Week 1 Homework - Brian Lin D01278742 Week 1 Homework...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Brian Lin D01278742 Week 1 Homework Chapter 1 Homework Mini Case a. Why is corporate finance important to all managers? d. What should be the primary objective of managers? (1) Do firms have any responsibiliites to society at large? Yes, in additiona to personal objectives, firms do have responsibilities to society at large (2) Is stock price maximization good or bad for society? (3) Should firms behave ethically? e. What aspects of cash flow affect the value of any investment? f. What are free cash flows? FCF = Sales Revenues - Operating Costs - Operating Taxes - Required New Investments in Operating Capital g. What is weighted average cost of capital? h. How do free cash flows and weighted average cost of capital interact to determine a firm's value? k. What are some economic conditions (including international aspects) that affect the cost of money? l. What are financial securities? Describe some financial instruments. m. List some financial institutions. Savings and Loan Associations Credit Unions Commercial Banks (pg. 24-25) n. What are some different types of markets? Markets have been classified into seven (7) different categories: 1. Physical Asset Markets 2. Spot Markets 3. Money Markets 4. Mortgage Markets 5. World, National, Regional and Local Markets 6. Primary Markets 7. Private Markets o. How are secondary markets organized? (1) List some physical location markets and some computer/telephone networks. Physical Location Markets: NYSE AMEX Computer/Telephone Networks: Nasdaq US Treasury Bonds p. Briefly explain mortgage securitization and how it contributed to the global economic crisis. Corporate finance is important to all managers because the knowledge of coroporate finance wil equip managers with the knowledge and insight to (1) evaluate any proposal, and (2) implement only the projects that add value for their investors. b. Describe the organizational forms a company might have as it evolves from start-up to a major corporation. List the advantages and disadvantages of each form. As a business starts up, it wil begin as a sole proprietorship , which is an "unincorporated business owned by one individual" (pg. 5) Proprietorship has three advantages: "(1) easily and inexpensively formed, (2) it is subject to few government regulations, and (3) its income is not subject to corporate taxatin but is taxed as part of the proprietor's personal income." The limitations of a proprietorship are: "(1) may be difficult for a proprietorship to obtain the capital needed for growth; (2) the proprietor has unlimited personal liability for the business's debts, which can result in losses that exceed the money invested in the company (creditors may even be able to seize a proprietor's house or other personal property); and (3) the life of a proprietorship is limited to the life of its founder." (pg. 6) When a business grows to more than one owner, some businesses decide to join into a partnership , which exists when "two or more persons or entities associate to conduct a noncorporate business for profit." (pg. 6)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/13/2011 for the course MAFM FI516 taught by Professor Anthonycriniti during the Spring '10 term at Keller Graduate School of Management.

Page1 / 2

Week 1 Homework - Brian Lin D01278742 Week 1 Homework...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online