习题答案PrinciplesofCorporateFinance第⼗版Chapter14 CHAPTER 14An Overview of Corporate Financing Answers to Problem Sets1. a. Falseb. Truec. True2. a. 40,000/.50 = 80,000 sharesb. 78,000 sharesc. 2,000 shares are held as Treasury stockd. 20,000 sharese. See table belowf. See table below3. a. 80 votesb. 10 X 80 = 800 votes.4. a. subordinatedb. floating ratec. convertibled. warrante. common stock; preferred stock.5. a. Falseb. Truec. False6. a. Par value is $0.05 per share, which is computed as follows:$443 million/8,863 million sharesb. The shares were sold at an average price of:[$443 million + $70,283 million]/8,863 million shares = $7.98c. The company has repurchased:8,863 million – 6,746 million = 2,117 million sharesd. Average repurchase price:$57,391 million/2,117 million shares = $27.11 per share.e. The value of the net common equity is:$443 million + $70,283 million + $44,148 million – $57,391 million= $57,483 million7. a. The day after the founding of Inbox:Common shares ($0.10 par value) $ 50,000Additional paid-in capital 1,950,000Retained earnings 0Treasury shares 0Net common equity $ 2,000,000b. After 2 years of operation:Common shares ($0.10 par value) $ 50,000Additional paid-in capital 1,950,000Retained earnings 120,000Treasury shares 0Net common equity $ 2,120,000c. After 3 years of operation:Common shares ($0.10 par value) $ 150,000 Additional paid-in capital 6,850,000Retained earnings 370,000Treasury shares 0Net common equity $ 7,370,0008. a.Common shares ($1.00 par value) $1,008Additional paid-in capital 5,444Retained earnings 16,250Treasury shares (14,015)Net common equity $8,687b.Common shares ($1.00 par value) $1,008Additional paid-in capital 5,444Retained earnings 16,250Treasury shares (14,715)Net common equity $7,9879. One would expect that the voting shares have a higher price because theyhave an added benefit/responsibility that has value.10. a.Gross profits $ 760,000Interest 100,000EBT $ 660,000Tax (at 35%) 231,000Funds available to common shareholders $ 429,000b.Gross profits (EBT) $ 760,000Tax (at 35%) 266,000Net income $ 494,000Preferred dividend 80,000Funds available to common shareholders $ 414,00011. Internet exercise; answers will vary.12. a. Less valuableb. More valuablec. More valuabled. Less valuable13. Answers may differ. Some key events of the financial crisis through the end of2008 include:June 2007: Bear Stearns pledges $3.2 billion to aid one of its ailing hedge funds Sept. 2007: Northern Rock receives emergency funding from the Bank of England Oct. 2007: Citigroup begins a string of writedowns based on mortgage losses Dec. 2007: Fed establishes Term Auction Facility linesJan. 2008: Ratings agencies threaten to downgrade Ambac and MBIA (major bond issuers)Feb. 2008: Economic stimulus package signed into lawMar. 2008: JPMorgan purchases Bear Stearns with support from the FedMar. 2008: SEC proposes ban on naked short sellingJuly 2008: FDIC takes over IndyMac BankSept. 2008: Lehman forced into bankruptcyB of A purchases Merrill Lynch10 banks create $70 billion liquidity fundAIG debt downgradedRMC money market fund “breaks the buck”Treasury bailout plan voted down in the HouseOct. 2008: 9 large banks agree to capital injection from TreasuryRevised bailout plan passes in HouseConsumer confidence hits lowest point on recordThe NY Fed has an excellent timeline of events at:/doc/24f5ef393968011ca30091d5.html /research/global_economy/Crisis_Timeline.pdf14. Answers will differ. Some purported causes of the financial crisis include:Long periods of very low interest rates leading to easy credit conditionsHigh leverage ratiosThe bursting of the US housing market bubbleHigh rates of default on subprime mortgagesMassive losses on investments in mortgage backed securitiesOpaque derivative markets and amplified losses through credit default swaps High rates of unemployment and job losses 15.a.For majority voting, you must own or otherwise control the votes of a simple majority of the shares outstanding, i.e., one-half of the shares outstanding plus one. Here, with 200,000 shares outstanding, you must control the votes of 100,001 shares. b.With cumulative voting, the directors are elected in order of the total number of votes each receives. With 200,000 shares outstanding and five directors to be elected, there will be a total of 1,000,000 votes cast. To ensure you can elect at least one director, you must ensure that someone else can elect at most four directors. That is, you must have enough votes so that, even if the others split their votes evenly among five other candidates, the number of votes your candidate gets would be higher by one.Let x be the number of votes controlled by you, so that others control (1,000,000 - x) votes. To elect one director:Solving, we find x = 166,666.8 votes, or 33,333.4 shares. Because there are no fractional shares, we need 33,334 shares.15x000,000,1x +-=。
