兹维博迪金融学第二版试题库7TB(1)

博迪《金融学》第2版名校考研真题【视频讲解】一、单选题1．以下货币制度中会发生劣币驱逐良币现象的是（）。

[中央财大2011金融硕士] A．金银双本位B．金银平行本位C．金币本位D．金汇兑本位【答案】A【解析】金银双本位制下金、银两种金属同时被法律承认为货币金属，金、银铸币都可自由铸造，都有无限的法定支付能力。

当金银铸币各按其本身所包含的价值并行流通时，市场上的商品就出现了金银两重价格，而这两重价格随金银市场比价的不断变动而变动。

为了克服由此造成的紊乱，很多国家用法律规定了金币与银币的比价。

但金银市场比价并不会由于法定比例的确定而不再发生变化。

于是法定比价和市场比价之间可能会出现差异，价值被高估的货币渐渐被贮藏，而劣币充斥市场。

金银平行本位是金银两种本位币按其所含金属的实际价值流通，国家对两种货币的交换不加规定，而由市场上的金银的实际比价自由确定金币和银币比价的货币制度。

在金本位制下，每单位的货币价值等同于若干重量的黄金（即货币含金量）；当不同国家使用金本位时，国家之间的汇率由它们各自货币的含金量之比——铸币平价（Mint Parity）来决定。

金汇兑本位制（Gold Exchange Standard）又称“虚金本位制”，该国货币一般与另一个实行金本位制或金块本位制国家的货币保持固定的比价，并在后者存放外汇或黄金作为平准基金，从而间接实行了金本位制。

实际上，它是一种带有附属性质的货币制度。

当然，无论金块本位制或金汇兑本位制，都是削弱了的金本位制，很不稳定。

而这种脆弱的制度经过1929年～1933年的世界经济危机，终于全部瓦解。

2．面值为100元的永久性债券票面利率是10%，当市场利率为8%时，该债券的理论市场价格应该是（）元。

[中央财大2011金融硕士]A．100B．125C．110D．1375【答案】B 【解析】该债券的理论市场价格应该是（元）125%8%10100=⨯==m r C P 。

3．实际利率为3%，预期通货膨胀率为6%，则名义利率水平应该近似地等于（）。

Chapter SevenPrinciples of Market ValuationThis chapter contains 30 multiple choice questions, 10 short problems and 5longer problems.Multiple Choice1.In regard to an asset, the ________ is defined as the process well-informedinvestors must pay for it in a free and competitive market.(a)analyst value(b)technical value(c)competitive value(d)fundamental valueAnswer: (d)2.In corporate finance decision making, an extremely important rule is tochoose the investment that ________ current shareholders’ wealth.(a)minimizes(b)maximizes(c)provides zero change in(d)jeopardizesAnswer: (b)3.In asset valuation, the method used to accomplish the estimation depends onthe ________.(a)number of participants(b)quality of calculating instruments(c)richness of the information set available(d)geographic locationAnswer: (c)4.The ________ states that in a competitive market, if two assets areequivalent, they will tend to have the same market price.(a)Law of Real Interest Rates(b)Law of One Price(c)Law of Price Equivalency(d)Law of FuturesAnswer: (b)5.The Law of One Price is enforced by a process called ________, the purchaseand immediate sale of equivalent assets in order to earn a sure profit froma difference in their prices.(a)swapping(b)maximization(c)arbitrage(d)speculationAnswer: (c)6.________ refers to the totality of costs such as shipping, handling,insuring, and broker fees.(a)Shipping costs(b)Transaction costs(c)Installation costs(d)Insurance costsAnswer: (b)7.The Law of One price is a statement about the price of one asset ________the price of another.(a)absolute to(b)relative to(c)multiplied by(d)independent ofAnswer: (b)8.If an entity borrows at a lower rate and lends at a higher rate, this is anexample of ________.(a)opportunity arbitrage(b)interest-rate arbitrage(c)exchange arbitrage(d)nominal arbitrageAnswer: (b)9.If arbitrage ensures that any three currencies are freely convertible incompetitive markets, then:(a)it is enough to know only one exchange rate to determine the third(b)we can estimate two exchange rates based on one exchange rate only(c)it is enough to know the exchange rates between any two in order todetermine the third(d)it is necessary to know all three ratesAnswer: (c)10.Suppose you have $15,000 in a bank account earning an interest rate of 4%per year. At the same time you have an unpaid balance on your credit card of $6,000 on which you are paying an interest rate of 17% per year. Whatarbitrage opportunity do you face?(a)$240 per year(b)$600 per year(c)$780 per year(d)$1,020 per yearAnswer: (c)11.If the dollar price of Japanese Yen is $0.009594 per Japanese Yen and thedollar price of Chinese Yuan is $0.1433 per Chinese Yuan, what is theJapanese Yen price of a Chinese Yuan? (i.e., JPY/CNY)(a)0.001375 JPY/CNY(b)0.066950 JPY/CNY(c)9.594 JPY/CNY(d)14.936419 JPY/CNYAnswer: (d)12.If the dollar price of guilders is $0.5634 per Guilder and the dollar priceof Euros is $1.5576 per Euro, what is the Euro price of the Guilder? (i.e.,EUR/ANG)(a)0.361700 EUR/ANG(b)0.877552 EUR/ANG(c) 2.764643 EUR/ANG(d) 5.634 EUR/ANGAnswer: (d)13.Suppose the price of gold is 51.09 British pounds per ounce. If the dollarprice of gold is $100 per ounce, what would you expect the dollar price ofa British pound to be?(a)$1.95733 per GBP(b)$1.5109 per GBP(c)$0.5109 per GBP(d)$0.4891 per GBPAnswer: (a)Questions 14-18 refer to the following exchange rate table. To answer 14-18you will have to fill in the missing exchange rates.Peso (MXN) Euro (EUR) Cdn Dlr (CAD) U.S. Dollar(USD)U.S. Dollar $1Peso 10.398Euro 0.6420Cdn Dlr 1.000314.What is the Euro/Peso exchange rate? (i.e., EUR/MXN)(a)0.617426EUR/MXN(b)0.641807 EUR/MXN(c) 6.675516 EUR/MXN(d)16.196262 EUR/MXNAnswer: (a)15.What is the Cdn Dlr/Euro exchange rate? (i.e., CAD/EUR)(a)0.641807 CAD/EUR(b) 1.558099 CAD/EUR(c) 6.420 CAD/EUR(d)16.196262 CAD/EURAnswer: (b)16.What is the Euro/Cdn Dlr exchange rate? (i.e., EUR/CAD)(a)0.3583 EUR/CAD(b)0.641807 EUR/CAD(c) 1.558099 EUR/CAD(d)10.394 EUR/CADAnswer: (b)17.What is the Peso/Cdn Dlr exchange rate? (i.e., MXN/CAD)(a)0.096201 MXN/CAD(b)0.641807 MXN/CAD(c)10.394882 MXN/CAD(d)16.196262 MXN/CADAnswer: (c)18.What is the Peso/Euro exchange rate? (i.e., MXN/EUR)(a)0.617426 MXN/EUR(b) 6.675516 MXN/EUR(c)15.581112 MXN/EUR(d)16.196262 MXN/EURAnswer: (d)19.You are travelling in FarOut where you can buy 130 kranes (a krane beingthe unit of currency of FarOut) with a U.S. dollar at official FarOut banks.Your tour guide has a relative who dabbles in the black market and thisparticular relative will sell you kranes for just $0.00833 each on theblack market. How much will you lose or gain by exchanging $200 on theblack market instead of going to the bank?(a)you would gain approximately 1,660 kranes(b)you would lose approximately 1,660 kranes(c)you would gain approximately 1,990 kranes(d)you would lose approximately 1,990 kranesAnswer: (d)20.In estimating the value of a share of a firm’s stock, a simple model isto :(a)divide EPS by a P/E multiple(b)multiply EPS by a P/E multiple(c)multiply EPS by EAT(d)divide EPS by market valueAnswer: (b)21.A firm’s earnings per share are $6 and the industry average P/E multipleis 9. What would be an estimate of the value of a share of the firm’s stock?(a)$54.00(b)$45.00(c)$1.50(d)$0.67Answer: (a)22.The value of the asset as it appears in the financial statement is calledthe asset’s ________.(a)market value(b)fixed value(c)book value(d)expected value Answer: (c)23.Consider the following stock market reaction to the information containedin a company’s announcement. A corporation has just announced that it must pursue the issuance of company equity. We could expect to see ________ inthe price of company stock.(a) a rise(b) a drop(c) a rapid rise(d)zero changeAnswer: (b)24.Consider what the stock market reaction to the following announcement wouldbe. A corporation has just announced that it is engaging in a stock splitof the company’s shares. We could expect to see a ________ in the overall market capitalization rate and a ________ in the price of company stock.(a)rise; drop(b)drop; rise(c)rise; drop(d)rise; dropAnswer: (a)25.The ________ is the proposition that an asset’s current price fullyreflects all publicly available information about future economicfundamentals affecting the asset’s value.(a)public markets hypothesis(b)efficient markets exchange rates(c)fundamental value proposition(d)efficient markets hypothesisAnswer: (d)26.The market price of an asset reflects the ________ of all analysts’opinions with heavier weights on analysts who control large amounts ofmoney and on those analysts who have better than average information.(a)best estimate(b)weighted average(c)highest estimate(d)lowest estimate Answer: (b)27.Assume that the worldwide risk-free real rate of interest is 4% per year.Inflation in Denmark is 9% per year and in the United States it is 7% peryear. Assuming there is no uncertainty about inflation, what are theimplied nominal interest rates denominated in Danish krone and in U.S.dollars, respectively?(a)16.63% (DKK); 13.50% (USD)(b)13.50% (DKK); 16.63% (USD)(c)13.36% (DKK); 11.28% (USD)(d)11.28% (DKK); 13.36% (USD)Answer: (c)28.The ________ theory states that the expected real interest rate on risk-free loans is the same all over the world.(a)nominal interest-rate parity(b)real interest-rate parity(c)efficient inflation rate parity(d)efficient market rateAnswer: (b)29.________ states that exchange rates adjust so as to maintain the same“real” price of a “representative” basket of goods and services aroundthe world.(a)Purchasing power parity(b)Efficient markets hypothesis(c)Market valuation model(d)Exchange rate equityAnswer: (a)30.Assume that the worldwide risk-free real rate of interest is 5% per year.Inflation in Australia is 9% per year and in Great Britain it is 12% peryear. Assuming there is no uncertainty about inflation, what are the implied nominal interest rates denominated in Australian dollars and GreatBritain pounds, respectively?(a)22.08% (AUD), 11.45% (GBP)(b)11.45% (AUD), 22.08% (GBP)(c)17.60% (AUD), 14.45% (GBP)(d)14.45% (AUD), 17.60% (GBP) Answer: (d)Short Problems1.Suppose you have $20,000 in a bank account earning an interest rate of 4%per year. At the same time you have an unpaid balance on your credit cardof $7,000 on which you are paying an interest rate of 18% per year. What isthe arbitrage opportunity you face?Answer: You could take $7,000 out of your bank account and pay downyour credit card balance. You would give up 4% per year in interestearnings ($280) but you would save 18% per year in interest expenses($1,260). So the arbitrage opportunity is worth $980 per year.2.Fill in the missing exchange rates in the following table:U.S. Dollar Euro Danish Krone Japanese Yen U.S. Dollar $1 1.5576 0.2088 0.009594Euro 0.6420Danish Krone 4.7898Japanese Yen 104.23Answer:U.S. Dollar Euro Danish Krone Japanese Yen U.S. Dollar $1 1.5576 0.2088 0.009594Euro 0.6420 1 Euro 0.1340 0.006159 Danish Krone 4.7898 7.46074 1 Krone 0.45954 Japanese Yen 104.23 162.35 21.761 Yen 13.You observe that the dollar price of the Mexican peso is $0.09618 and thedollar price of the Canadian dollar is $0.9997. What must the exchange ratebetween the Mexican peso and the Canadian dollar be for there to be no arbitrage opportunity?Answer: CAD/MXN = 0.096180.9997= 0.096208 CAD/MXN4.Suppose that the exchange rate is $0.2970 to the Israeli shekel. How couldyou make arbitrage profits with $10,000 if the dollar price of gold is $200per ounce and the shekel price is 750 ILS per ounce?Answer: Take $10,000 and buy 50 ounces of gold at $200 per ounce. Sell 50ounces of gold in Israel for 37,500 ILS (750 ILS per ounce). Take 37,500ILS and exchange it into dollars worth $11,137.50. The arbitrage profit is$1,137.50.5.You are travelling in FarOut where you can buy 150 kranes (a krane beingthe unit of currency in FarOut) with a U.S. dollar at official FarOut banks.Your tour guide has a relative who dabbles in the black market and this particular relative will sell you kranes for just $0.00685 each on the black market. How much would you gain or lose by exchanging $300 on the black market instead of going to the bank?Answer:On the official market: $300 x 150 kranes = 45,000 kranesOn the black market: $300 x 1/0.00685 kranes = 43,796 kranesHence, you would lose 1,204 kranes.6. A firm’s earnings per share are $5.50 and the industry average P/Emultiple is 8. What would be an estimate of the value of a share of the firm’s stock? Is it possible for firms being classified in the same industry to have different price/earnings multiples?Answer:Estimated value share of stock = firm’s EPS x Industry average P/E= $5.50 x 8= $44.00Firms classified as being in the same industry may have different opportunities for growth in the future and may therefore differ in their P/E multiples.7.The P/E multiple of BHM Corporation is currently 5, while the P/E ratio ofthe S&P 500 is 10. What reasons could account for this difference?Answer:BHM’s reported earnings may be higher than they are expected to bein the future, or they may be inflated due to special accountingmethods used by BHM.BHM may be riskier than the S&P 500 either because it is in arelatively risky industry or has a relatively higher debt ratio.8.The price of Hubris Co. stock recently jumped when the CEO for the companyannounced an increased dividend payment for the year. What might account for such a market reaction?Answer: The market may believe the company’s future prospects look very bright (that is, higher earnings, less risk, sound growth, etc.)and that the company can sustain such an earnings growth.9.Assume that the worldwide risk-free real rate of interest is 4% per year.Denmark has an expected rate of inflation of 9% per year and in Spain hasan expected rate of inflation of 14% per year. Assuming there is no uncertainty about inflation, what are the implied nominal interest rates denominated in Kroner and Euros?Answer: Denmark: nominal interest rate = (1.04) x (1.09) – 1= 13.36% per yearSpain: nominal interest rate = (1.04) x (1.14) –1= 18.56% per year10.Assume that the worldwide risk-free real rate of interest is 4% per year.The United Kingdom has an expected rate of inflation of 8% per year and inBelgium it is 10% per year. Assuming there is no uncertainty about inflation, what are the implied nominal interest rates denominated in Pounds Sterling and Euros?Answer: United Kingdom: nominal interest rate = (1.04) x (1.08) – 1= 12.32% per yearBelgium: nominal interest rate = (1.04) x (1.10) – 1= 14.40% per yearLonger Problems1.Let’s assume that you have operated your own business for 18 years. Forthe most recent fiscal year, sales were $15 million. Net Income for themost recent fiscal year was $1.5 million. The book value of your businesswas $11 million. Recently, a firm which is engaged in similar activities toyour own was sold and the following information was made public:Multiple of Book Value 0.8xMultiple of Net Income 11xMultiple of Sales 0.7xa)How would you determine an appropriate range of value for yourcompany?b)It has come to your attention that your company has futureinvestment opportunities that would be less profitable than thecompeting company above. What does this say about the valuation ofyour company?Answer: a) Multiple of Sales: 0.7x = $15 million x 0.7 =$10.5 millionMultiple of Net Income: 11x = $1.5 million x 11 = $16.5millionMultiple of Book Value: 0.8x = $11 million x 0.8 = $8.8millionb) The valuation of your company would be at the lower end ofthe range.2.BHM stock is trading for $47 per share on the NYSE and $45 per share on theSydney Stock Exchange. Assume that the costs of buying and selling BHMstock are negligible.a)How can you make an arbitrage profit?b)Over time what would you expect to happen to stock prices in NewYork and Sydney?c)Now assume that the cost of buying and selling shares of BHM are 2%per transaction. How does this affect your answers?Answer: a) You could buy BHM stock in Sydney and simultaneouslysell it in New York. Your arbitrage profit would be$2 per share.b)The prices would become equal.c)There could remain a 2% discrepancy between theprices which would be $1.84 in this instance.3.Suppose you have $50,000 in a bank account earning an interest rate of 3.5%per year. At the same time you have an unpaid balance on your credit cardof $13,000 on which you are paying an interest rate of 21% per year. Whatis the arbitrage opportunity you face?Answer: You could take $13,000 out of your bank account and pay downyour credit card balance. You would give up 3.5% per year in interestearnings ($455) but you would save 21% per year in interest expenses($2,730). So the arbitrage opportunity is worth $2,275 per year.4.The quotes from Hubris Bank and Modesty Bank are given below:Hubris Bank: 106 Yen/$Modesty Bank: 104 Yen/$Answer the following questions based on these figures.a)If we assume no transaction costs, there is evidently an opportunityfor arbitrage here. If an arbitrageur started with $10,000, exactlyhow would (s)he make profits and how much profit would (s)he make?b)As many traders engage in arbitrage who do you expect to see in theabove quotes at these two banks?c)If there is a 1% transaction cost for transactions is there still anopportunity for arbitrage?Answer:Hubris Bank: 106 Yen/$ Modesty Bank: 104 Yen/$a)At Hubris Bank, buy Yen with dollars (Yen are cheaper).At Modesty Bank, buy dollars with Yen (dollars are cheaper).Start with $10,000:At Hubris Bank: $10,000 x 106 Yen/$ = 1,060,000 YenAt Modesty Bank: 1,060,000 Yen x 1$/104 Yen = $10,192.31You make a profit of $192.31.b)The Yen will appreciate at Hubris Bank and it will depreciate atModesty Bank. Eventually the exchange rate will stabilize between106 Yen/$ and 104 Yen/$.c)Assume 1% transaction cost.At Hubris Bank: $10,000 (0.99) x 106 Yen/$ = 1,049,400 Yen At Modesty Bank: 1,049,400 Yen x (0.99) x $1/104 Yen =$10,090.38There is still an opportunity for arbitrage profit, but it hasdecreased from $192.31 to $90.38.实用标准文案5.In the United States, the real rate of return is expected to be 5% and inSwitzerland it is expected to be 4%.a)If the inflation rate in the United States is expected to be 6%and the Swiss inflation rate is expected to be 8%, what will thenominal interest rates be in the United States and Switzerland?b)Are these markets in equilibrium? Where would you prefer toinvest and why?c)What if the Swiss inflation rate were 6%? Are the markets inequilibrium?d)What are the respective nominal rates if the worldwide risk-freereal rate of return is 4% and inflation in the U.S. is 6% and inSwitzerland it is 8%?Answer:a) United States: Nominal interest rate = (1.05)(1.06) – 1= 11.30% per yearSwitzerland: Nominal interest rate = (1.04)(1.08) – 1= 12.32% per yearb)The markets are not in equilibrium. Investors will go where thereal rate is highest. That is, in the U.S.c) United States: Nominal interest rate = (1.05)(1.06)– 1= 11.30% per yearSwitzerland: Nominal interest rate = (1.04)(1.06) – 1= 10.24% per yearMarkets are still not in equilibrium.d) United States: Nominal interest rate = (1.04)(1.06) – 1= 10.24% per yearSwitzerland: Nominal interest rate = (1.04)(1.08) – 1= 12.32% per year精彩文档。

