firm does not wish to obtain any additional equityfinancing. The dividend payout ratio is constant at 40 percent. When the firm compilesa pro forma statement, the plug variable is most likely going to be:a. accounts payable.b. long-term debt.c. fixed assets.d. retained earnings.e. common stock.PRO FORMA STATEMENTSb 21. The composition of the liability and equity sections of a pro forma statement dependmost heavily on a firm’s:a. net working capital policies.b. financing and dividend policies.c. desired level of liquidity.d. capital budgeting and working capital policies.e. level of capacity utilization and net working capital policy.PRO FORMA STATEMENTSc 22. You are comparing a current income statement and a pro forma income statement for afirm. The pro forma statement reflects a 7 percent rate of growth. Both incomestatements include a common-size statement. The firm is currently operating at 80percent of their capacity. On the pro forma statement, all costs increase at the samerate as sales. Given this,a. the net income shown on both statements is identical.b. the tax rate is assumed to increase at the same rate as the sales.c. both common size income statements are identical.d. the projected increase in retained earnings is equal to the current increase in retainedearnings.e. total assets are required to also increase at a rate equal to the rate of sales growth. PRO FORMA STATEMENTSd 23. Which of the following statements concerning pro forma financials are correct?I. A pro forma income statement should consider both macroeconomic and industryforecasts.II. Pro forma statements should consider the dividend policy of the firm.III. A pro forma balance sheet must always maintain the current debt-equity ratio of a firm.IV. A pro forma balance sheet should include consideration of the capacity level of the firm.a. I and II onlyb. III and IV onlyc. I, III, and IV onlyd. I, II, and IV onlye. I, II, III, and IVPRO FORMA STATEMENTSc 24. By compiling pro forma statements, firms can:a. ensure that their anticipated rate of growth will in fact occur.b. avoid increasing their level of financial leverage while still increasing the growth rate of the firm.c. see the projected effects of their planned activities.d. determine how to grow at a rate that exceeds their sustainable rate of growth without increasing their equity financing.e. reduce the daily level of management involvement in the operations of the firm. PRO FORMA STATEMENTSb 25. To ascertain the amount of total assets required to support a projected level of sales,you primarily need to know the:a. projected level of capacity utilization.b. capital intensity ratio.c. financial structure policy of the firm.d. rate of internal growth.e. fixed-asset utilization rate.PLOWBACK RATIOb 26. The plowback ratio:a. is equal to net income divided by the change in total equity.b. shows the percentage of net income available to the firm for future growth.c. plus the retention ratio must equal 100 percent.d. is equal to the change in retained earnings divided by the dividends paid.e. represents the earnings returned to the shareholders.RETENTION RATIOe 27. Big Mac’s and Small Dog’s are two firms that are equal in every way except for theirretention ratios. Big Mac’s has a 50 percent retention ratio. Small Dog’s has a 60percent retention ratio. Given this difference,a. Small Dog’s profit margin next year will exceed the profit margin of Big Mac’s.b. Small Dog’s dividend payout ratio will exceed that of Big Mac’s.c. Big Mac’s plowback ratio will exceed that of Small Dog’s.d. Big Mac’s has a higher internal rate of growth than does Small Dog’s.e. Small Dog’s has a higher sustainable rate of growth than does Big Mac’s. CAPITAL INTENSITY RATIOe 28. Which one of the following statements concerning the capital intensity ratio is correct?a. The capital intensity ratio is equal to sales divided by net fixed assets.b. The lower the capital intensity ratio, the greater the capital intensity level of the firm.c. The capital intensity ratio is equal to one minus the total asset turnover ratio.d. The capital intensity ratio is based on the degree of financial leverage employed by afirm.e. The capital intensity ratio tells the amount of total assets needed to generate eachdollar of sales.CAPITAL INTENSITY RATIOe 29. You are comparing the financial statements of General Motors (an automaker) andSears (a department store). Which of the following items should you consider if youare attempting to compare the future growth