Chapter 14Liquidity Planning and Managing Cash Assets1.Which of the following is not considered a cash asset?a.Marketable securitiesb.Cash items in process of collectionc.Demand deposits at private financial institutionsd.Demand deposits at the Federal Reservee.Vault cashAnswer: a2.Which of the following is not a reason that banks hold cash assets?a.To meet customer's needs for currency.b.To meet capital requirements.c.To meet required reserves.d.To compensate for correspondent bank services.e.To assist in the check clearing process.Answer: b3.Which of the following is not considered a viable long-term source of bank liquidity?a.Federal funds soldb.Short-term Treasury securitiesc.Cashd.High quality short-term municipal securitiese.Reverse repurchase agreementsAnswer: c4.In which of the following ways can a bank acquire liquidity?a.Selling Fed fundsb.Investing in repurchase agreementsc.Increasing the number of loans outstandingd.Selling Treasury securitiese.Buying back outstanding bank stockAnswer: d5.Which of the following is not an advantage of larger cash balances for a bank?rger cash balances reduce the need to borrow at the discount window.rger cash balances reduce the risk of bank runs.rger cash balances reduce the risk of paying penalties to the Federal Rese rve.rger cash balances increase reserve balances.rger cash balances reduce a bank's interest expense.Answer: e996.Which of the following is not considered a monetary policy tool of the Federal Reserve?a.Changing float requirementsb.Open market operationsc.Changing the discount rated.Changing reserve requirementse.All of the above are considered to be monetary policy toolsAnswer: a7.The Federal Reserve has reduced the use of reserve requirements as a monetary policytool because:a.the Fed has focused on controlling short-term interest rates, rather than the size of M1.b.of the increased use of sweep accounts.c.reserve requirements are a "tax”on banks .d.All of the above.e. a. and c. only.Answer: d8.Which of the following does not directly influence the amount of required reserves abank must hold?a.The required reserve ratio.b.The dollar amount of cash items in process of collection.c.The dollar amount of demand deposits outstanding.d.The dollar amount of money market deposit accounts outstanding.e.The dollar amount of NOW accounts outstanding.Answer: d9.In determining reserves, the banks and the Federal Reserve currently use:a. a leading reserve accounting system.b. a contemporaneous reserve accounting system.c. a lagging reserve accounting system.d.an actual reserve accounting system.e. a holding reserve accounting system.Answer: c10.The two-week period during which a bank must hold sufficient legal reserves is called the:a.deposit computation period.b.deposit maintenance period.c.vault cash computation period.d.base computation period.e.maintenance period.Answer: e10011.A bank is currently exactly meeting its reserve requirements of 10%. If the bank has adeposit inflow of $10,000,000, what is the impact on its required reserve position?a.It now has excess reserves in the amount of $9,000,000.b.It now has excess reserves in the amount of $10,000,000.c.It is now deficient $1,000,000 in required reserves.d.It is now deficient $9,000,000 in required reserves.e.There would be no impact on the bank's required reserves.Answer: a12.Which of the following is a discretionary factor that will increase a bank's daily reservesheld at the Federal Reserve?a.The prior day's immediate cash letterb.Federal funds purchasedc.Deposits from the U.S. Treasuryd.Currency received from the Federal Reservee.Deficits at the local clearinghouseAnswer: b13.Which of the following is a discretionary factor that will decrease a bank's daily reservesheld at the Federal Reserve?a.Remittances chargedb.Federal funds purchasedc.The previous day’s immediate cash letterd.Currency received from the Federal Reservee.Deficits at the local clearinghouseAnswer: d14.Which of the following is a non-discretionary factor that will increase a bank's dailyreserves held at the Federal Reserve?a.Federal funds sold.b.Receiving a discount window loanc.Remittances chargedd.Security salese.Deposits from the U.S. TreasuryAnswer: e15.Which of the following is a non-discretionary factor that will decrease a bank's dailyreserves held at the Federal Reserve?a.Deferred availability itemsb.Receiving a discount window loanc.Remittances chargedd.Excess balances at the local clearing housee.Federal funds soldAnswer: c10116.The check-clearing services of correspondent banks are often used because:a.the respondent bank is required to purchase a minimum amount of services.b.it reduces required reserves.c.the correspondent bank may be marketing their own services in a local community.d.it often reduces float.e.it decreases interest income.Answer: d17.A respondent bank expects to purchase $500 worth of correspondent bank services duringthe next month. If the earnings credit rate is 5%, reserve requirements are 10%, and float is expected to be $5,000, what is the approximate required ledger balance the respondent bank must keep to exactly offset the service charges?a.