Chapter 29 - Financial Planning
CHAPTER 29
Financial Planning
Answers to Problem Sets
3.
Month 3: 18 + (.5 X 90) + (.3 X 120) + (.2 X 100) = $119,000.
Month 4: 14 + (.5 X 70) + (.3 X 90) + (.2 X 120) = $100,000.
7.
a.
Sales go up 10% => sales in 2012 = 1.
Chapter 03 - Valuing Bonds
CHAPTER 3
Valuing Bonds
Answers to Problem Sets
Does not change
Price falls
c.
2.
a.
b.
1.
Yield rises.
a.
If the coupon rate is higher than the yield, then investors must be
expecting a decline in the capital value of the bond
Chapter 04 - The Value of Common Stocks
CHAPTER 4
The Value of Common Stocks
Answers to Problem Sets
1.
a.
True
b.
True
2.
Investors who buy stocks may get their return from capital gains as well as
dividends. But the future stock price always depends on
Chapter 05 - Net Present Value and Other Investment Criteria
CHAPTER 5
Net Present Value and Other Investment Criteria
Answers to Problem Sets
1.
a.
A = 3 years, B = 2 years, C = 3 years
b.
B
c.
A, B, and C
d.
B and C (NPVB = $3,378; NPVC = $2,405)
e.
Tru
Chapter 06 - Making Investment Decisions with the Net Present Value Rule
CHAPTER 6
Making Investment Decisions with
The Net Present Value Rule
Answers to Problem Sets
1.
a, b, d, g, h.
2.
Real cash flow = 100,000/1.04 = $96,154; real discount rate = 1.08/
Chapter 07 - Introduction to Risk and Return
CHAPTER 7
Introduction to Risk and Return
Answers to Problem Sets
1.
Expected payoff is $100 and expected return is zero. Variance is 20,000 (%
squared) and standard deviation is 141%.
2.
a.
Standard deviation
Chapter 08 - Portfolio Theory and the Capital Asset Pricing Model
CHAPTER 8
Portfolio Theory and the Capital Asset Pricing Model
Answers to Problem Sets
a.
7%
b.
27% with perfect positive correlation; 1% with perfect negative correlation;
19.1% with no co
Chapter 09 - Risk and the Cost of Capital
CHAPTER 9
Risk and the Cost of Capital
Answers to Problem Sets
1.
Overestimate
2.
Company cost of capital = 10 x .4 + (10 + .5 x 8) x .6 = 12.4%
After-tax WACC = (1 - .35) x 10 x .4 + (10 + .5 x 8) x .6 = 11.0%
3.
Chapter 30 - Working Capital Management
CHAPTER 30: Working Capital Management
Answers to Problem Sets
17.
There is a 2% discount if the bill is paid within 30 days of the invoice
date; otherwise, the full amount is due within 60 days.
b.
There is a 2% di
Chapter 01 - Goals and Governance of the Firm
CHAPTER 1
Goals and Governance of the Firm
Answers to Problem Sets
6.
Separation of ownership and management typically leads to agency problems,
where managers prefer to consume private perks or make other dec
CHAPTER 5
Dynamic Systems Theory
Infants assemble motor skills for perceiving and
acting
Perceptions and actions are coupled
Motivation creates new behaviors
Perceptions fine tunes movements with repetitive
actions
Infants explore and select possible solu
Case Study #2:
WAL-MART
Bentonville, Arkansas
QUESTION #1
Wal-Mart takes on its critics and fight back, or should it focus on its business and let its results
speak for themselves?
Wal-Mart should focus on its business and let its results speak for themse
Case Study #1:
STARBUCKS
Seattle, Washington
QUESTION #1
So, what does Starbucks need to do to return to growth and profitability? Should it lower prices?
Should it expand its menu? What should be its strategy?
In order for Starbucks to return to growth a