Chapter NineValuation of Common StocksThis chapter contains 47 multiple choice questions, 17 short problems, and 9 longer problems. Multiple Choice1.In a quote listing of stocks, the ________ is defined as the annualized dollar dividend dividedby the stock’s price, and is usually expressed as a percentage.(a)cash dividend(b)dividend payout(c)dividend coverage(d)dividend yieldAnswer: (d)2.According to the discounted-dividend model, the price of a share of stock is the ________value of all expected ________ dividends per share, discounted at the market capitalization rate.(a)present; current(b)present; future(c)future; future(d)future; currentAnswer: (b)3.The value of common stock is determined by which of the following expected cash flows?(a)dividends and interest payments(b)dividends and maturity value of stock(c)dividends and net cash flows from operations of the firm(d)interest payments and maturity valueAnswer: (c)4.The ________ is the expected rate of return that investors require in order to be willing toinvest in the stock.(a)market capitalization rate(b)risk-adjusted discount rate(c)cost of debt(d)a and bAnswer: (d)5.The ________ of dividends is the most basic assumption underlying the discounted dividendmodel.(a)industry average(b)non-constant growth(c)constant growth(d)variabilityAnswer: (c)6.BHM stock is expected to pay a dividend of $2.50 a year from now, and its dividends areexpected to grow by 6% per year thereafter. What is the price of a BHM share if the market capitalization rate is 7% per year?(a)$250.00(b)$192.31(c)$25.00(d)$19.23Answer: (c)7.IOU stock is expected to pay a dividend of $1.67 a year from now, and its dividends are notexpected to grow in the foreseeable future. If the market capitalization rate is 7%, what is the current price of a share of IOU stock?(a)$11.69(b)$23.86(c)$116.90(d)$238.60Answer: (b)8.GMATS stock is currently selling for $34.50 a share. The current dividend for this stock is$1.60 and dividends are expected to grow at a constant rate of 10% per year thereafter. What must be the market capitalization rate for a share of GMATS stock?(a)4.90%(b)5.36%(c)14.64%(d)15.10%Answer: (d)9.Avacor stock is expected to pay a dividend of $1.89 a year from now, and its dividends areexpected to grow at a constant rate of 5% per year thereafter. If the market capitalization rate is 14% per year, what is the current price of a share of Avacor stock?(a)$13.50(b)$18.90(c)$21.00(d)$37.80Answer: (c)10.GRITO stock is currently selling for $46.10 a share. If the company is expected to pay adividend of $5.60 a year from now and dividends are not expected to grow thereafter, what is the market capitalization rate for a share of GRITO stock?(a)7.56%(b)8.23%(c)10.50%(d)12.15%Answer: (d)11.In the DDM model, if D1 and k are held constant, what will happen to the price of a stock ifthe constant growth rate gets higher?(a)the price of the stock will be higher(b)the price of the stock will hold constant(c)the price of the stock will be lower(d)it cannot be determined from the information givenAnswer: (a)12.The relation between earnings and dividends in any period is ________.(a)Dividends = Earnings/Net New Investment(b)Dividends = Earnings x Net New Investment(c)Dividends = Earnings + Net New Investment(d)Dividends = Earnings – Net New InvestmentAnswer: (d)13.Consider a firm called Nowhere Corporation, whose earnings per share are $12. The firminvests an amount each year that is just sufficient to replace the production capacity that is wearing out, and so the new investment is zero. The firm pays out all its earnings asdividends. Calculate the price of a share of Nowhere Corporation stock, give that k = 14%.(a)$168.00(b)$166.67(c)$85.71(d)$82.40Answer: (c)14.Consider a firm called SureBet Corporation. SureBet reinvests 55% of its earnings each yearinto new investments that earn a rate of return of 17% per year. Currently, SureBetCorporation has earnings per share of $12 and pays out 45% or $5.40 as dividends. Calculate the growth rate of earnings and dividends.(a)7.65%(b)8.50%(c)9.35%(d)24.75%Answer: (c)15.What adds value to the current price of a share of stock is ________.(a)growth per se(b)tax advantages(c)investment opportunities that earn rates of return > k(d)all of the aboveAnswer: (c)16.In order to evaluate the stock of Beltran Inc., an analyst uses the constant growth discounteddividend model. Expected earnings of $12 per share is assumed, as are an earnings retention rate of 70% and an expected rate of return on future investments of 17% per year. If the market capitalization rate is 14% per year, calculate the price for a share of Beltran stock.(a)$171.43(b)$367.35(c)$400.00(d)$857.14Answer: (a)17.In order to evaluate the stock of The Rendell-Vine Corporation, an analyst uses the constantgrowth discounted dividend model. Expected earnings of $12 per share is assumed, as are an earnings retention rate of 70% and an expected rate of return on future investments of 17% per year. If the market capitalization rate is 14% per year, what is the implied net present value of future investments?(a)$314.29(b)$281.64(c)$171.43(d)$85.72Answer: (d)18.In order to evaluate the stock of Toys’R’Me, an analyst uses the constant growthdiscounted dividend model. Expected earnings of $14 per share is assumed, as are anearnings retention rate of 60% and an expected rate of return on future investments of 17% per year. If the market capitalization rate is 15% per year, what is the implied net present value of future investments?(a)$23.34(b)$70.00(c)$93.34(d)$116.67Answer: (a)19.Firms with consistently high P/E multiples are interpreted to have either relatively ________market capitalization rates or relatively ________ present value of value-added investments.(a)low; low(b)high; high(c)high; low(d)low; highAnswer: (d)20.In a “frictionless” financial environment, the shareholders wealth is ________ the dividendpolicy the firm adopts.(a)increased by(b)decreased by(c)not affected by(d)determined byAnswer: (c)21.In a ________ the company pays cash to buy shares of its stock in the stock market, therebyreducing the number of shares outstanding.(a)cash dividend(b)share repurchase(c)stock split(d)a and bAnswer: (b)22.Stock splits and stock dividends ________ the number of shares of stock outstanding.(a)decrease(b)do not alter(c)increase(d)a or bAnswer: (c)23.SureBet Corporation has total assets with a market value of $15 million: $3 million in cashand $12 million in other assets. The market value of its debt is $3 million; of its equity $12 million. There are 1,000,000 shares of SureBet common stock outstanding, each with amarket price of $12. If SureBet distributes a cash dividend of $1.50 per share, the market value of its assets and of its equity ________ by ________.(a)increases; $1.5 million(b)increases; $10.5 million(c)decreases; $1.5 million(d)decreases; $10.5 millionAnswer: (c)24.SureBet Corporation has total assets with a market value of $15 million: $3 million in cashand $12 million in other assets. The market value of its debt is $3 million; of its equity $12 million. There are 1,000,000 shares of SureBet common stock outstanding, each with amarket price of $12. If SureBet repurchases shares worth $2.4 million, the resulting number of shares outstanding is ________ , with a price per share of ________.(a)200,000; $15(b)200,000; $12(c)800,000; $15(d)800,000; $12Answer: (d)25.“Frictions” that can cause a firm’s dividend policy to have an effect on the wealth ofshareholders include:(a)regulations(b)taxes(c)cost of external finance(d)all of the aboveAnswer: (d)26.Outside investors may interpret an increase in a corporation’s cash dividend as ________sign.(a)a positive sign(b)a negative sign(c)an indifferent sign(d)b or cAnswer: (a)27.From the perspective of a shareholder with regard to personal taxation, it is always ________for the corporation to pay out cash by ________.(a)better; cash dividends(b)worse; cash dividends(c)worse; share repurchases(d)it varies according to the situationAnswer: (b)28.An increase in a corporation’s cash dividend is most likely to ________.(a)decrease the price of its stock(b)increase the price of its stock(c)have no impact on the price of its stock(d)decrease trading activity of its stockAnswer: (b)29.Raising cash by issuing new stock is ________ to the corporation than raising cash byforegoing the payments of dividends.(a)is less costly(b)is more costly(c)is no different(d)just as costlyAnswer: (b)30.Gough Fraser is considering purchasing the stock of ASIOA Companies, which he plans tohold indefinitely. ASIOA just paid an annual dividend of $2.50 and the price of the stock is $48 per share. The earnings and dividends of the company are expected to grow forever at a rate of 6 percent per year. What annual rate of return does Gough expect on his investment?(a)10.58%(b)11.21%(c)11.52%(d)12.46%Answer: (c)31.Beazley Inc. just paid a dividend of $3.00 per share. This dividend is expected to grow at asupernormal rate of 15 percent per year for the next two years. It is then expected to grow at a rate of 6 percent per year forever. The appropriate discount rate for Beazley’s stock is 17 percent. What is the price of the stock?(a)$17.64(b)$27.27(c)$33.78(d)$46.15Answer: (c)32.Beazley Corporation would like to raise $100,000,000 by issuing preferred stock. Thepreferred stock will have a par value of $1,000 per share and pay a dividend of $72 per year.If the required rate of return for this stock is 16 percent, how many shares of preferred stock must Beazley issue?(a)450(b)16,000(c)222,222(d)265,332Answer: (c)33.If you use the constant dividend growth model to value a stock, which of the following iscertain to cause you to increase your estimate of the current value of the stock?(a)Decreasing the required rate of return for the stock(b)Decreasing the estimate of the amount of next year’s dividend(c)Decreasing the expected dividend growth rate(d)All of the aboveAnswer: (a)34.The constant dividend growth model may be used to find the price of a stock in all of thefollowing situations except when:(a)g < k(b)k < g(c)g = 0(d)k≠ gAnswer: (b)35.CarsonCorp just paid an annual dividend of $3.00. Dividends are expected to grow at aconstant rate forever. The price of the stock is currently $63.00. The required rate of return for this stock is 15 percent. What is the expected growth rate of CarsonCorp’s dividend?(a)5.00%(b)5.48%(c)6.33%(d)10.00%Answer: (a)36.The common stock of Century Inc. is expected to pay a dividend of $2.00 one year fromtoday. After that the dividend is expected to grow at a rate of 10 percent per year for two years and then at a rate of 5 percent per year forever. If the required rate of return for this stock is 15 percent what is the current price?(a)$12.00(b)$18.29(c)$21.69(d)$25.40Answer: (c)37.A firm’s common stock is trading at $80 per share. In the past the firm has paid a constantdividend of $6 per share. However, the company has just announced new investments that the market did not know about. The market expects that with these new investments, thedividends should grow at 4% per year forever. Assuming that the discount rate remains the same, what will be the price of the stock after the announcement?(a)$94.50(b)$156.00(c)$171.43(d)$178.29Answer: (d)38.If the model below is to give a reasonable valuation of a stock, which of the followingpossible situations must be excluded?P0 = D1/(r – g)(a)There is no growth.(b)The growth rate exceeds the required rate of return.(c)The required rate of return is exceptionally high.(d)Growth is constant.Answer: (b)39.According to the constant growth model of stock valuation, capital appreciation in commonstock is a direct result of ________.(a)growth in future dividends(b)a reduction in the required rate of return(c)growth in corporate assets(d)a growth rate that exceeds the required rate of returnAnswer: (a)Questions 40 through 43 refer to the following information:New competition in Sophco’s market is going to have an impact on the growth in thefirm’s dividends. A current dividend of $1.00 was paid yesterday by Sophco, and thisdividend is expected to increase by 25% in the first year. After that point, the growth individends is expected to “decay” to the firm’s long-run constant growth of 10%. Sucha “decay” process is one in which dividend growth declines by 5 percentage points peryear up to the point where the expected constant rate of dividend growth is reached. So,year 2 dividend will be 20 percent higher than year 1, year 3 dividends will be 15 percent higher than year 1, and after year 3, dividends will grow by 10 percent forever. Forproblems 40 – 43, assume investors in Sophco require a rate of return of 15%.40.Calculate Sophco’s dividend in year 2.(a)$1.13(b)$1.25(c)$1.5(d)$1.73Answer: (c)41.Calculate the Sophco’s dividend in year 4.(a)$1.24(b)$1.57(c)$1.73(d)$1.90Answer: (d)42.Determine the price of Sophco’s stock at the end of year 3 (just after the dividend has beenpaid).(a)$26.12(b)$28.34(c)$38.00(d)$39.73Answer: (c)43.Calculate the current price of Sophco’s stock.