1、Chapter 2: AccountingStatementsandCashFlow2.10$4,0008,000$12,000$34,00082,000$116,000$128,000AssetsCurrentassetsCashAccountsreceivableTotalcurrentassetsFixedassetsMachineryPatentsTotalfixedassetsTotalassetsLiabilitiesandequityCurrentliabilitiesAccountspayable$6,000Taxespayable2,000Totalcurrentliabil

2、ities$8,000Long-termliabilitiesBondspayable$7,000StockholdersequityCommonstock($100par)$88,000Capitalsurplus19,000Retainedearnings6,000Totalstockholdersequity$113,000Totalliabilitiesandequity$128,0002.11Long-termdebtPreferredstockCommonstockRetainedearningsTotalOneyearago$50,000,00030,000,000100,000

3、,00020,000,000$200,000,000Today$50,000,00030,000,000110,000,00022,000,000$212,000,0002.12TotalCashFlowoftheStancilCompanyCashflowsfromthefirmCapitalspending$(1,000)Additionstoworkingcapital(4,000)Total$(5,000)CashflowstoinvestorsofthefirmShort-termdebt$(6,000)Long-termdebt(20,000)Equity(Dividend-Fin

4、ancing)21,000Note:Total$(5,000)Thistableisn'ttheStatementofCashFlows,whichisonlycoveredinAppendix2B,sincethelattereiasthchangeincash(onthebalancesheet)asafinalentry.2.13a.Thechangesinnetworkingcapitalcanbecomputedfrom:SourcesofnetworkingcapitalNetincome$100Depreciation50Increasesinlong-termdebt7

5、5Totalsources$225UsesofnetworkingcapitalDividends$50Increasesinfixedassets*150Totaluses$200Additionstonetworkingcapital$25"Includes$50ofdepreciation.b.CashflowfromthefirmOperatingcashflow$150Capitalspending(150)Additionstonetworkingcapital(25)Total$(25)CashflowtotheinvestorsDebt$(75)Equity50Tot

6、al$(25)Chapter 3: FinancialMarketsandNetPresentValue:FirstPrinciplesofFinance(Advanced)3.14 $120,000-($150,000-$100,000)(1.1)=$65,0003.15 $40,000+($50,000-$20,000)(1.12)=$73,6003.16 a.($7million+$3million)(1.10)=$11.0millionb.i. Theycouldspend$10millionbyborrowing$5milliontoday.ii. Theywillhavetospe

7、nd$5.5million=$11million-($5millionx1.1)att=1.Chapter 4: NetPresentValue4"T2|a.$1,000父1.0510=$1,628.89b. $1,0001.0710=$1,967.15c. $1,0001.0520=$2,653.30d. Interestcompoundsontheinterestalreadyearned.Therefore,theinterestearnedinpartc,$1,653.30,ismorethandoubletheamountearnedinparta,$63

8、 |Sincethisbondhasnointerimcouponpayments,itspresentvalueissimplythepresentvalueofthe$1,000thatwillbereceivedin25years.Note:Aswillbediscussedinthenextchapter,thepresentvalueofthepaymentsassociatedwithabondisthepriceofthatbond.PV=$1,000/1.125=$92.30叵4PV=$1,500,000/1.0827=$187,780.231.15 |a.Atadiscoun

9、trateofzero,thefuturevalueandpresentvaluearealwaysthesame.Remember,FV=PV(1+r)t.Ifr=0,thentheformulareducestoFV=PV.Therefore,thevaluesoftheoptionsare$10,000and$20,000,respectively.Youshouldchoosethesecondoption.b. Optionone:$10,000/1.1=$9,090.91Optiontwo:$20,000/1.15=$12,418.43Choosethesecondoption.c

10、. Optionone:$10,000/1.2=$8,333.33Optiontwo:$20,000/1.25=$8,037.55Choosethefirstoption.d. YouareindifferentattheratethatequatesthePVsofthetwoalternatives.Youknowthatratemustfallbetween10%and20%becausetheoptionyouwouldchoosediffersattheserates.Letrbethediscountratethatmakesyouindifferentbetweentheopti

