《公司理财》课后答案(英文版).doc

公司理财课后答案(英文版) Chapter 2 Accounting Statements and Cash Flow210 AssetsCurrent assetsCash 4000Accounts receivable 8000Total current assets 12000Fixed assetsMachinery 34000Patents 82000Total fixed assets116000Total assets128000Liabilities and equityCurrent liabilitiesAccounts payable 6000Taxes payable 2000Total current liabilities 8000Long-term liabilitiesBonds payable7000Stockholders equityCommon stock 100 par 88000Capital surplus19000Retained earnings 6000Total stockholders equity113000Total liabilities and equity128000211One year agoTodayLong-term debt5000000050000000Preferred stock3000000030000000Common stock100000000110000000Retained earnings 20000000 22000000Total200000000212000000212Total Cash Flow of the Stancil CompanyCash flows from the firmCapital spending 1000 Additions to working capital 4000 Total 5000 Cash flows to investors of the firmShort-term debt 6000 Long-term debt 20000 Equity Dividend - Financing 21000Total 5000 Note This table isnt the Statement of Cash Flows which is only covered in Appendix 2B since the latter has the change in cash on the balance sheet as a final entry213aThe changes in net working capital can be computed fromSources of net working capitalNet income100Depreciation50Increases in long-term debt 75Total sources225Uses of net working capitalDividends50Increases in fixed assets 150Total uses200Additions to net working capital25Includes 50 of depreciation bCash flow from the firmOperating cash flow150Capital spending 150 Additions to net working capital 25 Total 25 Cash flow to the investorsDebt 75 Equity 50Total 25 Chapter 3 Financial Markets and Net Present Value First Principles of Finance Advanced 314 120000 - 150000 - 100000 11 65000315 40000 50000 - 20000 112 73600316a 7 million 3 million 110 110 millionb i They could spend 10 million by borrowing 5 million todayii They will have to spend 55 million 11 million - 5 million x 11 at t 1Chapter 4 Net Present Value412a1000 10510 162889b1000 10710 196715c1000 10520 265330dInterest compounds on the interest already earned Therefore the interest earned in part c 165330 is more than double the amount earned in part a 62889413Since this bond has no interim coupon payments its present value is simply the present value of the 1000 that will be received in 25 years Note As will be discussed in the next chapter the present value of the payments associated with a bond is the price of that bondPV 1000 1125 9230414PV 1500000 10827 18778023415aAt a discount rate of zero the future value and present value are always the same Remember FV PV 1 r t If r 0 then the formula reduces to FV PV Therefore the values of the options are 10000 and 20000 respectively You should choose the second optionbOption one10000 11 909091Option two20000 115 1241843Choose the second optioncOption one10000 12 833333Option two20000 125 803755Choose the first optiondYou are indifferent at the rate that equates the PVs of the two alternatives You know that rate must fall between 10 and 20 because the option you would choose differs at these rates Let r be the discount rate that makes you indifferent between the options10000 1 r 20000 1 r 5 1 r 4 20000 10000 21 r 118921r 018921 18921416The 1000 that you place in the account at the end of the first year will earn interest for six years The 1000 that you place in the account at the end of the second year will earn interest for five years etc Thus the account will have a balance of1000 112 6 1000 112 5 1000 112 4 1000 112 3 671461417PV 5000000 11210 160986618418a1000 108 3 125971b1000 1 008 2 2 3 1000 104 6 126532c1000 1 008 12 12 3 1000 100667 36 127024d1000 e008 3 127125eThe future value increases because of the compounding The account is earninginterest on interest Essentially the interest is added to the account balance at the end of every compounding period During the next period the account earns interest on the new balance When the compounding period shortens the balance that earns interest is rising faster419The price of the consol bond is the present value of the coupon payments Apply the perpetuity formula to find the present value PV 120 015 800420a1000 01 10000b500 01 5000 is the value one year from now of the perpetual stream Thus the value of the perpetuity is 5000 11 454545c2420 01 24200 is the value