1-1. Shareholder (owner) wealth maximization is the most widely cited business goal.
The justification for shareholder wealth maximization is that managers are
hired by the owners (shareholders) and serve as their agents. In addition, the
Cost of Capital
16-1. By trial and error, the yield to maturity is 10%:
The after-tax cost of debt is .10(1 - .35) = 6.5%
kp = $10/$80 = 12.50%
Arbitrage Pricing Theory, Option Pricing Theory,
and Capital Budgeting
15-1. As noted in Chapter 14, the set of assumptions necessary to justify CAPM are both
lengthy and unrealistic. In contrast, the basic assumptions about investor
Ranking Mutually Exclusive Investments
7-1. The optimal choice among mutually exclusive investments is the choice that
maximizes net present value, so P is the investment that should be chosen. It has a net
present value of $160 while i
5-1. Net present value is the sum of the present value of its expected benefits, minus the
present values of all expected cash outlays.
5-2. Net present value has the same general meaning in risk and certainty. The present
value of an expected c
4-1. Identical cash flows streams will have identical prices in a perfect market.
4-2. Price - the amount someone has paid in a recent transaction.
Bid Price - the amount someone is willing to pay for a tangible or financial
Ask Price - t
3-3. a) An annuity is a future stream of payments.
b) A level annuity is a stream of equal payments received at specified intervals.
c) An annuity due has payments at the beginning of each period.
d) An annuity in arrears has payments
2-1. Strategy is the grand design of the organization, involving the decision as to what
business the organization is in, and how the organization intends to position
itself in relation to other existing and potential competitors.
2-2. The chara
Eric Del Cid
Spirituality And Sports
25 September 2014
Chariots Of Fire
This Academy Awarded movie is an inspiring story of two extremely talented British
runners, as they prepared for their competition in the 1924 Summer Olympics in Paris.