11、ons.5$10,000/(1+r)=$20,000/(1+r)5(1+r)4=$20,000/$10,000=21+r=1.18921r=0.18921=18.921%4.16 The$1,000thatyouplaceintheaccountattheendofthefirstyearwillearninterestforsixyears.The$1,000thatyouplaceintheaccountattheendofthesecondyearwillearninterestforfiveyears,etc.Thus,theaccountwillhaveabalanceof$1,00

12、0(1.12)6+$1,000(1.12)5+$1,000(1.12)4+$1,000(1.12)3=$6,714.614.17 PV=$5,000,000/1.1210=$1,609,866.18還a.$1.000(1.08)3=$1,259.71b. $1,0001+(0.08/2)23=$1,000(1.04)6=$1,265.32c. $1,0001+(0.08/12)123=$1,000(1.00667)36=$1,270.24d. $1,000e0.083=$1,271.25e. Thefuturevalueincreasesbecauseofthecompounding.Thea

13、ccountisearninginterestoninterest.Essentially,theinterestisaddedtotheaccountbalanceattheendofeverycompoundingperiod.Duringthenextperiod,theaccountearnsinterestonthenewbalance.Whenthecompoundingperiodshortens,thebalancethatearnsinterestisrisingfaster.4.19Thepriceoftheconsolbondisthepresentvalueofthec

14、ouponpayments.Applytheperpetuityformulatofindthepresentvalue.PV=$120/0.15=$800畫a.$1,000/0.1=$10,000b. $500/0.1=$5,000isthevalueoneyearfromnowoftheperpetualstream.Thus,thevalueoftheperpetuityis$5,000/1.1=$4,545.45.c. $2,420/0.1=$24,200isthevaluetwoyearsfromnowoftheperpetualstream.Thus,thevalueofthepe

15、rpetuityis$24,200/1.12=$20,000.4.21 ApplytheNPVtechnique.Sincetheinflowsareanannuityyoucanusethepresentvalueofanannuityfactor.NPV=-$6,200+$1,200A80.1=-$6,200+$1,200(5.3349)=$201.88Yes,youshouldbuytheasset.4.22 |Useanannuityfactortocomputethevaluetwoyearsfromtodayofthetwentypayments.Remember,theannui

16、tyformulagivesyouthevalueofthestreamoneyearbeforethefirstpayment.Hence,theannuityfactorwillgiveyouthevalueattheendofyeartwoofthestreamofpayments.Valueattheendofyeartwo=$2,000-208=$2,000(9.8181)=$19,636.20Thepresentvalueissimplythatamountdiscountedbacktwoyears.PV=$19,636.20/1.082=$16,834.884.23 Theea

17、siestwaytodothisproblemistousetheannuityfactor.Theannuityfactormustbeequalto$12,800/$2,000=6.4;rememberPV=CATr.Theannuityfactorsareintheappendixtothetext.Tousethefactortabletosolvethisproblem,scanacrosstherowlabeled10yearsuntilyoufind6.4.Itisclosetothefactorfor9%,6.4177.Thus,therateyouwillreceiveont

18、hisnoteisslightlymorethan9%.Youcanfindamorepreciseanswerbyinterpolatingbetweennineandtenpercent.10%6.1446aribc|6.4dIL9%,H6.4177Byinterpolating,youarepresumingthattheratioofatobisequaltotheratioofctod.(9-r)/(9-10)=(6.4177-6.4)/(6.4177-6.1446)r=9.0648%Theexactvaluecouldbeobtainedbysolvingtheannuityfor

19、mulafortheinterestrate.Sophisticatedcalculatorscancomputetheratedirectlyas9.0626%.Note:Astandardfinancialcalculator'sTVMkeyscansolvefcWWibhsaaiteiityflows,theIRRkeyon“advanced“financaaculatorsisunnecessary.4.24a.TheannuityamountcanbecomputedbyfirstcalculatingthePVofthe$25,000whichyouneedinfiveye

