Chapter 3 HW Solutions.docx - Solutions to Chapter 3 Online Material Questions 1 A 2 FALSE 3 E 4 C 5 T 6 A 7 C 8 A Exercise 1 Item Lev el Ordinary

Chapter 3 HW Solutions.docx - Solutions to Chapter 3 Online...

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Solutions to Chapter 3 Online Material: Questions: 1. A 2. FALSE 3. E 4. C 5. T 6. A 7. C 8. A Exercise 1: Exercise 2: Item Lev el Ordinary shares traded on the NASDAQ 1 A piece of equipment was measured in an active market to get a benchmark for a similar piece of equipment that Company A owns 2 Debt of a large multinational traded on many worldwide exchanges 1 Share price of an infrequently traded equity instrument. An expert gave a quoted price of the value of the share 2 Over-the-counter derivative 2 Company pricing model to determine the value of goodwill 3 Outcome 1 N=4 I= 10 PMT= 30,000 PV= 95,096 95,096 x .15= 14,264 Fair Value = \$40,350 Outcome 2 N=3 I= 10 PMT= 20,000 PV= 49,737 49,737 x.35= 17,408 Outcome 3 N=2 I= 10 PMT= 10,000 PV= 17,355 17,355 x.50= 8,678

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Exercise 3: A. Given the circumstances, Funland Entity would use the Principal market to determine fair value. The principal market is Market A, even though Market B results in a higher net rate of return. The principal market is used because that is where the highest volume and most transactions occur.
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