$100,000b.$116,000c.$121,000d.$135,000e.$140,000Answer: eInvestment Income = (Earnings Credit Rate)(30/365)(1-RR)(Ledger Balance – Float)$500 = .05*(30/365)*(1-.10)(Ledger Balance - $5,000)$500 = .00369863*(Ledger Balance - $5,000)$500/.00369863 = Ledger Balance - $5,000$135,185 = Ledger Balance - $5,000Ledger Balance = $140,18518.The shiftability theory suggests that:a.banks can obtain liquidity by selling Treasury securities prior to maturity.b.banks should only make short-term self-liquidating loans.c.loan repayments should match the borrower's cash flows to repay the loan.d.banks can obtain liquidity by purchasing Fed funds.e.there is a tradeoff between liquidity and solvency.Answer: a19.The liability management theory suggests that:a.banks can obtain liquidity by selling Treasury securities prior to maturity.b.banks can obtain liquidity by purchasing Fed funds.c.loan repayments should match the borrower's cash flows to repay the loan.d.there is a tradeoff between liquidity and solvency.e.banks should only make short-term self-liquidating loans.Answer: b10220.Which of the following indicates the potential demand for new loans?a.Low business growth and activityb. A relatively large percentage of demand depositsrge, unused commercial credit lines outstandingrge deposits held by a single customere.The level of uninsured depositsAnswer: c21.Which of the following indicates the potential for deposits leaving a bank?a.High business activity and growthb.Deposits that are inelastic to changes in interest ratesc.An aggressive bank loan officerrge deposits held by a single customere.Small unused commercial credit lines outstandingAnswer: d22.Which of the following is not considered a highly liquid asset?a.Federal funds soldb.90-day Treasury billsc.AAA-rated commercial paperd. A Federal Home Loan Bank Board bond with 6 months until maturitye.Repurchase agreementAnswer: eNote: A repurchase agreement is a liability.23.Which of the following is not a measure of liability liquidity?a.Total loans to total assetsb.Total deposits to total assetsc.Total equity to total assetsd.Loan losses to net loanse.Core deposits to total assetsAnswer: a24.Everything else the same, a high loan-to-deposit ratio indicates:a.the bank will be very profitable.b.the bank is less liquid than a bank with a lower loan-to-deposit ratio.c.that capital requirements are being met.d.that the bank has lower than average credit risk.e.that the bank's customers are interest inelastic.Answer: b10325.When selling securities to meet liquidity needs, a bank should consider all of thefollowing except:a.brokerage fees.b.lost interest income.c.the gains or losses on the securities.d.the impact on taxes.e. A bank should consider all of the above when selling securities to meet liquidity needs. Answer: e26.When increasing liabilities to meet liquidity needs, a bank should consider all of thefollowing except:a.brokerage fees.b.required reserves.c.FDIC insurance premiums.d.lost interest income.e. A bank should consider all of the above when increasing liabilities to meet liquidityneeds.Answer: d27.How did the FDIC's bailout of Continental Illinois constitute special treatment?a.Continental's insured depositors did not lose anything.b.The FDIC took over management of the bank.c.The FDIC purchased problem loans from Continental.d.Continental's shareholders did not lose anything.e.Continental's uninsured depositors did not lose anything.Answer: eTrue/False1. Vault cash generally satisfies a bank's liquidity needs.Answer: False2. Respondent banks buy services from correspondent banks.Answer: True3. More liquid assets tend to earn lower returns, everything else the same.Answer: True4. Core deposits tend to be more interest elastic than volatile liabilities.Answer: False5. The best measure of bank asset liquidity is the core deposits to total asset ratio.Answer: False104Essay1. How has the introduction of products like sweep accounts and money market deposit accounts affected the Federal Reserves ability to control the money supply?2. Why do banks prefer a lagged reserve accounting system to a contemporaneous reserve accounting system?3. How can pledging requirements make bank assets less liquid?105。