20、ars.Thatamountis$17,824.65=$25,000/1.075.Nextcomputetheannuitywhichhasthesamepresentvalue.5$17,824.65=CA0.07$17,824.65=C(4.1002)C=$4,347.26Thus,putting$4,347.26intothe7%accounteachyearwillprovide$25,000fiveyearsfromtoday.cr5b.Thelumpsumpaymentmustbethepresentvalueofthe$25,000,i.e.,$25,000/1.07=$17,8

21、24.65Theformulaforfuturevalueofanyannuitycanbeusedtosolvetheproblem(seefootnote11ofthetext).1.25 Optionone:Thiscashflowisanannuitydue.Tovalueit,youmustusetheafter-taxamounts.Theafter-taxpaymentis$160,000(1-0.28)=$115,200.Valueallexceptthefirstpaymentusingthestandardannuityformula,thenaddbackthefirst

22、paymentof$115,200toobtainthevalueofthisoption.30Value=$115,200+$115,200A3010=$115,200+$115,200(9.4269)=$1,201,178.88Optiontwo:Thisoptionisvaluedsimilarly.Youareabletohave$446,000now;thisisalreadyonanafter-taxbasis.Youwillreceiveanannuityof$101,055foreachofthenextthirtyyears.Thosepaymentsaretaxablewh

23、enyoureceivethem,soyourafter-taxpaymentis$72,759.60=$101,055(1-0.28).30Value=$446,000+$72,759.60A；010=$446,000+$72,759.60(9.4269)=$1,131,897.47SinceoptiononehasahigherPV,youshouldchooseit.1.26 Letrbetherateofinterestyoumustearn.$10,000(1+r)12=$80,000(1+r)12=8r=0.18921=18.921%1.27 |Firstcomputethepre

24、sentvalueofallthepaymentsyoumustmakeforyourchildrenon.Thevalueseducatiasofoneyearbeforematriculationofonechild'seducationis$21,000A05=$21,000(2.8550)=$59,955.Thisisthevalueoftheelderchild'seducationfourteenyearstfrotheiowlueoftheyoungerchildeducationsixteenyearsfromtoday.Thepresentvalueofthe

25、seisPV=$59,955/1.1514+$59,955/1.1516=$14,880.44Youwanttomakefifteenequalpaymentsintoanaccountthatyields15%sothatthepresentvalueoftheequalpaymentsis$14,880.44.Payment=$14,880.44/二0515=$14,880.44/5.8474=$2,544.801.28 Thisproblemappliesthegrowingannuityformula.Thefirstpaymentis2_$50,000(1.04)2(0.02)=$1

26、,081.60.PV=$1,081.601/(0.08-0.04)-1/(0.08-0.04)1.04/1.0840=$21,064.28Thisisthepresentvalueofthepayments,sothevaluefortyyearsfromtodayis$21,064.28(1.0840)=$457,611.461.29 Usethediscountfactorstodiscounttheindividualcashflows.ThencomputetheNPVoftheproject.Noticethatthefour$1,000cashflowsformanannuity.

27、YoucanstillusethefactortablestocomputetheirPV.Essentially,theyformcashflowsthatareasixyearannuitylessatwoyearannuity.Thus,theappropriateannuityfactortousewiththemis2.6198(=4.3553-1.7355).YearCashFlowFactorPV10.9091$636.37$70020.8264743.7690031,000141,0002.61982,619.8051,00061,000-71,2500.5132641.508

28、1,3750.4665641.44Total$5,282.87NPV=-$5,000+$5,282.87=$282.87Purchasethemachine.Chapter 5: HowtoValueBondsandStocks5.9 Theamountofthesemi-annualinterestpaymentis$40(=$1,000工0.08/2).Thereareatotalof40periods;1 .e.,twohalfyearsineachofthetwentyyearsinthetermtomaturity.Theannuityfactortablescanbeusedtop

29、ricethesebonds.Theappropriatediscountratetouseisthesemi-annualrate.Thatrateissimplytheannualratedividedbytwo.Thus,forpartbtheratetobeusedis5%andforpartcisit3%.T40PV=CAr+F/(1+r)a. $40(19.7928)+$1,000/1.0440=$1,000Noticethatwheneverthecouponrateandthemarketratearethesame,thebondispricedatpar.b. $40(17