(a)$26.12(b)$28.34(c)$38.00(d)$39.73Answer: (b)Questions 44 through 47 refer to the following information:New competition in Acme Unlimited’s market is going to have an impact on the growth of the firm’s dividends. A current dividend of $1.50 was paid yesterday, and thisdividend is expected to increase by 35% in the first year. After that point, the growth individends is expected to “decay” to the firm’s long run constant growth of 5%. Such a “decay” process is one in which dividend growth declines by 10 percentage points per year up to the point where the expected constant rate of dividend growth is reached. So, year 2 dividend will be 25 percent higher than year 1, year 3 dividend will be 15 percent higher, and after year 3, dividends will grow by 5 percent forever. Assume that investors require a rate of return of 17 on Acme Unlimited’s stock.44.Calculate the dividend in year 2.(a)$2.54(b)$2.92(c)$3.21(d)$3.30Answer: (a)45.Calculate the dividend in year 4.(a)$2.35(b)$2.54(c)$3.21(d)$3.53Answer: (c)46.Determine the price of Acme Unlimited’s stock at the end of year 3 (just after the dividendhas been paid).(a)$22.13(b)$26.75(c)$29.67(d)$34.24Answer: (b)47.Calculate the current price of Acme Unlimited’s stock.(a)$22.13(b)$26.75(c)$29.67(d)$34.24Answer: (a)Short Problems1.Discuss the two ways in which a corporation can distribute cash to its shareholders.Answer:There are two ways a corporation can distribute cash to its shareholders: by paying acash dividend or by repurchasing the company’s shares in the stock market. When acompany pays a cash dividend, all shareholders receive cash in amounts proportional to the number of shares they own.In a share repurchase, the company pays cash to buy shares of its stock in the stockmarket, thereby reducing the number of shares outstanding. In this case, onlyshareholders who choose to sell some of their shares will receive cash.2.Does growth “per se” add value to the current price of a share? If not, what does add valueto a share’s current price?Answer:Growth per se does not add value. What adds value is the opportunity to invest inprojects that can earn rates of return in excess of the required rate, k. When a firm’sfuture investment opportunities yield a rate of return equal to k, the stock’s value can be estimated using the formula P0 = E1/k.3.In order to evaluate the stock of DippinDonuts, an analyst uses the constant growthdiscounted dividend model. Expected earnings of $15 per share are assumed, as are anearnings retention rate of 70% and an expected rate of return on future investments of 18% per year. If the market capitalization rate is 15% per year, what is the implied net present value of future investments?Answer:g = 0.7 x 0.18= 12.6%Use the constant growth formula to solve for P0:P0 = D1/(k – g)= 4.50/(0.15-0.126)= $187.50Next find P0 with the formula P0 = E1/k:= 15/0.15= $100The NPV of future investments is the difference between these two values: $187.50 –$100 = $87.504.In order to evaluate the stock of EasyStreet Corporation, an analyst uses the constant growthdiscounted dividend model. Expected earnings of $16 per share are assumed, as are anearnings retention rate of 60% and expected rate of return on future investments of 17% per year. If the market capitalization rate is 14% per year, what is the implied net present value of future investments?Answer:g = 0.6 X 0.17= 10.2%Use the constant growth formula to solve for P0:P0 = D1/(k – g)= $6.40/(0.14 – 0.102)= $168.42Next find P0 with the formula P0 = E1/k:= 16/0.14= $114.29The NPV of future investments is the difference between the two values: $168.42 –$114.29 = $54.13.anic Earth stock is expected to pay a dividend of $2.70 per share a year from now, and itsdividends are expected to grow by 7% per year thereafter. If its price is now $30 per share, what must be the market capitalization rate?Answer:Use the constant growth formula to solve for k:P0 = D1/(k – g)30 = 2.70/(k – 0.07)k = 16%6.Walch stock currently sells for $27.62 a share, and is expected to pay a dividend of D1 a yearfrom now. If its dividends are expected to grow by 4.5% per year thereafter and thecapitalization rate is 15% per year, what is the value of D1?Answer:Use the constant growth formula to solve for D1:P0 = D1/(k – g)D1 = P0(k – g)= $27.62(0.15 – 0.045)= $2.907.Discuss how outside investors may interpret an increase in a corporation’s cash dividend asopposed to a decrease.Answer:Investors may interpret an increase in a corporation’s cash dividend as a positive sign since it would suggest that management is confident the earnings can be sustained in the future.The result is most likely to be an increase in stock price. A decrease could be viewed as a bad signal that will most likely cause a decline in stock price.8.Consider the balance sheet of SureThing Corporation:Assets Liabilities and Shareholders’ EquityCash: $3 million Debt: $3 millionOther Assets: $11 million Equity: $11 millionTotal: $14 million Total: $14 millionNumber of shares outstanding = 440,000Price per share = $25If SureThing pays a cash dividend of $2.50 per share, what will the balance sheet look like afterward?Answer:Balance sheet after payment of cash dividend:Assets Liabilities and Shareholders’ EquityCash: $1.9 million Debt: $3 millionOther assets: $11 million Equity: $9.9 millionTotal: $12.9 million Total: $12.9 millionNumber of shares outstanding = 440,000Price per share = $22.509.Consider the balance sheet of SureThing Corporation:Assets Liabilities and Shareholders’ EquityCash: $3 million Debt: $3 millionOther assets: $11 million Equity: $11 millionTotal: $14 million Total: $14 millionNumber of shares outstanding = 440,000Price per share = $25If SureThing Corporation repurchases shares worth $2.5 million, what will the new balance sheet for SureThing Corporation look like?Answer:Balance sheet after share repurchase:Assets Liabilities and Shareholders’ EquityCash: $0.5 million Debt: $3 millionOther assets: $11 million Equity: $8.5 millionTotal: $11.5 million Total: $11.5 million Number of shares outstanding = 340,000Price per share = $2510.Consider the balance sheet of SureThing Corporation:Assets Liabilities and Shareholders’ Equity Cash: $3 million Debt: $3 million Other assets: $11 million Equity: $11 million Total: $14 million Total: $14 million Number of shares outstanding = 440,000Price per share = $25If SureThing is paying a 20% stock dividend, what will the number of shares outstanding be?What will be the price per share?What would be the effect of a two-for-one stock split?Answer:After paying a 20% stock dividend:Number of shares outstanding = 528,000Price per share = $20.83After a two-for-one stock split:Number of shares outstanding = 880,000Price per share = $12.5011.Gough Fraser is considering purchasing the stock of ASIOA Companies, which he plans tohold indefinitely. ASIOA just paid an annual dividend of $3.00 and the price of the stock is $48 per share. The earnings and dividends of the company are expected to grow forever at a rate of 6 percent per year. What annual rate of return does Gough expect on his investment?Answer:D1 is 3.00. Given 6% annual growth, D1 = 3.00 x 1.06 = 4.80.Use the constant growth formula to solve for k:P0 = D1/(k – g)48 = 4.80/(k – 0.06)48k – 2.88 = 4.8048k = 7.68k = 16%12.Halpert Corporation would like to raise $100,000,000 by issuing preferred stock. Thepreferred stock will have a par value of $1,000 per share and pay a dividend of $48 per year.If the required rate of return for this stock is 15 percent, how many shares of preferred stock must Halpert issue?Answer:P0 = D1kP0 = $480.15= $320Number of shares = $100,000,000/$320= 312,500 shares13.Aslan Inc. just paid a dividend of $5.00 per share. This dividend is expected to grow at asupernormal rate of 20 percent per year for the next two years. It is then expected to grow at a rate of 5 percent per year forever. The appropriate discount rate for Aslan’s stock is 17percent. What is the price of the stock?Answer:D0 = $5D1 = $5(1.2)= $6.00D2 = $6.00(1.2)= $7.20D3 = $7.20(1.05) = $7.56P2 = D3/(k – g)= $7.56/(0.17 – 0.05)= $63.00P0 = $6.00/(1.17) + ($7.20 + $63.00)/(1.17)2= $56.4114.Druids Corp. just paid an annual dividend of $2.50. Dividends are expected to grow at aconstant rate forever. The price of the stock is currently $38.40. The required rate of return for this stock is 15 percent. What is the expected growth rate of Druids dividend?Answer:D0 = $2.50D1 = $2.50(1 + g)P0 = $38.40k = 15%Use the constant growth formula to solve for g:P0 = D1/(k – g)38.40 = 2.50(1 + g)/(0.15 – g)5.76 – 38.4g = 2.5 + 2.5g3.26 = 40.9g0.0797 = g15.The common stock of Century Inc. is expected to pay a dividend of $1.80 one year fromtoday. After that the dividend is expected to grow at a rate of 15 percent per year for two years and then at a rate of 5 percent per year forever. If the required rate of return for this stock is 15 percent, what is the current price?Answer:D1 = $1.80D2 = $2.07D3 = $2.38D4 = $2.50P3 = $2.50/(0.15 – 0.05)= $25.00P0 = 1.80/(1.15) + 2.07/ (1.15)2 + (2.38 + 25.00)/(1.15)3= $21.1416.A firm’s common stock is trading at $54 per share. In the past the firm has paid a constantdividend of $4 per share. However, the company has just announced new investments that the market did not know about. The market expects that with these new investments, thedividends should grow at 4% per year forever. Assuming that the discount rate remains the same, what will be the price of the stock after the announcement?Answer:P0 = $54Dividends have been constant, so:P0 = D1kk = $4/$54= 7.4%Now g = 4% and k stays same:P0 = 4(1.04)/(0.074 – 0.04)= $122.3517.Consider a stock that just paid a $3.00 dividend. You expect dividends on this stock to growat 25 percent per year for the next 3 years and 10 percent per year thereafter. If you require an18 percent return, how much are you willing to pay for this stock?Answer:D0 = $3D1 = $3(1.25)= $3.75D2 = 3.75(1.25)= $4.69D3 = 4.69(1.25)= $5.86D4 = $5.86(1.10)= $6.45P3 = $6.45/(0.18 – 0.10)= $80.63P0 = 3.75/(1.18) + $4.69/(1.18)2 + $86.63/(1.18)3= $59.19Longer Problems1.WannaGrow Corporation has expected earnings per share of $8. It has a history of payingcash dividends equal to 30% of earnings. The market capitalization rate for WannaGrow stock is 15% per year, and the expected rate of return on future investments is 18% per year.Using the constant growth rate discounted dividend model:a.What is the expected growth rate of dividends?b.What is the model’s estimate of the present value of the stock?c.What is the expected price of a share a year from now?Answer:a.g = earnings retention rate x ROE= 0.7 x 0.18= 12.6%b.D1 = 0.3 x $8= $2.40Use the constant growth formula to solve for D1:P0 = D1/(k – g)= $2.40/(0.15 – 0.126)= $100c.P1 = P0 (1 + g)= $100(1.126)P1 = $112.602.Dividends’R’Us Corporation is an all equity financed firm with a total market value of$150 million. The company holds $20 million in cash and has $130 million in other assets.There are 2,500,000 shares of common stock outstanding for this company, each with a market price of $52. Consider the following decisions and the impact on Dividends’R’Us Corporation’s stock price and on number of shares outstanding.a.The company pays a cash dividend of $5 per share.b.The company repurchases 250,000 shares.c.The company pays a 20% stock dividend.d.The company has a two-for-one stock split.Answer:a.The company pays out a total of $12.5 million in cash dividends. The stock pricefalls to $47 per share. Shareholder wealth may decline because personal taxesmay have to be paid on the cash dividend. The number of shares outstanding isstill 2.5 million shares.b.The stock price is unchanged. The number of shares outstanding is now2,250,000 shares.c.The number of shares outstanding is 1.2 x 2.5 million = 3 million shares.The stock price is $43.34.d.The number of shares doubles to 5,000,000.The stock price halves to $26.3.The stock of WishToGrow Corporation is currently selling for $15 per share. Earnings pershare in the coming year are expected to be $3. The company has a policy of paying out 70% of its earnings each year in dividends. The remaining 30% is retained and invested in projects that earn a 19% rate of return each year. This situation is expected to continue into theforeseeable future.ing the constant growth rate DDM, what rate of return do WannaGrow investorsrequire?b.By how much does its value exceed what it would be if all earnings were paid asdividends and nothing were reinvested?c.If WannaGrow were to cut its dividend payout ratio to 35%, what would happen to itsstock price?Answer:a.P0 = $15, E1 = $3, D1 = 0.7 x $3= $2.10g = 0.3 x 0.19= 5.7%P0 = D1/(k – g)15 = $2.10/(k – 0.057)k = 19.7%b.If all earnings were paid as dividends its price would be:P0 = 3/0.197= $15.23The current price is actually $0.23 less in value than the above model.c. D1 = 0.35 x $3 g = 0.65 x 0.19= $1.05 = 12.35%P0 = 1.05/(0.197 – 0.1235)= $14.29The stock price would drop by $0.71.。

