发帖
雷达卡
习题答案
CHAPTER 1ANSWERS TO
END-OF-CHAPTERREVIEW QUESTIONS
1-1. The goal of profit maximization is toosimplistic in that it assumes away the problems of uncertainty of returns andthe timing of returns. Rather than use this goal, we have chosen maximizationof shareholders’ wealth—that is, maximization of the market value of the firm’scommon stock—because the effects of all financial decisions are included. Theshareholders react to poor investment or dividend decisions by causing thetotal value of the firm’s stock to fall and react to good decisions by pushingthe price of the stock upward. In this way, all financial decisions areevaluated, and all financial decisions affect shareholder wealth.
1-2. Thegoal of shareholder wealth maximization must be looked at as a long-run goal. Assuch, the public image of the firm may be of concern inasmuch as it may affectsales and legislation. Thus, while these actions may not directly result inincreased profits, they may affect consumers’ and legislators’ attitudes.
1-3. Almostall financial decisions involve some sort of risk-return trade-off. The morerisk the firm is willing to accept, the higher the expected return for thegiven course of action. For example, in the area of working capital management,the less inventory held, the higher the expected return, but also the greaterthe risk of running out of inventory. While one manager might accept a givenlevel of risk, another more risk-averse manager may not accept that level ofrisk. This does not mean that one manager is correct and one is not; rather, itonly means that not all managers will view the risk-return trade-off in the same manner.
1-4. Theagency problem is a result of the separation of owners and managers, wheremanagers do what’s in their own best interests rather than what is in the bestinterest of the shareholders. Large firms are typically run by professional managerswho own a small fraction of the firms’ equity. The individual actions of thesemanagers are often motivated by self-interest, which may result in managers notacting in the best interests of the firm’s owners. When this happens the firm’sowners will lose value.
1-5. a. Asole proprietorship is a business owned by a single individual who maintainscomplete title to the assets and is also personally liable for all indebtednessincurred.
b. Apartnership is an association of two or more individuals coming together asco-owners for the purpose of operating a business for profits. The partnershipis equivalent to the sole proprietorship, except that the partnership hasmultiple owners.
c. Acorporation is a legal entity functioning separate and apart from its owners. Itcan individually sue and be sued, purchase, sell, or own property, and besubject to criminal punishment for crimes.
1-6. a. Thesole proprietor maintains title to the firm’s assets, has unlimited liability,is entitled to the profits from the business, but must also absorb any lossesrealized. This form of business is easily initiated. Termination of thebusiness comes by the owner discontinuing the business or upon his death.
b. Ina partnership, all general partners have unlimited liability. Each partner isliable for the actions of the other partners. The partnership agreementdictates the basic relationships among the partners within the firm. As withthe sole proprietorship, the partnership is terminated upon the desires of anypartner within the organization, or upon a partner’s death. Under certainconditions a partner’s liability may be restricted to the amount of capitalinvested in the partnership. However, at least one general partner must remainin the association for whom the privilege of limited liability does not apply.
c. Thecorporation is legally separate from its owners. Ownership of the corporationis determined by the number of shares of common stock owned by an individual. Sincethe shares are transferable, the ownership in a corporation may be easilytransferred. Investors’ liability is limited to the amount of their investment.The life of the corporation is not dependent upon the status of the investors. Thedeath or withdrawal of an investor does not disrupt the corporate life. However,the cost of forming a corporation is more expensive than a proprietorship orpartnership.
1-7. a. Organizationalrequirements and costs favor the sole proprietorship or possibly the generalpartnership depending upon the approach taken in forming the partnership.
b. Undercorporation, owners have minimum liabilities.
c. Thecorporation is definitely the most favorable form of business because itprovides the continuity of the business regardless of an owner’s withdrawal ordeath.
d. Ifease of ownership transferability is desired, the corporation is best. However,because of certain circumstances, the owners may prefer that ownership not beeasily transferred, in which case the partnership would be the most desirable.
e. Thesole proprietor is able to maintain complete and ultimate control and minimizeregulations.
f. Thecorporation is the strongest form of legal entity in terms of the ease ofraising capital from external investors.
g. Inregard to income taxes, it is difficult to determine which form of business isthe most advantageous. Such a selection is dependent upon individualcircumstances.