30、.1591)+$1,000/1.0540=$828.41Noticethatwheneverthecouponrateisbelowthemarketrate,thebondispricedbelowpar.c. $40(23.1148)+$1,000/1.0340=$1,231.15Noticethatwheneverthecouponrateisabovethemarketrate,thebondispricedabovepar.5.10 |a.Thesemi-annualinterestrateis$60/$1,000=0.06.Thus,theeffectiveannualrateis

31、1.062-1=0.1236=12.36%.b. Price=$30凡0206+$1,000/1.0612=$748.48.1212c. Price=$30凡0.04+$1,000/1.0412=$906.15Note:Inpartsbandcweareimplicitlyassumingthattheyieldcurveisflat.Thatis,theyieldinyear5appliesforyear6aswell.5.11 Price=$2(0.72)/1.15+$4(0.72)/1.152+$50/1.153=$36.31Thenumberofsharesyouown=$100,00

32、0/$36.31=2,754shares532Price=$1.15(1.18)/1.12+$1.15(1.182)/1.122+$1.152(1.182)/1.123+$1.152(1.182)(1.06)/(0.12-0.06)/1.123=$26.955.13 |Insertbeforelastsentenceofquestion:Assumethatdividendsareafixedproportionofearnings.Dividendoneyearfromnow=$5(1-0.10)=$4.50Price=$5+$4.50/0.14-(-0.10)=$23.75Sincethe

33、current$5dividendhasnotyetbeenpaid,itisstillincludedinthestockprice.Chapter 6: SomeAlternativeInvestmentRules6.10 |a.PaybackperiodofProjectA=1+($7,500-$4,000)/$3,500=2yearsPaybackperiodofProjectB=2+($5,000-$2,500-$1,200)/$3,000=2.43yearsProjectAshouldbechosen.b.NPVa=-$7,500+$4,000/1.15+$3,500/1.152+

34、$1,500/1.153=-$388.96NPVb=-$5,000+$2,500/1.15+$1,200/1.152+$3,000/1.153=$53.83ProjectBshouldbechosen.6.11 |a.AverageInvestment:($16,000+$12,000+$8,000+$4,000+0)/5=$8,000Averageaccountingreturn:$4,500/$8,000=0.5625=56.25%b.1.AARdoesnotconsiderthetimingofthecashflows,henceitdoesnotconsiderthetimevalue

35、ofmoney.2. AARusesanarbitraryfirmstandardasthedecisionrule.3. AARusesaccountingdataratherthannetcashflows.6HHaAverageInvestment=(8000+4000+1500+0)/4=3375.00AverageNetIncome=2000(1-0.75)=1500=>AAR=1500/3375=44.44%6.13a.Solvexbytrialanderror:-$8,000+$4,000/(1+x)+$3000/(1+x)2+$2,000/(1+x)3=0x=6.93%b

36、.No,sincetheIRR(6.93%)islessthanthediscountrateof8%.Alternatively,theNPVadiscountrateof0.08=-$4|a.Solverintheequation:$5,000-$2,500/(1+r)-$2,000/(1+r)2-$1,000/(1+r)3-$1,000/(1+r)4=0Bytrialanderror,IRR=r=13.99%b. Sincethisproblemisthecaseoffinancing,accepttheprojectiftheIRRislessthantherequ

37、iredrateofreturn.IRR=13.99%>10%Rejecttheoffer.c. IRR=13.99%<20%Accepttheoffer.d. Whenr=10%:NPV=$5,000-$2,500/1.1-$2,000/1.12-$1,000/1.13-$1,000/1.14=-$359.95Whenr=20%:NPV=$5,000-$2,500/1.2-$2,000/1.22-$1,000/1.23-$1,000/1.24=$466.82Yes,theyareconsistentwiththechoicesoftheIRRrulesincethesignsof