prospects of both firms?I. profit marginII. capital intensityIII. dividend policyIV. capital structure policya. I and III onlyb. II and IV onlyc. I, II, and III onlyd. II, III, and IV onlye. I, II, III, and IVEXTERNAL FINANCING NEEDd 30. Any external financing need is generally covered by:a. the net income retained by the firm.b. adjusting accounts payable.c. adjusting the projected cash balance.d. adjusting the level of debt or equity.e. the projected operating cash flow.PERCENTAGE OF SALES APPROACHd 31. Sales can often increase without increasing which one of the following?a. accounts receivableb. cost of goods soldc. manufacturing labord. fixed assetse. inventoryFULL-CAPACITY SALESd 32. If a firm is at full-capacity sales, it means the firm is at the maximum level ofproduction possible without increasing:a. net working capital.b. cost of goods sold.c. inventory.d. fixed assets.e. the debt ratio.INTERNAL GROWTH RATEd 33. The internal growth rate increases when the:a. retention ratio decreases.b. dividend payout ratio increases.c. net income decreases.d. total assets decrease.e. plowback ratio decreases.EXTERNAL FINANCING NEEDe 34. Which of the following are generally expected to increase as the projected growth rateof a firm increases?I. addition to retained earningsII. external financing needIII. fixed assetsIV. current assetsa. II and IV onlyb. I, II, and IV onlyc. I, III, and IV onlyd. I, II, and III onlye. I, II, III, and IVSUSTAINABLE GROWTH RATEa 35. The sustainable growth rate will be equivalent to the internal growth rate when:a. a firm has no debt.b. the growth rate is positive.c. the plowback ratio is positive but less than 1.d. a firm has a debt-equity ratio exactly equal to 1.e. net income is greater than zero.SUSTAINABLE GROWTH RATEb 36. The sustainable growth rate:a. assumes there is no external financing of any kind.b. is normally higher than the internal growth rate.c. assumes the debt-equity ratio is variable.d. is based on receiving additional external debt and equity financing.e. assumes that 100 percent of all income is retained by the firm.SUSTAINABLE GROWTH RATEd 37. If a firm bases its growth projection on the rate of sustainable growth, and showspositive net income, then the:a. fixed assets will have to increase at the same rate, regardless of the current capacitylevel.b. number of common shares outstanding will increase at the same rate of growth.c. debt-equity ratio will have to increase.d. debt-equity ratio will remain constant while retained earnings increase.e. fixed assets, debt-equity ratio, and number of common shares outstanding will allincrease.SUSTAINABLE GROWTH RATEd 38. Marcie’s Mercantile wants to maintain their current dividen d policy, which is a payout ratio of 40 percent. The firm does not want to increase their equity financingbut are willing to maintain their current debt-equity ratio. Given these requirements, themaximum rate at which Marcie’s can grow is equal t o:a. 40 percent of the internal rate of growth.b. 60 percent of the internal rate of growth.c. the internal rate of growth.d. the sustainable rate of growth.e. 60 percent of the sustainable rate of growth.DETERMINANTS OF GROWTHc 39. Which of the following statements concerning the sustainable growth rate are correct?I. A decrease in the profit margin will decrease the sustainable rate of growth.II. Decreasing capital intensity increases the sustainable rate of growth.III. Decreasing the debt-equity ratio also decreases the sustainable rate of growth.IV. Decreasing the dividend payout ratio also decreases the sustainable rate of growth.a. I and II onlyb. III and IV onlyc. I, II, and III onlyd. I, III, and IV onlye. I, II, III, and IVFINANCIAL PLANNINGb 40. One of the primary advantages of financial planning is that it:a. concentrates solely on short-term profits.b. reconciles planned activities with company priorities.c. establishes the highest possible growth rate at any cost.d. limits expansion to the maximum achievable internal rate of growth.e. eliminates future surprises and unplanned activities.FINANCIAL PLANNING MODELSe 41. One of the primary weaknesses of many financial planning models is that they:a. rely too much on financial relationships and too little on accounting relationships.b. are iterative in nature.c. ignore the goals and objectives of senior management.d. are based solely on best case assumptions.e. ignore the size, risk, and timing of cash flows.FINANCIAL PLANNING MODELSe 42. Financial planning:I. is an on-going