1-8. Thisis an Internet question.
1-9. Thisis an Internet question.
1-10. Thisis an Internet question.
SOLUTION TO MINICASE
a. The goal of profit maximization is too simplistic in that itassumes away the problems of uncertainty of returns and the timing of returns. Ratherthan use this goal, we have chosen maximization of shareholders’ wealth—thatis, maximization of the market value of the firm’s common stock—because theeffects of all financial decisions are included. The shareholders react to poorinvestment or dividend decisions by causing the total value of the firm’s stockto fall and react to good decisions by pushing the price of the stock upward. Inthis way, all financial decisions are evaluated, and all financial decisionsaffect shareholder wealth.
b. Simply put,investors will not put their money in risky investments unless they arecompensated for taking on that additional risk. In effect, the return investorsexpect is composed of two parts. First, they receive a return for delayingconsumption, which must be greater than the anticipated rate of inflation. Second,they receive a return for taking on added risk. Otherwise, both risky and safeinvestments would have the same expected return associated with them, and noone would take on the risky investments.
c. The firm receivescash flows and is able to reinvest them, which cannot be done with accountingprofits. In effect, accounting profits are shown when they are earned ratherthan when the money is actually in hand. Unfortunately, a firm’s accountingprofits and cash flows may not be timed to occur together. For example, capitalexpenses, such as the purchase of a new plant or piece of equipment, aredepreciated over several years, with the annual depreciation subtracted fromprofits. However, the cash flow associated with these expenses generally occursimmediately. It is the cash inflows that can be reinvested and cash outflowsthat involve paying out money. Therefore, cash flows correctly reflect the truetiming of the benefits and costs.
d. In an efficientmarket, information is impounded into security prices with such speed thatthere are no opportunities for investors to profit from publicly availableinformation. Actually, what types of information are immediately reflected insecurity prices and how quickly that information is reflected determine howefficient the market actually is. The implications for us are that stock pricesreflect all publicly available information regarding the value of the company. Thismeans we can implement our goal of maximization of shareholder wealth byfocusing on the effect each decision should have on the stock price, all elseheld constant. It also means that earnings manipulations through accountingchanges should not result in price changes. In effect, our preoccupation withcash flows is validated.
e. The agency problemis the result of the separation of management and the ownership of the firm. Asa result, managers may make decisions that are not in line with the goal ofmaximization of shareholder wealth. To control this problem, we monitormanagers and try to align the interests of shareholders and managers. Theinterests of shareholders and managers can be aligned by setting up stockoptions, bonuses, and perquisites that are tied directly to how closelymanagement decisions coincide with the interest of shareholders.
f. Ethical errors arenot forgiven in the business world. Business interaction is based upon trust,and there is no way that trust can be eliminated quicker than through anethical violation. The fall of Ivan Boesky and Drexel, Burnham, Lanbert and thenear collapse of Salomon Brothers illustrates this fact. As a result, acting inan ethical manner is not only morally correct, but it is congruent with ourgoal of maximization of shareholder wealth.
g. (1) Asole proprietorship is a business owned by a single individual who maintainscomplete title to the assets, but who is also personally liable for allindebtedness incurred.
(2) Apartnership is an association of two or more individuals coming together asco-owners for the purpose of operating a business for profit. The partnershipis equivalent to the sole proprietorship, except that the partnership hasmultiple owners.
(3) Acorporation is a legal entity functioning separate and apart from its owners. Itcan individually sue and be sued, purchase, sell, or own property, and besubject to criminal punishment for crimes.
提升卡
置顶卡
沉默卡
变色卡
抢沙发
千斤顶
显身卡
京公网安备 11010802022788号