38、thecashflowschangeonlyonce.6.15|PI=$40,000a7.15/$160,000=1.04SincethePIexceedsoneaccepttheproject.Chapter 7: NetPresentValueandCapitalBudgeting7.1 Sincethereisuncertaintysurroundingthebonuspayments,whichMcRaemightreceive,youmustusetheexpectedvalueofMcRae'sbonusesinthecomputationofthePVofhiscontr

39、toRae'ssalaryplustheexpectedvalueofhisbonusesinyearsonethroughthreeis$250,000+0.6$75,000+0.4$0=$295,000.ThusthetotalPVofhisthree-yearcontractisPV=$400,000+$295,000(1-1/1.12363)/0.1236+$125,000/1.12363(1-1/1.123610/0.1236=$1,594,825.68730EPS=$800,000/200,000=$4NPVGO=(-$400,000+$1,000,000)/200,000

40、=$3Price=EPS/r+NPVGO=$4/0.12+$3=$36.337.11Year0Year1Year2Year3Year4Year51.AnnualSalary$120,000$120,000$120,000$120,000$120,000Savings2.Depreciation100,000160,00096,00057,60057,6003.TaxableIncome20,000-40,00024,00062,40062,4004.Taxes6,800-13,6008,16021,21621,2165.OperatingCashFlow113,200133,600111,84

41、098,78498,784$100,0006.-100,0007.8.(line1-4):NetworkingcapitalInvestmentTotalCashFlow$500,000_*75,792-$400,000$113,200$133,600$111,840$98,784$74,576*75,792=$100,000-0.34($100,000-$28,800)NPV=-$400,000+$113,200/1.12+$133,600/1.122+$111,840/1.123+$98,784/1.124+$74,576/1.125=-$7,722.527H2Realinterestra

42、te=(1.15/1.04)-1=10.58%NPVa=-$40,000+$20,000/1.1058+$15,000/1.10582+$15,000/1.10583=$1,446.76NPVb=-$50,000+$10,000/1.15+$20,000/1.152+$40,000/1.153=$119.17ChooseprojectA.733PV=$120,000/0.11-(-0.06)=$705,882.357.14 Assumethetaxrateiszero.t=0t=1t=2t=3t=4t=5t=6.$12,000$6,000$6,000$6,000$4,000$12,000$6,

43、000$6,000.Thepresentvalueofonecycleis:PV=$12,000+$6,000A3.06+$4,000/1.064一_一一_4=$12,000+$6,000(2.6730)+$4,000/1.06=$31,206.37Thecycleisfouryearslong,souseafouryearannuityfactortocomputetheequivalentannualcost(EAC).EAC=$31,206.37/A4.06=$31,206.37/3.4651=$9,006Thepresentvalueofsuchastreaminperpetuityi

44、s$9,006/0.06=$150,1007.15 |Toevaluatethewordprocessors,computetheirequivalentannualcosts(EAC).Bang4PV(costs)=(10X$8,000)+(10/$2,000)A4.14=$80,000+$20,000(2.9137)=$138,274EAC=$138,274/2.9137=$47,456IOU3PV(costs)=(11黑$5,000)+(11/$2,500)A0.143-(11$500)/1.1433=$55,000+$27,500(2.3216)-$5,500/1.143=$115,1

45、32EAC=$115,132/2.3216=$49,592BYOshouldpurchasetheBangwordprocessors.Chapter 8: StrategyandAnalysisinUsingNetPresentValue8.9 Theaccountingbreak-even=(120,000+20,000)/(1,500-1,100)=350units8.10 a.Theaccountingbreak-even=340,000/(2.00-0.72)=265,625abalonesb.($2.00300,000)-(340,000+0.72300,000)(0.65)=$2

46、8,600Thisistheaftertaxprofit.Chapter 9: CapitalMarketTheory:AnOverview9.8a.Capitalgains=$38-$37=$1pershareb. Totaldollarreturns=Dividends+CapitalGains=$1,000+($1*500)=$1,500Onapersharebasis,thiscalculationis$2+$1=$3persharec. Onapersharebasis,$3/$37=0.0811=8.11%Onatotaldollarbasis,$1,500/(500*$37)=0