Chapter SeventeenReal OptionsThis chapter contains 28 multiple choice questions, 10 short problems, and 5 longer problems.Multiple Choice1.There is a basic similarity between the options involved in investment projects and ________ optionson stocks.(a)switch(b)call(c)abandon(d)expandAnswer: (b)2.In comparing the similarity between options in investment projects and call options on stocks, thedecision maker has the ________ to buy something of value at a future date.(a)obligation(b)right but not the obligation(c)desire but not the right(d)financial meansAnswer: (b)3.In general, the ________ the uncertainty about future outcomes, the ________ the need to accountexplicitly for any options.(a)greater; greater(b)greater; less(c)less; greater(d)none of the aboveAnswer: (a)4.A(n) ________ in the uncertainty about a project's future payoffs ________ its value.(a)increase, decreases(b)increase, increases(c)decrease increases(d)increase, does not changeAnswer: (b)5.An option to ________ a project corresponds to an American put option.(a)defer(b)abandon(c)rescale(d)reverseAnswer: (b)6.An option to ________ allows the project to be expanded or contracted for some fixed price.(a)defer(b)abandon(c)rescale(d)reverseAnswer: (c)7.An option to ________ allows the postponement of the beginning of an investment project.(a)defer(b)abandon(c)rescale(d)reverseAnswer: (a)8.An option to ________ corresponds to an American call option.(a)defer(b)abandon(c)rescale(d)reverseAnswer: (a)9.If a company’s investment in a new project has a salvage va lue of zero, this investment is said to be________.(a)uncertain(b)irreversible(c)deferrable(d)mutableAnswer: (b)10.The option to ________ an investment decision is valuable even if the expected price in the future isequal to the current price.(a)defer(b)reverse(c)renew(d)obligateAnswer: (a)11.Taking management's flexibility explicitly into account ________ a project’s NPV.(a)decreases(b)increases(c)does not change(d)reversesAnswer: (b)12.________ can be used to determine a set of possible NPVs, with respect to variables within an project,to determine if the optimal strategy is to abandon, defer, or immediately proceed with the investment.(a)A decision tree(b)The APV method(c)Probability mapping(d)Sensitivity analysisAnswer: (d)13.The ________ formula can be applied to capital budgeting problems.(a)Dividend valuation(b)Capital structure valuation(c)Black-Scholes(d)all of the aboveAnswer: (c)14.In a capital budgeting framework, we can use the same valuation models developed to price________.(a)European exchange rate futures(b)American exchange rate futures(c)European preferred stock valuations(d)European call options on a stockAnswer: (d)15.In the context of option pricing, the value of flexibility ________ the volatility of the project.(a)undermines(b)is unaffected by(c)increases with(d)decreases withAnswer: (c)16.Failing to take into account the managerial options to delay the start of a project, or once started toexpand or abandon it, will cause an analyst evaluating the project to ________.(a)overestimate its NPV(b)underestimate its NPV(c)overestimate its initial costs(d)underestimate its initial costsAnswer: (b)17.A company is considering a new project that would require an initial investment of $5 million and inits second phase one year from now another investment of $105 million t o build a plant. From today’s perspective the value of the completed plant a year from now is a random variable with a mean of $110 million and a standard deviation of 0.2. The riskless interest rate is 5% per year. If one were to evaluate this investment with the Black-Scholes formula in order to take its flexibility into account, which of the following is true?(a)the value of E to be used in the formula is $110 million(b)the value of S to be used in the formula is $100 million(c)the value of C is found to be $8.02 million(d)none of the aboveAnswer: (b)18.True Blue Inc. is considering acquiring another firm, Mellow Yellow Inc. Let us assume that they areboth 100% equity financed firms, that is, neither firm has any debt outstanding. Each firm has 1 million shares of common stock outstanding that can be freely bought and sold in a competitive market. The current market value of Mellow Yellow Inc. is $50 million and its standard deviation is0.2. Suppose Mellow Yellow’s management offers True Blue an option to ac quire 100% of MellowYellow’s shares a year from now for $55 million. The riskless interest rate is 5% per year. If the option costs $2.25 million, the NPV is:(a)$5.27 million(b)$3.02 million(c)$0.77 million(d)$0Answer: (c)19.Consider the example in question 17. Assuming all other data remains the same, what would the NPVbe if the price to acquire Mellow Yellow’s stock were to $58 million instead of $55 million?(a)–$5.02 million(b)–$0.15 million(c)$2.1 million(d)$4.35 millionAnswer: (b)20.Consider the example in question 17. Assuming all other data remains the same, what would the NPVbe if Mellow Yellow’s standard deviation were 0.3 instead of 0.2?(a)(b)$0.85 million(c)$2.76 million(d)$5.01 millionAnswer: (c)21.Consider the example in question 17. What would the NPV be is the price to acquire Mellow Yellowwere $62 million instead of $55 million and its standard deviation were 0.4 instead of 0.2? Assume all other data remains the same.(a)$2.61 million(b)$4.86 million(c)$7.11 million(d)The NPV is the same as for the original data in question 17.Answer: (a)22.An option to abandon a project is an example of a(n) ________ option.(a)explicit purchase(b)managerial(c)call(d)irreversibleAnswer: (b)23.If a company is considering the acquisition of another company and has the opportunity to do so ayear from now the type of option this capital budgeting may entail is called a(n) ________ option.(a)explicit purchase(b)technical(c)growth(d)fundamentalAnswer: (a)24.Recognizing the similarity between call options and managerial options is important because________.(a)it clarifies the role of uncertainty in evaluating projects(b)it structures the analysis of investment projects as a sequence of management decisions overtime(c)it gives us a method for estimating the option value of projects by applying the quantitativemodels developed for valuing call options on stocks(d)all of the aboveAnswer: (d)e the Black-Scholes formula to calculate the value of an option where T = 2 years, = 0.3, theexercise price = $200 million, the current price is $181.41, and the riskless interest rate is 5% per year.(a)$15.86 million(b)$30.22 million(c)$30.66 million(d)$51.71 millionAnswer: (c)26.Consider Benedick Corp., which has the opportunity to invest in a hydro-electricity plant. An initialoutlay of $19 million is required to build the facility to house the equipment. In the second phase, one year from now, equipment costing $210 million must be purchased. Suppose from today's perspective the value of the plant a year from now is a random variable with a mean of $240 million and astandard deviation of 0.35 million. Use the Black-Scholes formula to compute the value of the option.(a)$22.15 million(b)$27.65 million(c)$27.89 million(d)$40.44 millionAnswer: (c)27.What is the NPV of the project in question 27?(a)$19 million(b)$8.89 million(c)$8.65 million(d)$3.15 millionAnswer: (b)28.Consider the scenario in question 27. If the standard deviation is changed to 0.25, what happens to thevalue of the option?(a)It is unchanged(b)It increases by approximately $8 million(c)It decreases by approximately $8 million(d)It is reduced by approximately 10%Answer: (c)pute the NPV of the project from question 27 if its standard deviation is now 0.25.(a)$0(b)$1 million(c)$12 million(d)$16.65 millionAnswer: (b)Short Problems1.What are some important “real options” a manger has with regards to investment projects? Why is itimportant to be aware of them?Answer:Many, if not most, corporate investment opportunities present the ability for managers to delaythe start of a project, or once started, to expand it or abandon it. Failure to take into accountthese real options will cause an analyst evaluating the project to underestimate its NPV.2.Discuss deferral, abandon, rescale options.Answer:The option to postpone the beginning of an investment project is a deferral option and can bemapped nicely into an American call option. Here the exercise price of the option is the project’s required initial investment and the maturity date of the option corresponds to the final decision point beyond which the decision cannot be postponed. An option to abandon a project corresponds to an American put option. The exercise price for the option would be the amount that must be paid to terminate the project. This could be a contracted amount or simply the market value of theproject if it is liquidated. On both sides of a deferral option and an option to abandon may liepossibilities to exercise an option to rescale the project where the project can be expanded orcontracted for some fixed price.3.What is the fundamental similarity between options in investment projects and call options on stocks?Answer:The fundamental similarity is that the decision maker has the right but not the obligation tobuy something of value at a future date.4.Discuss irreversibility in terms of an investment decision.Answer:Consider the situation of a company contemplating whether to invest in a factory. The investment is completely irreversible, meaning that the custom-built facility can be used to produce noalternative product nor can it be modified to do so except at a prohibitive cost. Hence after theinitial investment the factory immediately has no value in an alternative use. This is for practical purposes equivalent to assuming the salvage value is zero. Once the investment is undertaken the costs are sunk and cannot be recovered.ing the Black-Scholes formula, calculate the value of an option where T = 3 years, the standarddeviation of the annualized continuously compounded rate of return on stock = 0.3, the exercise price = $400 million, the current price of the stock is $350 million, and the riskless interest rate is 5% per year.Answer:S E r T σResult6. A new project would required a company to make an initial outlay of $125 million. In 3 years, phasetwo of the project would require the company to purchase buildings and equipment at a cost of $400 million. From today’s perspective the value of phase two when completed is a random variable with a mean of $425 million and a standard deviation of 0.4. The riskless interest rate is 5% per year.Compute the NPV of the investment. Should the project be undertaken?Answer:S E r T σResultNPV = C – Initial investment= $94.09 – $125 million= –$30.91 millionA project should only be undertaken if it has a positive NPV, so this project should not bepursued.7.See question 6. What happens to the NPV of the investment project if the volatility = 0.6?Answer:S E r T σResultNPV = C – Initial investment= $137.45 – $125 million= $12.44 millionThe increase in volatility results in an increases value of the call, making the NPV positive.8.Consider a firm, McIntyre Oil Corporation, which is considering the acquisition of another firm,Argyll Inc. Let us assume that both of these firms are both 100% equity financed firms, that is, neither firm has any debt outstanding. Each firm has 1 million shares of common stock outstanding that can be freely bought and sold in a competitive market. The current value of Argyll Inc. is $80 million and its standard deviation is 0.283. The riskless interest rate is 6%. Suppose Argyll'smanagement offers McIntyre Corp. an option to acquire 100% of Argyll's shares two years from now for $90 million. What is the value of the option?Answer:S E r T σResult9.Refer to question 8. Argyll offers the option to McIntyre at a price of $10 million. Is this investmentworthwhile to McIntyre?Answer:NPV = C – Initial investment= $12.76 million – $10 million= $2.76 millionSince the NPV is positive, the project is worthwhile10.A company is considering a new project that would require an initial investment of $5 million and inits second phase one year from now another investment of $105 mil lion to build a plant. From today’s perspective the value of the completed plant a year from now is a random variable with a mean of $110 million and a standard deviation of 0.2. The riskless interest rate is 5% per year. Discuss how one should view this situation in the context of the Black-Scholes formula.Answer:By undertaking the first phase of the project, the company would in effect be paying $5 million to “buy an option” that will mature in one year. The option is to undertake phase two of the pr oject, and its “exercise price” is $105 million. The present value of the completed project is $100 million.The Black-Scholes formula says that this option is worth approximately $8 million. The project, therefore, has a positive NPV of approximately $3 m illion, although if we ignore management’s option to discontinue the project after the first year and do a conventional DCF analysis the NPV is negative. Our conclusion is that taking management’s flexibility explicitly into account increases a project’s NPV. Moreover, from the theory of option pricing, we know that the value of flexibility increases with the volatility of the project.Longer Problems1.Discuss why it is important to recognize the similarities between call options and managerial or realoptions.Answer:(1) It helps in structuring the analysis of the investment project as a sequence ofmanagerial decisions over time.(2) It clarifies the role of uncertainty in evaluating projects.(3) It gives us a method for estimating the option value of projects by applying thequantitative models developed for valuing call options on stocks.2.Discuss the more complex real options of switching options and compound options.Answer:More complex real options would include switching options, which requires the payment of a fixed amount to change operating or production modes. An example would be an electric generatingplant that could switch between using alternative sources of fuel (perhaps coal and natural gas).The option to close down and restart a production line, or exit and then reenter a market are also examples of switching options that can be modeled as portfolios of American put and call options.Complex investment projects, which are typically organized into a set of alternative stages withcritical decision at the end of each stage, can be analyzed as compound options in which options on options exist. For example, a major drug company’s product cycles consist of a research stage in which alternative compounds are tested, a product development stage in which clinical trials are conducted, and a marketing stage in which the final product is brought to market. Each stageinvolves new investments that are conditional on exercise of the option to proceed with the previous stage.3.Discuss real options in the context of the movie industry.Answer:The movie industry provides a good example of the importance of real-option values in evaluating investment projects. Often a movie studio will buy the rights to a movie script and then wait todecide if and when to actually produce it. Thus, the studio has the option to wait. Once production starts, and at every subsequent step in the process, the studio has the option to discontinue theproject in response to information about cost overruns or changing tastes of the moviegoing public.Another very important managerial option in the movie business is the option of the film studio to make sequels. If the original movie turns out to be a success, then the studio has the exclusive right to make additional movies with the same title and characters. The option to make sequels can be a significant part of a movie project’s total value.4.W. Jofish Inc. is considering the acquisition of another firm, B.B. John Corp. Let us assume that bothof these firms are both 100% equity financed firms, that is, neither firm has any debt outstanding.Each firm has 1 million shares of common stock outstanding that can be freely bought and sold in a competitive market. The current value of B.B. John Corp. is $120 million and its standard deviation is0.3. The riskless interest rate is 5%. Suppose B.B. John Corp.’s management offers W. Jofish Inc. anoption to acquire 100% of B.B. John’s shares two years from now for $135 million. The option is priced at $10 million. What is the value of the option? Is this investment worthwhile to W. Jofish?How would the evaluation change if the standard deviation of B.B. John were actually 0.5 instead of0.3?Answer:S E r T σResultNPV = C – Initial investment= $10.98 million – $10 million= $0.98 millionSince the NPV is positive, the project is worthwhile.The value of flexibility increases with the volatility of the project, so we would expect the NPV to increase if the standard deviation increases:S E r T σResultNPV = C – Initial investment= $20.53 million – $10 million= $10.53 millionAs expected, the increase in volatility dramatically increases the NPV of the project.5. A company is considering a new project that would require an initial investment of $25 million and inits second phase one year from now another investment of $210 million to build a plant. From t oday’s perspective the value of the completed plant a year from now is a random variable with a mean of $225 million and a standard deviation of 0.35. The riskless interest rate is 5% per year. What is the NPV of the project?Answer:S E r T ResultNPV = C – Initial investment= $27.89 million – $25 million= $2.89 millionSince the project has a positive NPV, the company should pursue it.。