process.II. must consider the constraints that exist both internally and externally.III. helps a firm establish priorities.IV. reconciles the activities of the various departments within a firm.a. III and IV onlyb. II and III onlyc. I, II, and IV onlyd. II, III, and IV onlye. I, II, III, and IVFINANCIAL PLANNINGd 43. Financial planning, when properly executed,a. ignores the normal restraints encountered by a firm.b. ensures that the primary goals of senior management are fully achieved.c. reduces the necessity of daily management oversight of the business operations.d. helps ensure that proper financing is in place to support the desired level of growth.e. eliminates the need to plan more than one year in advance.III. PROBLEMSPRO FORMA STATEMENTSc 44. Baker’s Dozen has current sales of $1,400 and a profit margin of 7 percent. Thefirm estimates that sales will increase by 8 percent next year and that all costs willvary in direct relationship to sales. What is the pro forma net income?a. $90.72b. $98.00c. $105.84d. $107.84e. $119.84PRO FORMA STATEMENTSb 45. A firm, which is currently operating at full capacity, has sales of $2,000, currentassets of $600, current liabilities of $300, net fixed assets of $1,500, and a 5 percentprofit margin. The firm has no long-term debt and does not plan on acquiring any.The firm does not pay any dividends. Sales are expected to increase by 10 percentnext year. If all assets, liabilities and costs vary directly with sales, how muchadditional equity financing is required for next year?a. $10b. $70c. $170d. $200e. $210PRO FORMA STATEMENTSc 46. Jose’s Boxed Goods expects sales of $1,800 next year. The profit margin is 6percent and the firm has a 40 percent dividend payout ratio. What is the projectedincrease in retained earnings?a. $28.80b. $43.20c. $64.80d. $76.20e. $108.00FULL CAPACITY SALES LEVELd 47. Rosie’s currently has $1,200 in sales and is operating at 72 percent of the firm’scapacity. What is the full capacity level of sales?a. $864.00b. $1,333.33c. $1,428.00d. $1,666.67e. $1,728.00CAPITAL INTENSITY RATIOc 48. Roy and Flo’s Flowers has $1,300 of sales and $1,755 of total assets. The firm isoperating at 80 percent of capacity. What is the capital intensity ratio at full capacity?a. $.59b. $.93c. $1.08d. $1.43e. $1.69CAPITAL INTENSITY RATIOb 49. Kurt’s Adventures is operating at full capacity with a sales level of $1,200 and fixedassets of $900. What is the required addition to fixed assets if sales are to increase by20 percent?a. $160b. $180c. $240d. $320e. $360CAPACITY USAGE AND CAPITAL INTENSITY RATIOe 50. Ernie’s Electrical has a capital intensity ratio of 1.20 at full capacity. Currently, totalassets are $2,880 and current sales are $2,300. At what level of capacity is the firmcurrently operating?a. 63 percentb. 67 percentc. 69 percentd. 83 percente. 96 percentFULL CAPACITY SALES AND FIXED ASSETSd 51. A firm has current sales of $940,000 and is operating at 76 percent of its fixed assetcapacity. How fast can the firm grow before any new fixed assets are needed?a. 28.97 percentb. 29.08 percentc. 30.67 percentd. 31.58 percente. 33.33 percentSUSTAINABLE GROWTH AND DU PONT IDENTITYc 52. The Green Giant has a 5 percent profit margin and a 40 percent dividend payoutratio. The total asset turnover is 1.40 and the equity multiplier is 1.50. What is thesustainable rate of growth?a. 6.30 percentb. 6.53 percentc. 6.72 percentd. 6.80 percente. 6.83 percentSUSTAINABLE GROWTH AND DEBT-EQUITY RATIOb 53. A firm wants a sustainable growth rate of 2.68 percent while maintaining a 40percent dividend payout ratio and a 6 percent profit margin. The firm has a capitalintensity ratio of 2. What is the debt-equity ratio that is required to achieve thefirm’s desired rate of growth?a. .42b. .45c. .49d. .52e. .54SUSTAINABLE GROWTH AND PROFIT MARGINd 54. A firm has a plowback ratio of 80 percent and a sustainable growth rate of 7.759percent. The capital intensity ratio is 1.2 and the debt-equity ratio is .5. What is theprofit margin?a. 6.6 percentb. 6.8 percentc. 6.9 percentd. 7.2 percente. 7.4 percentSUSTAINABLE GROWTH AND RETENTION RATIOc 55. A firm wants to maintain a growth rate of 8 percent without incurring anyadditional equity financing. The firm maintains a constant debt-equity ratio of .5, atotal asset turnover ratio of .83, and a profit margin of 8 percent. What must theretention ratio be?a. 71.8 percentb. 72.7 percentc. 74.4 percentd. 75.1 percente. 