two years from now of the perpetual stream Thus the value of the perpetuity is 24200 112 20000421Apply the NPV technique Since the inflows are an annuity you can use the present value of an annuity factorNPV -6200 1200 -6200 1200 53349 20188Yes you should buy the asset422Use an annuity factor to compute the value two years from today of the twenty payments Remember the annuity formula gives you the value of the stream one year before the first payment Hence the annuity factor will give you the value at the end of year two of the stream of payments Value at the end of year two 2000 2000 98181 1963620The present value is simply that amount discounted back two yearsPV 1963620 1082 1683488423The easiest way to do this problem is to use the annuity factor The annuity factor must be equal to 12800 2000 64 remember PV C ATr The annuity factors are in the appendix to the text To use the factor table to solve this problem scan across the row labeled 10 years until you find 64 It is close to the factor for 9 64177 Thus the rate you will receive on this note is slightly more than 9You can find a more precise answer by interpolating between nine and ten percent 10 61446 a r b c 64 d 9 64177 By interpolating you are presuming that the ratio of a to b is equal to the ratio of c to d 9 - r 9 - 10 64177 - 64 64177 - 61446 r 90648The exact value could be obtained by solving the annuity formula for the interest rate Sophisticated calculators can compute the rate directly as 90626Note A standard financial calculators TVM keys can solve for this rate With annuity flows the IRR key on advanced financial calculators is unnecessary424aThe annuity amount can be computed by first calculating the PV of the 25000 which you need in five years That amount is 1782465 25000 1075 Next compute the annuity which has the same present value1782465 C 1782465 C 41002 C 434726Thus putting 434726 into the 7 account each year will provide 25000 five years from todaybThe lump sum payment must be the present value of the 25000 ie 25000 1075 1782465The formula for future value of any annuity can be used to solve the problem see footnote 11 of the text 425Option one This cash flow is an annuity due To value it you must use the after-tax amounts The after-tax payment is 160000 1 - 028 115200 Value all except the first payment using the standard annuity formula then add back the first payment of 115200 to obtain the value of this optionValue 115200 115200 115200 115200 94269 120117888Option two This option is valued similarly You are able to have 446000 now this is already on an after-tax basis You will receive an annuity of 101055 for each of the next thirty years Those payments are taxable when you receive them so your after-tax payment is 7275960 101055 1 - 028 Value 446000 7275960 446000 7275960 94269 113189747Since option one has a higher PV you should choose it426Let r be the rate of interest you must earn10000 1 r 12 80000 1 r 12 8r 018921 18921427First compute the present value of all the payments you must make for your childrens education The value as of one year before matriculation of one childs education is21000 21000 28550 59955This is the value of the elder childs education fourteen years from now It is the value of the younger childs education sixteen years from today The present value of these is PV 59955 11514 59955 11516 1488044You want to make fifteen equal payments into an account that yields 15 so that the present value of the equal payments is 1488044 Payment 1488044 1488044 58474 254480428This problem applies the growing annuity formula The first payment is 50000 104 2 002 108160PV 108160 1 008 - 004 - 1 008 - 004 104 108 40 2106428This is the present value of the payments so the value forty years from today is 2106428 10840 45761146429Use the discount factors to discount the individual cash flows Then compute the NPV of the project Notice that the four 1000 cash flows form an annuity You can still use the factor tables to compute their PV Essentially they form cash flows that are a six year annuity less a two year annuity Thus the appropriate annuity factor to use with them is 26198 43553 - 17355 YearCash FlowFactorPV1 70009091636372 900082647437631000 41000 2619826198051000 61000 712500513264150813750466564144Total528287NPV -5000 528287 