博迪《⾦融学》第2版课后习题及详解（居民户的储蓄和投资决策）【圣才出品】博迪《⾦融学》第2版课后习题及详解第5章居民户的储蓄和投资决策⼀、概念题1．⼈⼒资本（human capital）答：⼈⼒资本是指劳动者受到教育、培训、实践经验、迁移、保健等⽅⾯的投资⽽获得的知识和技能的积累，亦称“⾮物⼒资本”。

由于这种知识与技能可以为其所有者带来⼯资等收益，因⽽形成了⼀种特定的资本——⼈⼒资本。

任何使⼈⼒资本增值的活动都是⼈⼒资本投资，包括医疗和保健、在职⼈员培训、正规教育、成⼈教育与培训、迁移者⼯作搜寻等等。

⼈⼒资本投资的决策是⼀种收益与成本的权衡，其成本包括：实际的费⽤或直接的费⽤、放弃的⼯资报酬以及⼼理成本。

投资的预期收益可能是以各种形式表现出来的，⽐如较⾼的未来收⼊、终⾝⼯作满意程度的提⾼、对娱乐活动欣赏⽔平的提⾼以及欣赏兴趣的增长等。

2．永久性收⼊（permanent income）答：永久性收⼊是指消费者可以预期到的长期收⼊，即预期在较长时期中（3年以上）可以维持的稳定的收⼊流量。

永久性收⼊是弗⾥德曼持久收⼊假说中的重要概念，⼤致可以根据所观察到的若⼲年收⼊的数值的加权平均数来计算，估算持久收⼊的计算公式为：YP T=Y T-1＋θ（Y T－Y T-1）=θY T－（1－θ）Y T-1（0＜θ＜1）式中，YP T为现期永久性收⼊，Y T为现期收⼊，Y T-1为前期收⼊，θ为加权数。