76.3 percentSUSTAINABLE GROWTH AND OUTSIDE FINANCINGa 56. Guido’s Garden Supplies has sales of $180,000, net income of $14,400, total assetsof $280,000, total equity of $200,000, and paid $5,760 in dividends. The firmmaintains a constant dividend payout ratio. The firm is currently operating at fullcapacity. All costs and assets vary directly with sales. The firm does not want toobtain any additional external equity. At the sustainable rate of growth, how muchnew total debt must the firm acquire?a. $3,612b. $4,008c. $6,116d. $10,793e. $12,382INTERNAL GROWTH RATEc 57. N eal’s Nails has an 11 percent return on assets and a 30 percent dividend payoutratio. What is the internal growth rate?a. 7.11 percentb. 7.70 percentc. 8.34 percentd. 8.46 percente. 11.99 percentINTERNAL GROWTH RATEa 58. Katelyn’s Kites has n et income of $240 and total equity of $2,000. The debt-equityratio is 1.0 and the plowback ratio is 40 percent. What is the internal growth rate?a. 2.46 percentb. 3.00 percentc. 4.92 percentd. 5.88 percente. 6.00 percentThe following balance sheet and income statement should be used for questions #59 through #65:Make Me Think, Inc.2005 Income StatementNet sales $7,500Less: Cost of goods sold 6,415Less: Depreciation 200Earnings before interest and taxes 885Less: Interest paid 25Taxable Income $ 860Less: Taxes 300Net income $ 560Dividends $252Addition to retained earnings $308Make Me Think, Inc.2005 Balance Sheet2005 2005Cash $1,050 Accounts payable $1,750Accounts rec. 850 Long-term debt 330Inventory 2,100 Common stock 2,500Total $4,000 Retained earnings 1,020Net fixed assets 1,600Total assets $5,600 Total liabilities& equity $5,600RETENTION RATIOd 59. Make Me Think, Inc. maintains a constant dividend payout ratio. What is theirretention ratio?a. 40 percentb. 45 percentc. 50 percentd. 55 percentd. 60 percentINTERNAL GROWTH RATEb 60. Make Me Think, Inc. does not want to incur any additional external financing. Thedividend payout ratio is constant. What is their maximum rate of growth?a. 4.71 percentb. 5.82 percentc. 6.34 percentd. 9.48 percente. 11.11 percentSUSTAINABLE GROWTH RATEd 61. If Make Me Think, Inc. decides to maintain a constant debt-equity ratio, what rate ofgrowth can they maintain?a. 8.20 percentb. 8.75 percentc. 9.13 percentd. 9.59 percente. 9.84 percentEXTERNAL FINANCING NEED AT MAXIMUM CAPACITYb 62. Make Me Think, Inc. is currently operating at maximum capacity. All costs, assets, andcurrent liabilities vary directly with sales. The tax rate and the dividend payout ratiowill remain constant. How much additional debt is required if no new equity is raisedand sales are projected to increase by 10 percent?a. $30.30b. $46.20c. $329.00d. $354.20e. $363.00EXTERNAL FINANCING NEED AT LESS THAN MAXIMUM CAPACITYa 63. Make Me Think, Inc. is currently operating at 80 percent of capacity. All costs and networking capital vary directly with sales. The tax rate, the profit margin, and thedividend payout ratio will remain constant. How much additional debt is required if nonew equity is raised and sales are projected to increase by 10 percent?a. -$113.80b. $194.20c. $225.00d. $329.00e. $354.20INCREASE IN RETAINED EARNINGSd 64. Assume that the profit margin and the dividend payout ratio of Make Me Think, Inc.are constant. If sales increase by 12 percent, what is the projected addition to retainedearnings?a. $36.96b. $37.20c. $136.96d. $344.96e. $369.60INCREASE IN NET FIXED ASSETSa 65. Assume that Make Me Think, Inc. is currently operating at 85 percent of capacity andthat sales are projected to increase to $9,600. What is the projected addition to fixedassets?a. $141b. $367c. $448d. $660e. $776The following balance sheet and income statement should be used for questions #66 through #74:KNF, Inc.2005 Income StatementNet sales $10,300Less: Cost of goods sold 7,400Less: Depreciation 1,500Earnings before interest and taxes 1,400Less: Interest paid 340Taxable Income $ 1,060Less: Taxes 371Net income $ 689Dividends $310.05Addition to retained earnings $378.95KNF, Inc.2005 Balance Sheet2005 2005Cash $ 840 Accounts payable $ 1,010Accounts rec. 750 Long-term debt 4,800 Inventory 930 Common stock 5,300 Total $ 2,520 Retained earnings 3,770Net fixed assets 12,360Total assets $14,880 Total liabilities & equity $14,880PERCENTAGE OF SALESc 66. All costs and net working capital vary directly with sales. Sales are projected toincrease by 7 percent. What is the projected increase in accounts payable?a. $7.50b. $15.00c. $70.70d. $77.70e. $105.70RETAINED EARNINGSd 67. The profit margin, the debt-equity ratio, and the