47、.0811=8.11%d. No,youdonotneedtosellthesharestoincludethecapitalgainsinthecomputationofthereturns.Thecapitalgainisincludedwhetherornotyourealizethegain.Sinceyoucouldrealizethegainifyouchoose,youshouldincludeit.99Theexpectedholdingperiodreturnis:$5.50$54.75-$52/$52=0.15865=15.865%Thereappearstobealack

48、ofclarityaboutthemeaningofholdingperiodreturns.ThemethodusedintheanswertothisquestionistheoneusedinSection9.1.However,thecorrespondenceisnotexact,becauseinthisquestion,unlikeSection9.1,therearecashflowswithintheholdingperiod.Theansweraboveignoresthedividendpaidinthefirstyear.Althoughtheanswerabovete

49、chnicallyconformstotheeqnatthebottomofFig.9.2,thepresenceofintermediatecashflowsthataren'taccountedifomeaslursquestionable,atbest.Thereisnosimilarexampleinthebodyofthetext,andIhaveneverseenholdingperiodreturnscalculatedinthiswaybefore.Althoughnotdiscussedinthisbook,therearetwogenerallyacceptedme

50、thodsofcomputingholdingperiodreturnsinthepresenceofintermediatecashflows.First,thetimeweightedreturncalculatesaverages(geometricorarithmetic)ofreturnsbetweencashflows.Unfortunately,thatmethodcan'tbeusedhere,becausewearenotlgivonthevathestockattheendofyearone.Second,thedollarweightedmeasurecalcul

51、atestheinternalrateofreturnovertheentireholdingperiod.Theoretically,thatmethodcanbeappliedhere,asfollows:0=-52+5.50/(1+r)+60.25/(1+r)2=>r=0.1306.Thisproducesatwoyearholdingperiodreturnof(1.1306)2-1=0.2782.Unfortunately,thisbookdoesnotteachthedollarweightedmethod.Inordertosalvagethisquestioninafin

52、anciallymeaningfulway,youwouldneedthevalueofthestockattheendofoneyear.Thenanillustrationofthecorrectuseofthetime-weightedreturnwouldbeappropriate.Acomplicatingfactoristhat,whileSection9.2illustratestheholdingperiodreturnusingthegeometricreturnforhistoricaldata,thearithmeticreturnismoreappropriatefor

53、expectedfuturereturns.9.10E(R)=T-Billrate+AverageExcessReturn=15.4%=6.2%+(13.0%-3.8%)9.11a.CommonStocksTreasuryBillsRealizedRiskPremium-732.4%11.2%21.2%-6-4.914.7-19.6-521.410.510.9-422.58.813.7-36.39.9-3.6-232.27.724.5Lastb. Theaverageriskpremiumis8.49%.21.2-19.610.913.7-3.624.512.3°

54、;s=8.497c. Yes,itispossiblefortheobservedriskpremiumtobenegative.Thiscanhappeninanysingleyear.Theaverageriskpremiumovermanyyearsshouldbepositive.972a.EconomicStateProb.(P)ReturnifStateOccursPxReturnRecession0.20.050.010ModerateGrowth0.60.080.048RapidExpansion30ExpectedReturn0.088b.Returnif

55、StateOccursPx0.05-0.0380.0014440.00028880.08-0.0080.0000640.00003840.150.0620.0038440.0007688Variance=0.0010960Standarddeviation=,0.001096=0.033119.13a.EconomicStateProb.(P)ReturnifStateoccursPmReturnRecession0.30.020.0061ModerateGrowth0.40.050.020RapidExpansion30ExpectedReturn=0.056b.ReturnifStateoccursPM0.02-0.0360.0012960.000388810.05-0.0060.0000360.00001440.100.0440.0019360.0005808Variance=0.0009840Standarddeviation=0.03137=3.137%9.14a.b.Chapter10:ReturnandRisk:TheCapital-Asset-PricingModel(CAPM)10.17 a.=0.1(-4.5%)+0.2(4.4%)+0.5(12.0%)+0.2(20.7%)=1