该公式说明，现期的永久性收⼊等于前期收⼊和两个时期收⼊变动的⼀定⽐率，或者说等于现期收⼊和前期收⼊的加权平均数。

加权数的⼤⼩取决于⼈们对未来收⼊的预期，这种预期要根据过去的经验进⾏修改，称为适应性预期。

如果⼈们认为前期和后期收⼊变动的时间较长，θ就⼤；反之，前期和后期收⼊变动的时间较短，θ就⼩。

3．跨期预算约束（inter-temporal budget constraint）答：跨期预算约束是指决定⼀⽣消费计划时⾯临的约束条件，即⼀⽣的消费开⽀和遗产的现值等于包括初始财产和未来劳动收⼊在内的⼀⽣资源的现值。

博迪《金融学》第2版课后习题及详解博迪的《金融学》第2版是一本广泛使用的金融学教材，其中的课后习题对于学生理解和掌握金融学概念和理论具有重要意义。

本文将选取一些具有代表性的课后习题，并提供详细的解答和分析。

答：金融学是一项针对人们怎样跨期配置稀缺资源的研究。

它涉及货币、投资、证券、银行、保险、基金等领域，主要研究如何在不确定的环境下对资源进行跨时期分配，以实现最大化的收益或满足特定的目标。

金融体系（financial system）答：金融体系是金融市场以及其他金融机构的集合，这些集合被用于金融合同的订立以及资产和风险的交换。

它是由连接资金盈余者和资金短缺者的一系列金融中介机构和金融市场共同构成的一个有机体，包括股票、债券和其他金融工具的市场、金融中介（如银行和保险公司）、金融服务公司（如金融咨询公司）以及监控管理所有这些单位的管理机构等。

研究金融体系如何发展演变是金融学科的重要方面。

假设某个投资者在2022年购买了一张面值为1000元，年利率为5%的债券，并在2023年以1100元的价格卖出。

请问该投资者的年化收益率是多少？(1100 - 1000) / 1000 × 100% = 10%其中，分子部分为投资者获得的收益，分母部分为投资者的初始投资金额。

答：现代金融学的三个主要理论包括资本资产定价模型（CAPM）、有效市场假说（EMH）和现代投资组合理论（MPT）。

资本资产定价模型（CAPM）是一种用来决定资产合理预期收益的模型，它认为资产的预期收益与该资产的系统性风险有关。

在投资决策中，投资者可以通过比较不同资产的预期收益与其系统性风险来确定最优投资组合。

有效市场假说（EMH）认为市场是有效的，即市场上的价格反映了所有可用信息。

根据这个理论，投资者无法通过分析信息来获取超额收益。

然而，在实践中，许多研究表明市场并非完全有效，投资者可以通过分析和利用信息来获得超额收益。

现代投资组合理论（MPT）是由Harry Markowitz于20世纪50年代提出的，它认为投资者应该通过多元化投资来降低风险。

Chapter OneFinancial EconomicsThis chapter contains 48 multiple choice questions, 20 short problems and 5 longer problems.Multiple Choice1.The primary goal of corporate management is to ________ shareholder wealth.(a)minimize(b)maximize(c)leverage(d)mitigateAnswer: (b)2. A ________ stock market imposes ________ discipline on managers to take actions to maximize themarket value of the firm’s shares.(a)competitive, strong(b)dispersed, weak(c)mature, no(d)dispersed, strongAnswer: (a)3. The ________ form is especially well suited to the separation of ownership and management of firms because it allows relatively frequent changes in owners by share transfer without affecting the operations of the firm.(a)corporate(b)sole proprietorship(c)partnership(d)householdAnswer: (a)4. ________ is anything that has economic value.(a)A partnership(b)An asset(c)A balance sheet(d)An income statementAnswer: (b)5. A household’s wealth or net worth is measured by the value of its ________ minus its ________.(a)liabilities; assets(b)assets; liabilities(c)stocks; bonds(d)bonds; liabilitiesAnswer: (b)6. The branch of finance dealing with financial decisions of firms is called ________ or ________.(a)investments; international finance(b)markets; institutions(c)business finance; institutions(d)business finance; corporate financeAnswer: (d)7. Bonds promise ________ cash payments, while stocks pay the ________ value left over after all other claimants have been paid.(a)variable; residual(b)residual; fixed(c)fixed; residual(d)fixed; variableAnswer: (c)8. The day-to-day financial affairs of the firm are usually referred to as ________.(a)working capital management(b)capital structure(c)capital budgeting(d)strategic planningAnswer: (a)9. A disadvantage of the sole proprietorship is the fact that the sole proprietor has ________.(a)limited liability for the debts of the firm(b)unlimited liability for the debts of the firm(c)expensive costs to establish the firm(d)limited authority over the day-to-day business decisions of the firmAnswer: (b)10. In the U.S. corporations with concentrated ownership are called ________ and corporations with broadly dispersed ownership are called ________.(a)private corporations; public corporations(b)public corporations; private corporations(c)public corporations; monopolies(d)private corporations; state owned corporationsAnswer: (a)11. Billy owns a house worth $350,000 and has a $55,000 bank account. Billy owes $270,000 to the bank on a home mortgage loan and has a $12,000 credit card debt outstanding. Calculate Billy’s net worth.(a)$135,000(b)$123,000(c)$497,000(d)$37,000Answer: (b)12. Marlowe owns a house worth $150,000, a car worth $25,000 and has an $18,000 bank account. Marlowe owes $135,000 to the bank on a home mortgage loan, $18,000 on the car loan and has an $18,000 credit card debt outstanding. Calculate Marlowe’s net worth.(a)$58,000(b)$123,000(c)$22,000(d)$37,000Answer: (c)13. An advantage of the corporate form of ownership is ________.(a)no liability(b)unlimited liability(c)limited liability(d)CEO liabilityAnswer: (c)14. In the corporate form, the separated structure creates the potential for ________ between owners and managers.(a)a conflict of interest(b)increased transactional costs(c)stability in relations(d)none of the aboveAnswer: (a)15. All of the following are reasons for having a separation of management and ownership of the firm except:(a)the “going concern” effect favors the separated structure(b)professional managers may be found who possess a superior ability to run the business(c)it prevents the possibility of a conflict of interest between the owners and management(d)it allows for savings in the cost of information gatheringAnswer: (c)16. ________ involves the evaluation of costs and benefits spread out over time, and it is largely a financial decision-making process.(a)Stock valuation(b)Bond valuation(c)Inventory costing(d)Strategic planningAnswer: (d)17. Shareholder wealth maximization depends on all of the following except:(a)production technology(b)market interest rates(c)risk aversion(d)market risk premiumsAnswer: (c)18. A problem with using the profit maximization criterion is ________.(a)deciding which period’s profit is to be maximized(b)the definition of “maximize profits” is ambiguous(c)the failure to consider risk(d)all of the aboveAnswer: (d)19. The existence of a well functioning stock market facilitates the efficient separation of the ownership and management of firms, since stock prices can be substituted for external information about ________.(a)the firm’s production technology(b)the wealth, preferences, and other investment opportunities of the owners(c)the historic costs of the firm’s infrastructure(d)the firm’s ability to meet its projected goalsAnswer: (b)20. One place to look for a statement of the goals of a corporation’s top managers is the ________.(a)balance sheet(b)income statement(c)annual report(d)bankruptcy filingAnswer: (c)21. In the absence of a stock market, managers would require information that is ________ to obtain.(a)costly if not impossible(b)costless(c)readily available(d)time-consuming but inexpensiveAnswer: (a)22. Management’s task is made much easier when it can observe the ________ of its own and other firms’ shares.(a)book prices(b)market prices(c)historical prices(d)security pricesAnswer: (b)23. ________ are entitled to a share of any of the distributions from the corporation such as cash dividends.(a)Sole proprietors(b)General partners(c)Professional managers(d)ShareholdersAnswer: (d)24. ________ is the founder of modern portfolio theory.(a)Harry Markowitz(b)Merton Miller(c)William Sharpe(d)Bill GatesAnswer: (a)25. In Germany, public corporations are identifiable by ________ after the company name, whereas private companies are denoted by ________.(a)PLC, Inc.(b)GmbH, AG(c)AG, GmbH(d)SpA, GmbHAnswer: (c)26. In the United Kingdom, public corporations are identifiable by ________ after the company name, whereas private companies are denoted by ________.(a)Inc, PLC(b)LTD, PLC(c)AG, GmbH(d)PLC, LTDAnswer: (d)27. Shareholders elect ________ who in turn select ________ to run the business.(a)a board of directors; a treasurer(b)a board of directors; managers(c)managers; a board of directors(d)a board of directors; accountantsAnswer: (b)28. In a competitive stock market, ________ offer(s) another important mechanism for aligning the incentives of managers with those of shareholders.(a)takeovers(b)increased taxes(c)liquidation(d)increased liabilityAnswer: (a)29. If a raider is interested in making a profit through the takeover of a prospective firm, the only expenses that need be incurred are ________.(a)the cost of identifying a mismanaged firm(b)the cost of acquiring the firm’s shares(c)physical capital(d)both (a) and (b)Answer: (d)30. The cost of identifying a mismanaged firm can be low if the raider is which of the following:(a)a supplier(b)a customer(c)a competitor(d)all of the aboveAnswer: (d)31. Takeover mechanisms can most effectively be reduced by ________.(a)directives from the board of directors(b)media intervention(c)government policies(d)public disapprovalAnswer: (c)32. The chief financial officer (CFO) of a corporation normally reports to the ________ of the company.(a)controller(b)treasurer(c)chief executive officer(d)chairman of the board of directorsAnswer: (c)33. All of the following departments typically report to the chief financial officer (CFO) except:(a)marketing(b)financial planning(c)treasury(d)controlAnswer: (a)34. The treasurer’s job includes managing all of the following except:(a)the firm’s exposure to currency and interest rate risks(b)the tax department(c)relations with the external investment community(d)the analysis of proposed mergers and acquisitionsAnswer: (d)35. The activities of the vice president for financial planning include all of the following except:(a)analyzing proposed mergers(b)analyzing proposed spin-offs(c)preparing internal reports comparing planned and actual costs(d)analyzing major capital expendituresAnswer: (c)36.Which of the following statements is most correct?(a)The shareholders of a corporation elect managers who in turn select a board of directors torun the business.(b)Partnerships do not pay corporate tax.(c) A disadvantage of the corporation is unlimited liability.(d)The government is powerless to discourage corporate takeovers.Answer: (b)37.For a typical firm, which of the following statements is most correct?(a)The CFO has three departments reporting to him: financial planning, treasury and control.(b)The treasurer oversees the accounting and auditing activities of the firm.(c)The controller has responsibility for managing the financing activities of the firm and forworking capital management.(d)The CEO is a senior vice president with responsibility for all the financial functions in thefirm.Answer: (a)38.Which of the following are financial decisions a firm has to make?(a)financing decisions(b)capital budgeting decisions(c)working capital decisions(d)all of the aboveAnswer: (d)39.The controller’s job includes responsibility for ________.(a)relations with the external investment community(b)preparation of financial statements for use by shareholders, creditors and regulatoryauthorities(c)analysis of proposed mergers, acquisitions and spin-offs(d)all of the aboveAnswer: (b)40.The basic unit of analysis in capital budgeting is the ________.(a)financing project(b)investment project(c)strategic project(d)variable projectAnswer: (b)41.The steps involved in any capital budgeting process include:(a)evaluating projects(b)deciding which projects to undertake(c)identifying ideas for new investment projects(d)all of the aboveAnswer: (d)42.Preferred stock, bonds, and convertible securities are also known as ________.(a)nonmarketable claims(b)standardized securities(c)variable securities(d)covenantsAnswer: (b)43.The basic unit of analysis in capital structure decisions is the ________.(a)firm as a whole(b)investment project(c)firm’s personnel(d)financial systemAnswer: (a)44.Which one of the following correctly orders the steps involved in capital structure decisions?(a)determining a feasible financing plan; identifying new ideas for investment projects(b)determining the optimal financing mix; determining a feasible financing plan(c)identifying ideas for investment projects; determining the optimal financing mix(d)determining a feasible financing plan; determining the optimal financing mixAnswer: (d)45.Which of the following is not a financial function of a corporation?(a)investor relations(b)tax administration(c)provision of capital(d)regulatory legislationAnswer: (d)46.Which of the following functions may be categorized as administration of funds?(a)custodial responsibilities(b)tax administration(c)internal auditing(d)all of the aboveAnswer: (a)47.Investor relations includes:(a)government reporting(b)establishment and maintenance of communications with company stockholders(c)relations with taxing agencies(d)consultation with and advice to other corporate executivesAnswer: (b)48.Oscar owns a boat worth $2 million, a house worth $lion and has $900,000 in a bank account.Oscar owes $1.1 million to the bank on the boat loan, $2 million on the home loan and has $20,000 credit card debt. Calculate Oscar’s net worth.(a)$3.12 million(b)$5.28 million(c)$7.28 million(d)$8.4 millionAnswer: (b)Short Problems1.Give a brief definition of the financial system.Answer: A financial system is defined as the set of markets and other institutions used for financial contracting and the exchange of assets and risks.2.List the markets that the financial system likely includes.Answer: A financial system includes the markets for stocks, bonds and other financial instruments, financial intermediaries, financial service firms and the regulatory bodies that govern all of these institutions.3.Briefly describe the distinction between physical capital and financial capital.Answer: Physical capital includes items such as buildings, machinery and other intermediate products used in the production process. Financial capital, however, includes stocks, bonds and loans used to finance the acquisition of physical capital.4. Give a brief description of the wide range of financial instruments and claims a firm can issue. Answer: These include common stock, preferred stock, bonds and convertible securities (standardized securities that can be traded in organized markets). Financial instruments and claims can also include nonmarketable claims such as bank loans, employee stock options, leases and pension liabilities.5.Siggy owns a house worth $200,000, a car worth $25,000 and has an $18,000 bank account. He alsohas furniture worth $4,000 and jewelry worth $10,000. However, Siggy owes $145,000 to the bank on a home mortgage loan, $17,000 on the car loan, $40,000 on student loans and has an $16,000 credit card debt outstanding. Calculate Siggy’s net worth.Answer: Net Worth = Total Assets – Total Liabilities= ($200,000 + $25,000 + $18,000 + $4,000 + $10,000) –($145,000 + $17,000 + $40,000 + $16,000)= $39,0006.Briefly list the problems associated with profit maximization as the chief goal of corporate managers. Answer: The profit-maximization criterion has two problems associated with it. The first is that it is difficult to determine which period’s profit is to be maximized if the production process requires many periods. Secondly, if either future revenues or expenses are uncertain, then what exactly is the meaning of “maximize profits” if profits are described by a probability distribution?7.Kecia owns a house worth $220,000, a car worth $20,000 and has a $13,000 bank account. She alsohas furniture worth $8,000. However, Kecia owes $165,000 to the bank on a home mortgage loan, $17,000 on the car loan, $50,000 on student loans and has an $18,000 credit card debt outstanding.Calculate Kecia's net worth.Answer: Net Worth = Total Assets – Total Liabilities= ($220,000 + $20,000 + $13,000 + $8,000) –($165,000 + $17,000 + $50,000 + $18,000)= $261,000 - $250,000= $11,0008.Give an example of a potential conflict of interest that can arise between owners and managers of afirm.Answer: Managers being concerned with their own personal welfare may lead to concern about job security in the long run. This concern about long run survival may cause managers to limit the risk incurred by the firm and make other decisions not with the objective of shareholder wealth maximization.9.What use does the existence of a stock market serve to the manager of a firm?Answer: Observing its own and other firms’ market price of shares helps it make decisions about maximizing the firm’s value to its shareholders. If there was not a stock market, then managers would be required to obtain information that is costly, if not impossible, to obtain. This includes the wealth, preferences and other investment opportunities of the owners.10.Outline the role of the takeover in aligning the incentives of managers with those of shareholders. Answer: The threat of a takeover provides a strong incentive for current managers to act in the interests of the firm’s current shareholders by maximizing market value. If managers fail to maximize the market value of the firm’s shares, the firm will be vulnerable to a takeover in which the managers may lose their jobs.11.Outline the role of the chief financial officer (CFO) in a corporation.Answer: The CFO is a senior vice president with responsibility for all the financial functions in the firm and reports directly to the CEO. Three departments report to the CFO: financial planning, treasury, and control.12.Discuss the role of the treasurer in a corporation.Answer: The treasurer has responsibility for managing the financing activities of the firm and for working capital management. The treasurer is responsible for managing relations with the external investor community, managing the firm’s exposure to currency and interest rate risks, and managing the tax department.13. Discuss the tasks performed by the controller of a corporation.Answer: The controller oversees the accounting and auditing tasks of the firm. The controller is responsible for the preparation of internal reports comparing planned and actual costs, revenues, and profits from the corporation’s various business units. The controller will also be involved with preparation of financial statements for use by shareholders, creditors and regulatory authorities.14. Discuss why voting rights for shareholders are not adequate to compel managers to act in the bestinterests of the shareholders.Answer: Because a major benefit of the separated structure is that the owners can remain relatively uninformed about the operations of the firm, it is not apparent how these owners could know whether their firm is being mismanaged. The value of voting rights is further cast into doubt if ownership of the firm is widely dispersed. If that is the situation, then the holdings of any single owner are likely to be so small that he or she would not incur the expense to become informed and to convey this information to the other owners.15.Is it possible for government to reduce the effectiveness of the takeover mechanism?Answer: Yes. It is possible for government policy to prevent the formation of monopolies in various product markets – as in the case of the United States Department of Justice, which can take legal action under the antitrust laws to prevent mergers and acquisitions that might reduce competition.16.In terms of the financial functions of a corporation, what responsibilities do administration of fundsentail?Answer: Management of cash; maintenance of banking arrangements; receipt, custody and disbursementof the company’s monies and securities; credit and collection management; management of pensionfunds; management of investments and custodial responsibilities.17.Discuss the liability a partnership faces.Answer: Unless otherwise specified, all partners have unlimited liability as in the sole proprietorship.However, it is possible to limit the liability for some partners called “limited partners”. At least one ofthe partners, called the general partner, has unlimited liability for the debts of the firm.18.Describe the advantages of the corporate form of business organization.Answer: The corporate form of ownership has the advantage that ownership shares can usually betransferred without disrupting the business. Limited liability is also another advantage of the corporateform. In this case, if the corporation fails to pay its debts, the creditors can seize the assets of thecorporation but have no recourse to the personal assets of the shareholders.19.Briefly outline the process of capital budgeting.Answer: The process of capital budgeting includes identifying ideas for new investment projects,evaluating them, deciding which ones to undertake, and then implementing them.20.Briefly discuss the process of working capital management.Answer: Working capital management refers to the day-to-day financial affairs of the business, such aswhether to extend credit to customers or demand cash on delivery or managing cash flow.Longer Problems1.Describe the four basic types of financial decisions faced by householders.Answer: Investment decisions – whether to invest in stocks or bondsConsumption/Savings Decisions – how much to save for one’s retirement or a child’s educationRisk management decisions – whether to buy disability insuranceFinancing decisions – what type of loan to adopt in order to finance the purchase of a homeorcar.2.Give a brief description of each of the four main areas of financial decision-making in a business.Answer: Strategic Planning: Evaluating the costs and benefits associated with the firm’sbusiness line, which may change over time.Capital Budgeting: Identifying ideas for new investment projects, evaluating them,deciding which ones to undertake, and then implementing them.Capital Structure: The initial step is deciding upon a feasible financing plan for the firm.The next decision involves the optimal debt/equity mix to use.Working Capital Management: The day-to-day affairs of the business. This includespaying bills as they come due, collecting from customers, managing the firm’s cashflows to ensure that operating cash flows deficits are financed and that cash flowsurpluses are efficiently invested to earn a good return.3.Explain the five basic reasons for separating the management from the ownership of an enterprise.Answer:•Professional managers may be found who have a superior ability to run the business.•To achieve the efficient scale of a business the resources of many households may have to be pooled.•In an uncertain economic environment, owners will want to diversify their risks across many firms.•The separated structure allows for savings in the costs of information gathering.•There is a “learning curve” or “going concern” effect, which favors to separated structure.4.Discuss the types of decisions that firms must make.Answer: Capital budgeting decisions – whether to build a new plant or produce a new product.Financing decisions – how much equity and how much debt a firm should adopt in its capital structure.Working Capital decisions – whether credit should be extended to a customer or cashdemanded on delivery.5.Outline the roles of the three departments that report to the Chief Financial Officer.Answer: Treasury: This department is responsible for managing the financing activitiesof the firm and for working capital management. This includes managing relations with theexternal investment community, managing the firm’s exposure to currency and interest raterisks, and managing the tax department.Financial Planning: This department is responsible for analyzing major capitalexpenditures such as proposals to enter new lines of business or to exit existing businesses.This includes analyzing proposed mergers, acquisitions and spin-offs.Controller: This department oversees the accounting and auditing activities of the firm.Activities include preparation of financial statements for use by shareholders, creditors andregulatory authorities, as well as the preparation of internal reports comparing planned andactual costs, revenues, and profits from the corporation’s various business units.。