dividend payout ratio are constant.Sales are expected to increase by $875.50 next year. What is the projected additionto retained earnings for next year?a. $321.55b. $366.35c. $389.09d. $411.16e. $747.57TOTAL ASSETSe 68. Assume that KNF, Inc. is operating at full capacity. Also assume that all costs, networking capital, and fixed assets vary directly with sales. The debt-equity ratio andthe dividend payout ratio are constant. What is the projected increase in total assetsif sales are projected to increase by 12 percent?a. $302.40b. $1,116.08c. $1,483.20d. $1,503.33e. $1,785.60FULL CAPACITY SALES AND FIXED ASSETSa 69. Assume that KNF, Inc. is operating at 80 percent of capacity. All costs and networking capital vary directly with sales. What is the amount of total fixed assetsrequired if sales are projected to increase by 25 percent?a. $12,360b. $14,880c. $15,450d. $17,300e. $18,600EXTERNAL FINANCING NEEDa 70. Assume that KNF, Inc. is operating at full capacity. Also assume that assets andcosts vary directly with sales but liabilities do not. The dividend payout ratio isconstant. What is the external financing need if sales increase by 8 percent?。
Fundamentals of Financial Accounting (4)
4-4
1. Deferral Adjustments
An expense or revenue has been deferred if we have postponed reporting it on the income statement until a later period.
Sept. 1 Use-up rent benefits Sept. 30
4-6
2. Accrual Adjustments
Accrual adjustments are needed when a company has earned revenue or incurred an expense in the current period but has not yet recorded it because the related cash will not be received or paid until a later period.
4-3
Why Adjustments Are Needed
Income Statement
Revenues are recorded when earned. Expenses are recorded in the same period as the revenues to which they relate.
Assets (c) Accumulated Depr.(+xA) -$400 = Liabilities + Stockholders’ Equity Depreciation Expense (+E) -$400
2
Record (c) Depreciation Expense (+E, -SE) Accumulated Depreciation (+xA, -A)
(完整word版)国际财务管理课后习题答案chapter4
CHAPTER 4 CORPORATE GOVERNANCE AROUND THE WORLDSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQuestions1.The majority of major corporations are franchised as public corporations. Discuss the key strengthand weakness of the ‘public corporation’. When do you think the public corporation as an organizational form is unsuitable?Answer: The key strength of the public corporation lies in that it allows for efficient risk sharing among investors. As a result, the public corporation may raise a large sum of capital at a relatively low cost. The main weakness of the public corporation stems from the conflicts of interest between managers and shareholders.2.The public corporation is owned by multitude of shareholders but managed by professional managers.Managers can take self-interested actions at the expense of shareholders. Discuss the conditions under which the so-called agency problem arises.Answer: The agency problem arises when managers have control rights but insignificant cash flow rights. This wedge between control and cash flow rights motivates managers to engage in self-dealings at the expense of shareholders.3.Following corporate scandals and failures in the U.S. and abroad, there is a growingdemand for corporate governance reform. What should be the key objectives ofcorporate governance reform? What kind of obstacles can there be thwarting reformefforts?Answer: The key objectives of corporate governance reform should be to strengthen shareholder rights and protect shareholders from expropriation by corporate insiders, whether managers or large shareholders. Controlling shareholders or managers do not wish to lose their control rights and thus resist reform efforts.4.Studies show that the legal protection of shareholder rights varies a great deal acrosscountries. Discuss the possible reasons why the English common law traditionprovides the strongest and the French civil law tradition the weakest protection ofinvestors.Answer: In civil law countries, the state historically has played an active role in regulating economic activities and has been less protective of property rights. In England, control of the court passed from the crown to the parliament and property owners in seventeenth century. English common law thus became more protective of property owners, and this protection was extended to investors over time.5.Explain ‘the wedge’ between the control and cash flow rights and discuss its implications forcorporate governance.Answer: When there is a separation