28287Purchase the machineChapter 5 How to Value Bonds and Stocks59The amount of the semi-annual interest payment is 40 1000 008 2 There are a total of 40 periods ie two half years in each of the twenty years in the term to maturity The annuity factor tables can be used to price these bonds The appropriate discount rate to use is the semi-annual rate That rate is simply the annual rate divided by two Thus for part b the rate to be used is 5 and for part c is it 3 PV CF 1r 40a 40 197928 1000 10440 1000Notice that whenever the coupon rate and the market rate are the same the bond is priced at par b 40 171591 1000 10540 82841Notice that whenever the coupon rate is below the market rate the bond is priced below parc 40 231148 1000 10340 123115Notice that whenever the coupon rate is above the market rate the bond is priced above par510aThe semi-annual interest rate is 60 1000 006 Thus the effective annual rate is 1062 - 1 01236 1236bPrice 30 1000 10612 74848cPrice 30 1000 10412 90615Note In parts b and c we are implicitly assuming that the yield curve is flat That is the yield in year 5 applies for year 6 as well511Price 2 072 115 4 072 1152 50 1153 3631The number of shares you own 100000 3631 2754 shares512Price 115 118 112 115 1182 1122 1152 1182 1123 1152 1182 106 012 - 006 1123 2695513Insert before last sentence of question Assume that dividends are a fixed proportion of earningsDividend one year from now 5 1 - 010 450Price 5 450 014 - -010 2375Since the current 5 dividend has not yet been paid it is still included in the stock priceChapter 6 Some Alternative Investment Rules610aPayback period of Project A 1 7500 - 4000 3500 2 yearsPayback period of Project B 2 5000 - 2500 -1200 3000 243 yearsProject A should be chosenbNPVA -7500 4000 115 3500 1152 1500 1153 -38896NPVB -5000 2500 115 1200 1152 3000 1153 5383Project B should be chosen611aAverage Investment 16000 12000 8000 4000 0 5 8000Average accounting return4500 8000 05625 5625b1AAR does not consider the timing of the cash flows hence it does not consider the time value of money2AAR uses an arbitrary firm standard as the decision rule3AAR uses accounting data rather than net cash flows612aAverage Investment 8000 4000 1500 0 4 337500Average Net Income 2000 1-075 1500 AAR 15003375 4444 613 aSolve x by trial and error-8000 4000 1 x 3000 1 x 2 2000 1 x 3 0x 693bNo since the IRR 693 is less than the discount rate of 8Alternatively the NPV a discount rate of 008 -13662614aSolve r in the equation5000 - 2500 1 r - 2000 1 r 2 - 1000 1 r 3 - 1000 1 r 4 0By trial and errorIRR r 1399bSince this problem is the case of financing accept the project if the IRR is less than the required rate of returnIRR 1399 10Reject the offercIRR 1399 20Accept the offerdWhen r 10NPV 5000 - 2500 11 - 2000 112 - 1000 113 - 1000 114 -35995When r 20NPV 5000 - 2500 12 - 2000 122 - 1000 123 - 1000 124 46682Yes they are consistent with the choices of the IRR rule since the signs of the cash flows change only once615 PI 40000 160000 104Since the PI exceeds one accept the projectChapter 7 Net Present Value and Capital Budgeting79Since there is uncertainty surrounding the bonus payments which McRae might receive you must use the expected value of McRaes bonuses in the computation of the PV of his contract McRaes salary plus the expected value of his bonuses in years one through three is 250000 06 75000 04 0 295000Thus the total PV of his three-year contract isPV 400000 295000 1 - 1 112363 01236 125000 112363 1 - 1 1123610 01236 159482568710 EPS 800000 200000 4NPVGO -400000 1000000 200000 3Price EPS r NPVGO 4 012 3 3633711Year 0Year 1Year 2Year 3Year 4Year 51Annual Salary Savings1200001200001200001200001200002Depreciation 1000001600009600057600576003Taxable Income20000-400002400062400624004Taxes6800-13600816021216212165Operating Cash Flow line 1-4 11320013360011184098784987846 Net working capital100000-1000007Investment500000757928Total Cash Flow-400000113200133600111840987847457675792 100000 - 034 100000 - 28800 NPV -400000 113200 112 133600 1122 111840 1123 98784 1124 74576 1125 -772252712Real interest rate 115 104 - 1 1058NPVA -40000 20000 11058 15000 110582 15000 110583 144676NPVB -50000 10000 115 20000 1152 40000 1153 11917Choose project A713PV 120000 011 - -006 70588235714Assume the tax rate is zerot 0t 1t 2t 3t 4t