Chapter FifteenMarkets for Options and Contingent ClaimsThis chapter contains 50 multiple choice questions, 15 short problems, and 9 longer problems.Multiple ChoiceAn option to buy a specified item at a fixed price is a(n) ________。

an option to sell is a ________.(a)put。

call(b)spot option, call(c)call。

put(d)put。

spot optionAnswer: (c)A(n) ________ option can be exercised up to and on the expiration date, whereas a(n) ________ option can only be exercised on the expiration date.(a)American-type。

Bermudan-type(b)American-type。

European-type(c)European-type。

American-type(d)Bermudan-type。

European-typeAnswer: (b)The difference between exercise price and current stock price is the tangible value of an ________, and the difference between the current stock price and exercise price is the tangible value of an ________.out of the money put option。

兹维博迪金融学第二版试题库5TB（1）Chapter FiveHousehold Savings and Investment DecisionsThis chapter contains 28 multiple choice questions, 10 short problems, and 9 longer problems.Multiple Choice1.Getting a professional degree can be evaluated as ________.a) a social security decisionb)an investment in human capitalc)an investment in a consumer durabled) a tax exempt decisionAnswer: (b)2.Suppose you will face a tax rate of 20% before and after retirement. The interest rate is 8%.You are 30 years before your retirement date and invest $10,000 to a tax deferred retirement plan. If you choose to withdraw the total accumulated amount at retirement, what will you be left with after paying taxes?a)$51,445b)$64,000c)$80,501d)$100,627Answer: (c)3.Suppose you will face a tax rate of 20% before and after retirement. The interest rate is 8%.You are 30 years before your retirement date and have $10,000 to invest. If you invest this in an ordinary savings plan instead of a tax deferred retirement plan, what amount will you have accumulated at retirement?a)$51,445b)$64,000c)$80,501d)$100,627Answer: (a)4.When your tax rate remains unchanged, the benefit of tax deferral can be summarized in therule, “deferral earns you ________.”a)the after-tax rate of return before taxb)the pretax rate of return after taxc)the after-tax rate of return after taxd)the pretax rate of return before taxAnswer: (b)5.From an economic perspective, professional training should be undertaken if the ________exceeds the ________.a)future value of the benefit; present value of the costsb)present value of the benefits; future value of the costsc)future value of the benefits; future value of the costsd)present value of the benefits; future value of the costsAnswer: (d)6.Suppose you will face a tax rate of 30% before and after retirement. The interest rate is 6%.You are 35 years before your retirement date and $2,000 to a tax deferred retirement plan. If you choose to withdraw the total accumulated amount at retirement, what will you be left with after paying taxes?a)$7,532b)$10,760c)$12,298d)$15,372Answer: (b)7.Kecia is currently thirty years old and she plans to retire at age sixty. She is expected to liveto age eighty-five. Her labor income is $45,000 per year and she intends to maintain aconstant level of real consumption spending over the next fifty-five years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Kecia’s human capital?a)$31,797b)$35,196c)$778,141d)$994,888Answer: (c)8.Kecia is currently thirty years old and she plans to retire at age sixty. She is expected to liveto age eighty-five. Her labor income is $45,000 per year and she intends to maintain aconstant level of real consumption spending over the next fifty-five years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Kecia’s permanent income?a)$31,797b)$35,196c)$778,141d)$994,888Answer: (b)9.Oscar is currently thirty-five year old, plans to retire at age sixty-five, and to live to ageeighty-five. His labor income is $40,000 per year, and he intends to maintain a constant level of real consumption spending over the next fifty years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Oscar’s human capital?a)$884,344b)$691,681c)$39,999d)$32,198Answer: (b)10.Oscar is currently thirty-five year old, plans to retire at age sixty-five, and to live to ageeighty-five. His labor income is $40,000 per year, and he intends to maintain a constant level of real consumption spending over the next fifty years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Oscar’spermanent income?a)$884,344b)$691,681c)$39,999d)$32,198Answer: (d)11.You are currently renting a house for $12,000 per year, and you also have an option to buy itfor $240,000. Maintenance and property taxes are estimated to be $4,320, and these costs are included in your rent. Property taxes ($2,880 of the $4,320) are deductible for income tax purposes. Your tax rate is 35%. You wish to provide yourself with housing at the lowest present value of cost. If the real after-taxrate is 2.52%, should you rent or buy?a)rent the house; the PV cost of renting is $476,190b)rent the house; the PV cost of renting is $309,524c)buy the house; the PV cost of owning is $442,198d)buy the house; the PV cost of owning is $371,429Answer: (d)12.You are currently renting a house for $12,000 per year and you also have an option to buy itfor $240,000. Maintenance and property taxes are estimated to be $4,320, and these costs are included in your rent. Property taxes ($2,880 of the $4,320) are deductible for income tax purposes. Your tax rate is 35%. You wish to provide yourself with housing at the lowest present value of cost. The real after-tax rate is 2.52%. What is the break-even rent?a)$6,048b)$9,360c)$10,128d)$12,302Answer: (b)13.As one gets older, the ________ declines, so ________ falls steadily until it reaches zero atage 65.a)future value of remaining labor income; human capitalb)future value of remaining labor income; initial wealthc)present value of remaining labor income; human capitald)present value of initial wealth; optimizationAnswer: (c)14.Any lifetime consumption spending plan that satisfies your budget constraint is:a)an optimal modelb) a feasible planc) a model benefitd) a target replacementAnswer: (b)15.There is an advantage to tax deferred retirement savings plans for those ________ when themoney is withdrawn.a)who will be in a lower tax bracketb)who will be in the same tax bracketc)both (a) and (b)d)neither (a) nor (b)Answer: (c)16.In the United States, individual retirement accounts (IRAs) are called ________ rather than________ because any amounts withdrawn from the plan are taxed at the time of withdrawal.a)tax advantaged; tax deferredb)tax deferred; tax exemptc)tax advantaged; tax loopholesd)tax exempt; tax deferredAnswer: (b)17.The present value of one’s future labor income is called ________ and the constant level ofconsumption spending that has a present value equal to one’s huma n capital is called________.a)human income; taxable incomeb)human capital; permanent incomec)permanent capital; taxable incomed)permanent income; human capitalAnswer: (b)18.The ________ the interest rate, the ________ the value of human capital, but the higher thelevel of permanent income.a)lower; lowerb)higher; lowerc)higher; higherd)lower; higherAnswer: (b)19.The ________ states that the present value of one’s lifetime consumption spending andbequests equals the present value of one’s initi al wealth and future labor income.a)consumption budget constraintb)spending constraintc)intertemporal budget constraintd)income and spending constraintAnswer: (c)20.According to the text, many experts recommend that in making a savings plan one should aimfor a replacement rate of ________ of pre-retirement income.a)100%b)25%c)50%d)75%Answer: (d)21.Economic costs that are said to be explicit costs include items such as ________.a)tuitionb)foregone rentc)foregone earningsd)all of the aboveAnswer: (a)22.Economic costs that are said to be implicit costs include items such as ________.a)tuitionb)administrative fees while undertaking a professional degreec)foregone earningsd)all of the aboveAnswer: (c)23.In making lifetime saving/consumption decisions it is considered simpler to do the analysis________.a)in nominal termsb)in inflationary termsc)in perpetual termsd)in real termsAnswer: (d)24.In terms of a lifetime saving/consumption decision such as buying or renting an apartment ora consumer durable, the alternative you should choose is ________.a)the one with the lower present value of benefitsb)the one with the lower present value of costsc)the one with the higher present value of costsd)the one with the lower present value of benefits and the higher present costsAnswer: (b)25.Among the approaches you can use for saving for yourretirement is/are ________.a)aiming to maintain the same level of consumption spending before and afterretirementb)aiming for a target replacement rate of incomec)bypassing graduate school and continuing to consume at the same leveld)(a) and (b)Answer: (d)26.In the equation known as the intertemporal budget constraint, ________.a)the present value of lifetime consumption spending equals the present value ofbequestsb)the present value of lifetime consumption spending and bequests equals the presentvalue of lifetime resourcesc)the present value of lifetime consumption spending equals the future value of laborincomed)the future value of lifetime consumption spending equals the present value of laborincomeAnswer: (b)27.Salman is currently twenty-five years old and plans to live to age eighty. His labor income is$75,000 per year and he plans to maintain a constant level of real consumption spending over the next fifty-five years. Salman plans to retire at age 60. Assume the real interest rate is 5% per year and there are no taxes and no growth in real labor income.What is the value ofSalman’s permanent income?a)$75,000b)$65,906c)$85,348d)$1,228,064Answer: (b)28.You are currently renting a house for $25,800 a year and you have an option to buy it for$350,000. Maintenance and property taxes are $6,150 per year and these costs are included in your rent. Property taxes ($4,150 of the $6,150) are deductible for income tax purposes. Your tax rate is 35%. The real after-tax rate is 3.5%. What is the break-even rent?a)$16,770.00b)$16,947.50c)$21,102.46d)$24,927.54Answer: (b)Short Problems1.You are currently renting a house for $17,000 a year and you also have an option to buy it for$300,000. Maintenance and property taxes are $5,040 per year and these costs are included in your rent. Property taxes ($3,360 of the $5,040) are deductible for income tax purposes.Your tax rate is 40%. You wish to provide yourself with housing at the lowest present value of cost. The real after-tax rate is 3.1% per year. Should you rent or buy? What is the break-even rent?Answer:After-tax outflow for property taxes each year is 0.6 x $3,360 = $2,016Cash outflow in year t = $1,680 + $2,016= $3,696PV cost of owning = $300,000 + $3,696/i= $300,000 + $3696/0.031= $419,226PV cost of renting = $17,000/i= $17,000/0.031= $548,387You would be better off buying the house.Break-even rent: X/0.031 = $300,000 +$3,696/0.031X = $12,996The break-even rent is $12,996.So if the rent is less than $12,996 per year, you would prefer to keep renting.2.You are currently renting a house for $16,000 a year and you also have an option to buy it for$250,000. Property taxes and maintenance care is $5,000 per year, and these costs areincluded in your rent. Property taxes ($3,200 of the $5,000) are deductible for income tax purposes. Your tax rate is 40%. You wish to provide yourself with housing at the lowest present value of cost. The real before-tax discount rate is 3.5% per year. Should you rent or buy? What is the break-even rate?Answer:Real after-tax rate = 0.6 x 0.035= 0.021After-tax cash outflow for property taxes each year is 0.6 x $3,200 = $1,920Cash outflow for year t = $1,800 + $1,920= $3,720PV cost of owning = $250,000 + $3,720/i= $250,000 + $3,720/0.021= $427,143PV cost of renting = $16,000/i= $16,000/0.021= $761,905You would be better off buying the house.To find the break-even rent:X/0.021 = $250,000 + $3,720/0.021X = $8,970So if the rent is less than $8,970 per year, you would be better off renting.3.Kieran is currently twenty-five years old, plans to retire at age sixty, and to live to age eighty.His labor income is $45,000 per year, and he intends to maintain a constant level of real consumption spending over the next fifty-five years. Assuming a real interest rate of 3%, no taxes, and no growth in real labor income, what is the value of Kieran’s human capital?What is th e value of Kieran’s permanent income?Answer:n i PV FV PMT Result35 3 ? 0 45,000 PV = $966,925n i PV FV PMT Result55 3 $966,925 0 ? PMT = $36,114The value of Kieran’s human capital is $966,925.The value of Kieran’s permanent income is $36,114.4.Mariana is currently thirty years old, plans to retire at ageseventy and to live to age ninety.Her labor income is $60,000 per year, and she intends to maintain a constant level of real consumption spending over the next sixty years. Assuming a real interest rate of 4% per year, no taxes and no growth in real labor income, what is the value of Mariana’s human capital?What is the value of Mariana’s permanent income?Answer:n i PV FV PMT Result40 4 ? 0 60,000 PV = $1,187,566n I PV FV PMT Result60 4 $1,187,566 0 ? PMT = $52,493The value of Mariana’s human capital is $1,187,566.The value of Mariana’s permanent income is $52,493.5.Your employer, Novocastrian Films, has agreed to make 60 quarterly payments of $1,000each into a trust account to fund your early retirement. The first payment will be made 3months from now. At the end of 15 years (60 payments), you will be paid 15 equal annual payments, with the first receipt to be made at the beginning of Year 16 (or the end of Year15). The funds will be invested at a nominal rate of 10.0%, quarterly compounding, duringboth the accumulation and the distribution periods. How large will each of your 15 receipts be?Answer:First determine the effective annual rate:EFF = (1 + 0.10/4)4 –1= 10.38%Next, determine amount at end of year 15N I PMT Result_____________15 10.38 $4000 FV = $130,983.39At the end of year 15, there will be $130,983.39 in your retirement account.Since you will be making withdrawals at the beginning of each year, PV = $130,983/(1 +i), or $118,625.10.N I PV Result___________15 10.38 -$118,625.10 PMT = $15,935.89Each of the receipts will be $15,935.896.Mr. Palin has received a job offer from a large investment bank as an assistant to the vicepresident and Mr. Palin’s base salary will be $90,000. In addition, he will receive his first annual salary payment one year from the day he begins work. He will also get an immediate $45,000 bonus for joining the company and his salary will grow at 8 percent each year. Mr.Palin is expected to work for 20 years. What is the present value of the offer if the appropriate discount rate is 11 percent?Answer:Simplest approach is to set up a spreadsheet like:Year PMT PV@11%0 45,000 45,0001 90,000 81,081.082 97,200 78,889.70. . .. . .. . .19 359,641.75 49,514.6320 388,413.10 $48,176.39Total: $1,310,649.82The present value of the offer is $1,310,649.827.Natalia will face a tax rate of 25% before and after retirement. The interest rate is 9%. She is35 years from her retirement date and invests $5,000 to a tax deferred retirement plan. If shechooses to withdraw the total accumulated amount at retirement, what will she be left with after paying taxes?Answer:$5,000 x 1.0935 = $102,069After taxes this leaves $102,069 x 0.75 = $76,5528.Damian is currently twenty-five years old and plans to live to age eighty. His labor income is$80,000 per year, and he plans to maintain a constant level of real consumption spending over the next fifty-five years. Damian plans to retire at age 60. Assume the real interest rate is 5% per year and there are no taxes and no growth in real labor income. What is the value ofDamian’s human capital? What is the value of Damian’s permanent income?Answer:N I PV FV PMTResult_________35 5 ? 0 $80,000 PV =$1,309,936N I PV FV PMT Result________55 5 $1,309,936 0 ? PMT = $70,300Damian’s human capital is $1,309,936.Damian’s permanent income is $70,300.9.You are currently renting a house for $25,800 a year andyou have an option to buy it for$350,000. Maintenance and property taxes are $6,150 per year, and these costs are included in your rent. Property taxes ($4,150 of the $6,150) are deductible for tax purposes. Your tax rate is 35%. The real after tax rate is 3.5%. What is the NPV of the investment in the house?Answer:After-tax outflow for property taxes each year is 0.65 x $4,150 = $2,697.50Cash outflow in year t = $2,697.50 + $2,000= $4,697.50PV cost of owning = $350,000 + $4,697/0.035= $350,000 + $134,214= $484,214PV cost of renting = $25,800/0.035= $737,143So the NPV of investing in the house instead of renting is $737,143 – $484,214 = $252,929.10.Carson will face a tax rate of 30% before and after retirement. The interest rate is 6%. He is32 years from his retirement date and invests $3,000 to a tax deferred retirement plan. If hechooses to withdraw the total accumulated amount at retirement, what will he be left with after paying taxes? Show how to find the answer using the rule, “Deferral earns you the pretax rate of return after tax.”Answer:If Carson paid the initial tax he would have $3,000 x 0.7 = $2,100 to invest.Investing $2,100 at the pretax rate of 6% would result in$2,100 x 1.0632 = $13,552Longer Problems1.Tamara is currently twenty-eight years old, plans to retire at age seventy and to live to ageninety. Her labor income is $50,000 per year, and she intends to maintain a constant level of real consumption spending over the next sixty-two years. Assume no taxes, no growth in real labor income and a real interest rate of 4% per year.(a)What is the value of Tamara’s human capital?(b)What is the value of Tamara’s permanent income?Answer:(a) N I PV FV PMT Result42 4 ? 0 $50,000 PV =$1,009,281(b) N I PV FV PMT Result62 4 $1,009,281 0 ? PMT =$44,261The value of Tamara’s human capital is $1,009,281The value of Tamara’s permanent income is $44,2612.You have just turned twenty-eight years of age and feel it is necessary to upgrade yourqualifications. After some consideration, you feel that undertaking full-time study for an MBA degree is one alternative. For the two years of full-time study, tuition and living expenses will be $25,000 per year. In addition, you will have to give up your current job witha salary of $35,000 per year. Assume all cash flows occur at the end of the year. Assume areal interest rate of 4% per year, ignoring taxes. Also assume that the salary increase is at a constant real amount that startsafter you complete your degree (at the end of the year following graduation) and lasts until retirement at age sixty-five. In order to justify theinvestment, by how much does your salary have to increase as a result of getting the MBA degree?Answer:Find the FV of tuition and foregone salary at the end of two years:N i PV FV PMT Result________2 4 0 ? 60,000 FV = $122,400Find the increase in salary that has this amount as its PV:n i PV FV PMT Result_______35 4 $122,400 0 ? PMT = $6,5583.At the age of thirty Terry was earning $30,000 and decided to undertake an MBA to increasehis earning potential. Two years later Terry has his degree and has achieved a constant real increase of $5,898 in his annual salary that will last until he retires at age sixty. If Terry lives to the age of ninety, what will be the value of his human capital and permanent income?Assume a real interest rate of 2.52% per year, no taxes, and no growth in real labor income.Answer:New base salary = $30,000 + $5,898 = $35,898n i PV FV PMT Result________28 2.52 ? 0 $35,898 PV = $714,899n i PV FV PMT Result________58 2.52 $714,899 0 ? PMT = $23,584The value of Terry’s human capital is $714,899.The value of Terry’s permanent income is $23,584.4.Juliet currently rents an apartment but has the option to buy it for $185,000. Property taxesare $2,000 per year and are deductible for income tax purposes. Annual maintenance costs are $1,800 per year, but are not tax deductible. Juliet expects that the above taxes will increase at the rate of inflation. Her income tax rate is 35%, and she can earn a before-tax real interest rate of 5% per year. If Juliet buys the apartment she plans to keep it forever. What is the “break-even” annual rent such that Juliet would buy the apartment if the rent exceeded this amount?Answer:Real after-tax rate = 0.65 x 0.05= 0.0325 (or 3.25%)After-tax annual outflow for property taxes each year is 0.65 x $2,000 = $1,300Break-even rent: X/0.035 = $185,000 + $3,100/0.0325X = 0.035($185,000) + $3,100X = $6,012.50 + $3,100X = $9,112.50So the break-even rent is $9,112.50.5.Anton’s retirement goal is to set aside an a mount of money each year into a savings accountuntil he retires so that he can withdraw $80,000 each year during his retirement. He expects to retire in thirty years and expects to live for twenty years following his retirement. Anton expects to be able to earn 9 percent per year on his account balance. Calculate the deposit Anton must make for Plan 1 and the amount of the deposit Anton must make for Plan 2.Plan 1: Anton's first deposit will be one year from today and his last deposit will betwenty-nine years from today. He intends to make his first withdrawal thirty years from today.Plan 2: Anton's first deposit will be today and his last deposit will be thirty years fromtoday. He intends to make his first withdrawal thirty one years from today.Answer:Plan 1N I PMT Result__________20 9 $80,000 PV = $730,283.65N I FV Result__________29 9 $730,283.65 PMT = $5,882.96Under Plan 1, Anton must deposit $5, 882.96Plan 2N I PMT Result__________20 9 $80,000 PV = $730,283.65(set to Begin mode)N I FV Result_______31 9 $730,283.65 PMT = $4,479Under Plan 2, Anton must deposit $4,479.6.Your 68 year old mother plans to retire in 2 years, and she expects to live independently for 3years. She wants a retirement income that has, in the first year, the same purchasing power as $60,000 has today. However, her retirement income will be of a fixed amount, so her real income will decline over time. Her retirement income will start the day she retires (2 years from today), and she will receive a total of 3 retirement payments. Inflation is expected to be constant at 6%. Your mother has $100,000 in savings now, and she can earn 9% on savings now and in the future. How muchmust she save each year, starting today, to meet herretirement goals?Answer:First of all, your mother needs the following payments at age 70-72:Age 70: $67,416Age 71: $71,460.96Age 72: $75,748.62At age 68, the PV of these cash flows = $165,585.90Your mother has already set aside $100,000So to calculate what she has to save:Set calculator to Begin modePV N I/Y Result$65,585.90 2 9 PMT = $34,205.097. A relative of yours has just turned 45 years old and plans on retiring in 15 years on her 60thbirthday. She is saving money today for her retirement and is establishing a retirementaccount with your office. She would like to withdraw money from her retirement account on her birthday each year until she dies. She would ideally like to withdraw $60,000 on her 60th birthday, and increase her withdrawals 10% a year through her 69th birthday (i.e., she would like to withdraw $141,476.86 on her 69th birthday). She plans to die on her 70th birthday, at which time she would like to leave $400,000 to her descendants. Your relative currently has $100,000. You estimate that the money in the retirement account will earn 11% a year over the next 25 years. Calculate how much your relative should deposit each year (at the end of each year).Answer:Between ages 60-70, cash flows look like:Year CF Get the PV of these withdrawals.6060,0006166,006272,600. .. .. .69141,476.9070400,000At age 60, PV = $717,124.72At age 45, PV = $149,882.18Relative already has $100,000Solve:N I PV Result_________15 11 $49,882.18 PMT = $6,936.888.Consider the following retirement plan. Today is January 1 and your employer will make a$100 contribution to your retirement plan at the end of January and this amount will increase by $100 each month through December 31. Thus in February you get $200 and then up to a $1,200 contribution on December 31. Thus at the end of each January, you will alwaysreceive $100 and the end of each December you will always receive $1,200. The employer will continue this contribution pattern for the next 25 years. You expect to receive a 12% quoted yield, compounded monthly, on your investments. How much money will be in your account when you retire?Answer:Determine what the monthly deposits are worth on annualbasis:CF0 = 0, CF1 = 100, …, CF12 = $1,200NPV = $7,182.38 at start of each year.Determine EFF = 12.68%Set calculator to Begin mode:N I PMT Result_____________25 12.68 $7,182.38 F = $1,198,487。