of ownership and control, managers have control rights with insignificant cash flow rights, whereas shareholders have cash flow rights but no control rights. This wedge gives rise to the conflicts of interest between managers and shareholders. The wedge is the source of the agency problem.6.Discuss different ways that dominant investors use to establish and maintain the control of thecompany with relatively small investments.Answer: Dominant investors may use: (i) shares with superior voting rights, (ii) pyramidal ownership structure, and (iii) inter-firm cross-holdings.7.The Cadbury Code of the Best Practice adopted in the United Kingdom led to a successful reform ofcorporate governance in the country. Explain the key requirements of the Code and discuss how it may have contributed to the success of reform.Answer: The Code requires that chairman of the board and CEO be held by two different individuals, and that there should be at least three outside board members. The recommended board structure helped to strengthen the monitoring function of the board and reduce the agency problem.8.Many companies grant stocks or stock options to the managers. Discuss the benefitsand possible costs of using this kind of incentive compensation scheme.Answer: Stock options can be useful for aligning the interest of managers with that of shareholders and reduce the wedge between managerial control rights and cash flow rights. But at the same time, stock options may induce managers to distort investment decisions and manipulate financial statements so that they can maximize their benefits in the short run.9.It has been shown that foreign companies listed in the U.S. stock exchanges are valued more thanthose from the same countries that are not listed in the U.S. Explain the reasons why U.S.-listed foreign firms are valued more than those which are not. Also explain why not every foreign firm wants to list stocks in the United States.Answer: Foreign companies domiciled in countries with weak investor protection can bond themselves credibly to better investor protection by listing their stocks in U.S. exchanges that are known to provide a strong investor protection. Managers of some companies may not wish to list shares in U.S. exchanges, subjecting themselves to stringent disclosure and monitoring, for fear of losing their control rights and private benefits.。
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Chapter 4 Time Value of Money: Valuing Cash Flow Streams
14. Perpetuities The British government has a consol bond outstanding paying £1,000 per year forever. Assume the current interest rate is 8% per year.
a. What is the value of the bond immediately after a payment is made?
Answer: p = C/r = 1000 / 8% = £ 12500
b. What is the value of the bond immediately before a payment is made?
Answer: p = 1000/8%+1000 = £ 13500
*18. Annuities When you purchased your car, you took out a five-year
annual-payment loan with an interest rate of 6% per year. The annual payment on the car is $5000. You have just made a payment and have now decided to pay off the loan by repaying the outstanding balance. What is the payoff amount for the following scenarios?
You have owned the car for one year (so there are four years left on the loan)? Answer: Present value of an annuity:
PV=C*(1/r)(1-1/(1+r)^n)=$5000*(1/0.06)(1-(1/1.06)^4)=17325.53
b. You have owned the car for four years (so there is one year left on the loan)? Answer: PV=$5000*(1/0.06)(0.06/1.06)=$4716.98
26. Growing Cash Flows You work for a pharmaceutical company that has developed
a new drug. The patent on the drug will last 17 years. You expect that the drug’s profits will be $2 million in its first year and that this amount will grow at a rate of 5% per year for the next 17 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero.What is the present value of the new drug if the interest rate is 10% per year?
Answer: Present value of a growing annuity:
pv=c*(1/r-g)(1-(1+g/1+r)^n)=2*(1/0.05)(1-(1.05/1.10)^17)=$21.861million *35. You are saving for retirement. To live comfortably, you decide you will need to save $2 million by the time you are 65. Today is your 22nd birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a savings account. If the interest rate is 5%, how much must you set aside each year to ensure that you will have $2 million in the account on your 65th birthday?
Answer: $2 billion=FV(annuity)=c*(1/0.05)(1.05^44-1)=c*(7.56/0.05) Therefore, C=$13233 Thus, I need to save $13233 each year.。