兹维博迪⾦融学第⼆版试题库3TB（1）Chapter ThreeManaging Financial Health and PerformanceThis chapter contains 62multiple choice questions, 19 short problems and 9 longer problems. Multiple Choice1.For a corporation, net worth is called ________.(a) net income(b) assets(c) stockholder’s equity(d) retained earningsAnswer: (c)2.On a company’s published balance sheet, the value of assets, liabilities and net worth, are measured at ________.(a)expected market value(b)current book value(c)current market value(d)historical acquisition costsAnswer: (d)3.Any U.S. or non-U.S. company that wishes to list its shares on a U.S. exchange must regularly report its activities by filing financial statements with the ________.(a)SEC(b)NYSE(c)GAAP(d)AMEXAnswer: (a)4.Noncurrent assets typically consist of ________.(a)accounts payable(b)receivables and inventories(c)cash and marketable securities(d)property, plant, and equipmentAnswer: (d)5.The difference between a firm’s current assets and its current liabilities is called ________.(a)net worth(b)net working capital(c)net income(d)stockholder’s equityAnswer: (b)6.________ is the difference between revenues and cost of goods sold.(a)Operating income(b)Gross margin(c)Taxable income(d)Change in retained earningsAnswer: (b)7.________ is the difference between gross margin and GS&A expenses.(a)Operating income(b)Gross margin(c)Taxable income(d)Net incomeAnswer: (a)8.Although it differs from the income statement, the statement of cash flows is a useful supplement to the income statement because:(a)it focuses attention on what is happening to the firm’s cash position over time(b)it avoids the judgments about revenue and expense recognition that go into the income statement(c)it is influenced by accrual accounting decisions(d)(a) and (b)Answer: (d)9.On the statement of cash flows, the purchase of new plant and equipment represents a ________.(a)cash flow from operating activity(b)cash flow from investing activity(c)cash flow from financing activity(d)total cash flow from (a) + (b) +(c )Answer: (b)10.On the balance sheet, the value of assets, liabilities, and net worth are measured in accordance with ________.(a)generally accepted economic principles(b)generally accepted accounting principles(c)market value accreditation(d)generally adopted and accredited principlesAnswer: (b)11.________ is the official accounting value of assets and shareholder’s equity.(a)Market value(b)Historical market value(c)Book value(d)Economic value addedAnswer: (c)12.Building up a good reputation for quality and reliability, and building up a knowledge base as theresult of past research and development, are both examples of ________ that add to the firm’s________.(a)intangible assets, book value(b)tangible assets, market value(c)tangible assets, book value(d)intangible assets, market valueAnswer: (d)13.The value of goodwill is the difference between the ________ of the acquisition and its ________.(a)market price, book value(b)amortized value, market price(c)historical acquisition cost, book value(d)market price, after tax valueAnswer: (a)14.At the beginning of 19X7 Success Galore has a market price of $250 per share and at the end of theyear $225.50. Cash dividends for the year are $7.50 per share. Compute the total shareholder returns.(a)6.8%(b)–6.8%(c)12.8%(d)–12.8%Answer: (b)15.Success Galore had a market price of $178 per share at the beginning of 19X7 and at the end of theyear the price per share was $205.50. Cash dividends for the year were $7 per share. Calculate the total shareholder returns.(a)19.38%(b)–19.38%(c)16.79%(d)–16.79%Answer: (a)16.In 19X7, Kanga Inc. had a net income of $40.2 million, assets of $600 million, and shareholders’equity of $405 million. Calculate the return on equity.(a)4%(b)6.7%(c)9.93%(d)20.62%Answer: (c)17.Asset turnover ratios ________.(a)assess the firm’s profitability(b)assess the firm’s ability to use its assets productively in generating revenue(c)highlight the capital structure of the firm(d)measure the ability of the firm to meet its short-term obligationsAnswer: (b)Use the information below for BGB Manufacturing to answer Questions 18-22.18.Calculate the current ratio for BGB Manufacturing for 1998.(a)1.5 times(b)2.43 times(c)3.19 times(d)4.25 timesAnswer: (b)19.Calculate the quick ratio for BGB Manufacturing for 1997.(a)0.25 times(b)0.5 times(c)0.75 times(d)1.5 timesAnswer: (c)20.From the perspective of a bank loan officer from 1997 to the present, which of the followingstatements best summarizes the information revealed by the current ratio and quick ratio for BGB Manufacturing?(a)The ability of the firm to meet its long-term obligations has deteriorated.(b)The ability of the firm to meet its short-term obligations has improved.(c)The ability of the firm to meet its short-term obligations has deteriorated.(d)The ability of the firm to meet its long-term obligations has improved.Answer: (b)21.Calculate the debt ratio for BGB Manufacturing for 1999.(a)0.14%(b)0.24%(c)0.48%(d)0.82%Answer: (c)22.Calculate the times interest earned (TIE) ratio for BGB Manufacturing for 1998.(a)2.25 times(b)2.7 times(c)3.25 times(d)5.2 timesAnswer: (c)23. If a firm’s total asset turnover ratio is 3.0:(a)its average total assets are one-sixth of its annual sales(b)its average total assets are three times its annual sales(c)its annual sales are three times its average total assets(d)its annual sales are one-third of its total assetsAnswer: (c)24. A firm has a P/E of 9 and a market to book ratio of 2.5. If EPS are $3.50, what is the book value per share?(a) $8.75(b) $12.60(c) $31.50(d) $78.75Answer: (b)25. A firm has EBIT of $3 million, sales of $15 million, and average total assets of $30 million. Calculate its ROA.(a)6.67%(b)10%(c) 20%(d) 50%Answer: (b)26. If the average inventory for a firm is $17 million and inventory turnover is 0.9 times, what is its cost of goods sold?(a)$15.3 million(b)$18.89 million(c)$153 million(d)$188.9 millionAnswer: (a)27. If the average total assets for the Heartland Corporation are $660 million and EAT are $100 million, calculate its ROA. Assume a tax rate of 40% and interest of $3 million.(a) 15.15%(b) 15.6%(c) 25.15%(d) 25.71%Answer: (d)28. The beginning of year receivables for a firm are $40 million. If the receivables turnover for the firm is4.2 times and its sales are $220 million, calculate the firm’s end of year receivables.(a) $24.76 million(b) $52.38 million(c) $64.76 million(d) $168 millionAnswer: (c)29. In developing a financial plan, the first step is to:(a) distribute rewards and punishments to relevant parties(b) develop the firm’s strategic plan(c) establish specific performance targets for the firm and its suppliers(d) adjust targets based on the previous year’s dataAnswer: (b)30. The planning horizon is an important component of the financial planning process. Generally, the longer the horizon:(a) the less detailed the financial plan(b) the more detailed the financial plan(c) the more performance targets the financial plan will include(d) the less a financial plan is neededAnswer: (a)31. The “blueprints,” or the tangible outcomes of the financial planning process, are in the form of:(a) executive stock options(b) auditor’s recommendations(c) projected financial statements and budgets(d) tactical plans and budgetsAnswer: (c)32. Based on a consideration of the planning horizon, which of the following projects is most likely to consist of the most detailed financial plans?(a) a five-year financial plan(b) a one-year financial plan(c) a six-month financial plan(d) a one-month financial planAnswer: (d)33. Forecasting sales for the next year and assuming that most of the items on the income statement and balance sheet will maintain the same ratio to sales as in the previous year is called the_______________ method.(a) forecast ratio(b) percent-of-sales(c) planning horizon(d) financial predictorAnswer: (b)34. Using the percent-of-sales method, which of the following variables are typically assumed to increase proportionately with sales?(a) costs(b) EBIT(c) assets(d) all of the aboveAnswer: (d)35. Rupert’s Glassworks Ltd. has an inventory period of 50 days, a receivables period of 55 days, and a payables period of 40 days. Compute its cash cycle time.(a) 35 days(b) 45 days(c) 65 days(d) 105 daysAnswer: (c)Questions 36 through 45 refer to the following information:Income Statement data and Balance Sheet data is provided for the firm Neural Way Inc. for 19x7 and 19x8. Financial Statementsfor Neural Way Inc.19x719x8Income StatementSales$1,500,000$1,980,000Cost of Goods Sold$967,500$1,277,100Gross Margin$532,500$702,900Operating ExpensesAdvertising Expense$50,400$66,528Rent Expense$72,000$95,040Salesperson Commission Expense$48,000$63,360Utilities Expense$15,000$19,800EBIT$347,100$458,172Interest Expense$102,000$107,000Taxable Income$245,100$351,172Taxes (@35%)$85,785$122,910Net Income$159,315$228,262Dividends (40% payout)$63,726$91,305Change in Shareholders Equity$95,589$136,957Balance SheetAssetsCash and Equivalents$310,000$409,266Receivables$205,000$270,666Inventories$720,000$950,400Property, Plant and Equipment$1,956,000$2,571,306Total Assets$3,191,000$4,201,638LiabilitiesPayables$310,000$409,266Short Term Debt (10% interest)$510,000$1,088,535Long Term Debt (7% interest)$800,000$995,880Shareholders equityCommon Stock$1,150,000$1,150,000Retained earnings$421,000$557,957Total Liabilities and Equity$3,191,000$4,201,63836. From the financial data provided, which of the following items has maintained a fixed ratio to sales?(a) interest expense(b) net income(c) rent expense(d) taxes37.What is the ratio between sales and dividend payments in 19x8?(a) 3.22%(b) 4.25%(c) 4.61%(d) 6.09%Answer: (c)38.Calculate the rate of sales growth from 19x7 to 19x8.(a) 48%(b) 32%(c) 24.24%(d) 31.25%Answer: (b)39.What is the firm’s return on equity for 19x8?(a) 10.14%(b) 13.36%(c) 19.85%(d) 40.91%Answer: (b)40.What is the firm’s external financing funding requirement determined to be for 19x8?(a) $774,415(b) $873,681(c) $911,372(d) $972,947Answer: (a)41.If it is assumed that sales will grow by 17% for 19x9, then sales for 19x9 are forecast to be ________.(a) $1,755,000(b) $2,316,600(c) $2,613,600(d) $11,647,059Answer: (b)42.If sales growth is forecast to be 17% for 19x9, what is the forecast gross margin for 19x9?(a) $393, 822(b) $822,393(c) $873,300Answer: (b)43.How much additional funding will the firm need for 19x9?(a) $709,544(b) $639,979(c) $618,863(d) $549,288Answer: (d)44.In 19x7, taxable income is what proportion of sales?(a) 5.72%(b) 6.11%(c) 16.34%(d) 17.74%Answer: (c)45.In 19x8, common stock is what proportion of sales?(a) 28.18%(b) 58.08%(c) 76.67%(d) 86.26%Answer: (b)46.Which is the correct formula for calculating a firm’s sustainable growth rate?(a) sustainable growth rate = earnings retention rate x ROE(b) s ustainable growth rate = earnings retention rate x ROI(c) sustainable growth rate = (1 – dividend payout) x ROE x ROI(d) s ustainable growth rate = share repurchase rate x ROIAnswer: (a)47.Lucinda Inc. has the following fixed ratios:Asset Turnover = 0.6 Times per YearDebt/Equity Ratio = 1.5Dividend Payout Ratio = 0.53ROE = 25% per YearWhat is the sustainable growth rate for this firm?(a) 10%(b) 11.75%(c) 15%(d) 39.75%Answer: (b)48.Onegin Corporation has the following fixed ratios:Asset Turnover = 0.4 Times per YearDebt/Equity Ratio = 1.4Dividend Payout Ratio = 0.49ROE = 27% per YearWhat is the sustainable growth rate for this firm?(a) 13.77%(b) 14%(c) 16.2%(d) 18.25%Answer: (a)49. If a firm’s working capital need is permanent rather than seasonal, the firm ________.(a) will usually seek short-term financing for it(b) will not seek financing at all(c) will revise its strategic plan immediately(d) will usually seek long-term financing for itAnswer: (d)50. Which of the following is not part of a firm’s working capital?(a) inventories(b) accounts payable(c) plant and equipment(d) cashAnswer: (c)51. Working capital is defined to be ________.(a) the difference between current assets and current liabilities(b) the difference between accounts receivable and accounts payable(c) the difference between current assets and shareholders’ equity(d) the difference between total assets and total liabilitiesAnswer: (a)52. The cash cycle time begins with ________and ends with ________.(a) payment of cash to suppliers, liquidation of inventory(b) receipt of cash from customers, payment of cash to suppliers(c) payment of cash to suppliers, receipt of cash from customers(d) selling of purchase on credit, receipt of cash from customersAnswer: (c)53. Which of the following is the correct representation of the cash cycle time?(a) Cash cycle time = inventory period – payables period(b) Cash cycle time = inventory period – receivables period – payables period(c) Cash cycle time = receivables period – payables period(d) Cash cycle time = inventory period + receivables period – payables periodAnswer: (d)54. A firm’s required investment in working capital is ________ to the cash cycle length of time.(a) inversely proportional(b) directly related(c) indirectly related(d) not related at allAnswer: (b)Use the following data to answer Questions 55 - 59Prepare a multi-step income statement for Kangarucci Inc. (a retailer) for the year ending December 31, 1997. Use the information below:Interest Expense 18,799Beginning Inventory 422,550Depreciation 14,861General and Administrative Expenses 19,745Advertising 14,090Interest Income 5,087Ending Inventory 456,988Gross Sales 543,777Taxes 10,006Lease Payments 61,444Purchase of Materials 199,766Returns and Allowances 9,888R&D Expenditures 12,867Repairs and Maintenance 7,54255. The cost of goods sold is ________.(a)$34,438(b)$165,328(c)$199,766(d)234,204Answer: (b)56. The operating expenses for the period are ________.(a)$95,279(b)$110,140(c)$115,688(d)$130,549Answer: (d)57. The gross margin for the period is ________.(a)$353,700(b)$368,561(c)$378,449(d)$543,777Answer: (b)58. The operating income for the period is ________.(a)$238,012(b)$247,900(c)$273,282(d)$283,170Answer: (a)59. The net income is ________.(a)$214,294(b)$209,207(c)$204,120(d)$189,259Answer: (a)60. In the construction of a statement of cash flows, which of the following is considered a financing activity?(a)increase in accounts payable(b)repayment of long-term debt(c)reduction of accounts receivable(d)purchase of gross fixed assetsAnswer: (b)61. Assume you are given the following information for Flanders Company:Current Ratio: 2.5xQuick Ratio: 2.0xCurrent Liabilities: $200,000Current assets comprise cash, account receivables and inventory.Compute Inventory.(a)$500,000(b)$400,000(c)$100,000(d)$80,000Answer: (c)62. Assume you are given the following information for Flanders Company:Return on Assets (ROA): 11%Return on Equity (ROE): 20%Total Asset Turnover: 1.5xCalculate the ROS for Flanders Company.(a)7.33%(b)13.33%(c)13.64%(d)16.5%Answer: (a)Short Problems1.Explain why the market price of a company’s stock does not necessarily equal its book value.Answer:The book value does not include all of a firm’s assets and liabilities.The assets and liabilities included on a firm’s official balance sheet are (for the most part) valued at original acquisition cost less depreciation, rather than at current market values.2.Explain why it may be possible for two firms to have the same ROA.Answer: ROA = ROS x ATOFor example, a supermarket (low profit margin, high asset turnover) and a jewelry store (high profit margin, low asset turnover) – could have the same ROA.3.As a financial document, what purpose does the statement of cash flows serve? What is a benefit ofthe statement of cash flows?Answer: The statement of cash flows gives a summary of cash flows from operating, investing, and financing activities for a period of time. The statement of cash flows focuses attention on what is happening to the firm’s cash position over time and it also avoids judgements about revenue and expense recognition that go into the income statement. A benefit of the statement of cash flows is that it is not influenced by accrual accounting decisions.4.What are the three types of benchmarks?Answer:Financial ratios of other companies for the same period of time.Financial ratios of the company itself in previous time periods.Information extracted from financial markets such as asset prices or interest rates.5.You invest in a stock that costs $215.50. It pays a cash dividend during the year of $12.20 and you expect its price to be $229 at year’s end. What is the total shareholder return?Answer:Total Shareholder returns = Ending Price of a Share – Beginning Price of Share + Cash Dividend Beginning Price of Share= $229 - $215.50 + $12.20$215.50= 11.93%6.In 19X7, Slater Inc. had a net income of $30.3 million, assets of $560 million, and shareholders equity of $400 million. Calculate its return on equity.Answer: Return on equity = Net IncomeShareholders’ Equity= $30.3$400= 7.58%7.Grad Inc. has EBIT of $13 million, sales of $25 million, and average total assets of $50 million. Calculate its ROA.Answer: Return on assets = EBIT x SalesSales Assets= 13 x 252550= 26%8.If Profit Inc. has interest expenses of $16,000 per year, sales of $1,000,000, a tax rate of 40%, and a net profit margin of 7%, what is Success Inc.’s times interest earned ratio?Answer: EAT = Sales x Net Profit Margin= $1,000,000 x 0.07= $70,000EBT = EAT/(1-T)= $70,000/0.6= $116,667EBIT = EBT + I= $116,667 + $16,000= $132,667T.I.E = EBIT/ Interest Expense = $132,667/ $16,000= 8.29 times。