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Words 71395

Pages 286

Corporate Finance: Core Principles and Applications

3rd edition

Ross, Westerfield, Jaffe, and Jordan

Updated 09-28-2010

Prepared by

Joe Smolira

Belmont University

CHAPTER 1

INTRODUCTION TO CORPORATE FINANCE

Answers to Concept Questions

1. The three basic forms are sole proprietorships, partnerships, and corporations. Some disadvantages of sole proprietorships and partnerships are: unlimited liability, limited life, difficulty in transferring ownership, and hard to raise capital funds. Some advantages are: simpler, less regulation, the owners are also the managers, and sometimes personal tax rates are better than corporate tax rates. The primary disadvantage of the corporate form is the double taxation to shareholders on distributed earnings and dividends. Some advantages include: limited liability, ease of transferability, ability to raise capital, and unlimited life. When a business is started, most take the form of a sole proprietorship or partnership because of the relative simplicity of starting these forms of businesses.

2. To maximize the current market value (share price) of the equity of the firm (whether it’s publicly traded or not).

3. In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone else’s best interests, rather than those of the shareholders. If such events occur, they may contradict the goal of maximizing the share price of the equity of the firm.

4. Such organizations frequently pursue social or political missions, so many different goals are conceivable. One goal that is often cited is revenue…...

...Betty Kittles MM255 Business Math & Statistical Measures Unit Eight: 06/08/2014 Unit 8: Instructor Graded Assignment Mortgages In this and future Instructor Graded Assignments you will be asked to use the answers you found in the Unit 1 Assignment. Note: For these questions you need to cite a reliable source for information, which means you cannot use sites like Wikipedia, Ask.com®, and Yahoo® answers. If you do use those sites the instructor may award 0 points for your response. The Assignment problems must have the work shown at all times. The steps for solving the problems must be explained. Failure to do so could result in your submission being given a 0. If you have any questions about how much work to show, please contact your instructor. Assignments must be submitted as a Microsoft Word® document and uploaded to the Dropbox for Unit 8. Please type all answers directly in this Assignment below the question it applies to. All Assignments are due by Tuesday at 11:59 PM ET of the assigned Unit. Note: All interest rates are to be assumed to be yearly interest rates. For this assignment you will need the prime interest rate, as posted in the Wall Street Journal®. Use the internet to search for the current prime interest rate. * List the current prime interest rate:___3.25____________ Question 1 (15 points) 1. Using the internet, research and find a house listing that you would not mind living in. Any house will work, but it......

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...This is not an “opinion” question – you must offer evidence to support your position, using properly-cited sources. * Your answer must be between ¾-1 page in length. * You must cite and reference at least one source (book, website, periodical) using APA format. The required website counts as one source * You must state at least one clear advantage and one clear disadvantage in your essay. However more references are recommended. * Hint: Some major stock market events to consider are the crash of 1929, the flash crash of 2011, the dot com era of the late 90's, the fast drop in value in 2007-2008 then the market's climb back up in 2009 - 2012. Research into those may help you to get started. You may submit your Assignments to the Math Center for review. Tutors will not grade or correct the Assignment, but they will provide guidance for improvement. Tutors will not, however, help you find web sites for the Assignment. Be sure to submit Assignments early enough to receive feedback and make corrections before the Assignment due date (24 hour turn-around times Monday-Thursday and 48 hour turn-around times on weekends are typical). Email Assignments to: kumc@kaplan.edu. Please put “MM255 Assignment Review” in the subject line of the message. ...

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...GST Including gst = 111x item costing. | Without GST= 111x item Calculate the amount on which capital gains tax must be paid for a house that is sold for $345,000 after having been bought as an investment property 5 years ago for $298,000 345,000-298,000=47000 0.5=47000 equals $23500 tax to be paid Simple Interest Calculate the interest earned on $1500 invested at 9% p.a for 6 years. PrT100 P=Principal r=Rate T=Time 1500x9x6100=$810 Find the total amount returned when $850 is invested for 30 months at 12.5% p.a P=$850 r=12.5 T= 3012 =2.5 850x12.5x2.5100 =$1115.63 A loan of $5000 was taken out on 23 March and repaid on 17 September. Find the interest payable if the rate is 11.6% p.a P=$5000 r=11.6 23 T=23 March to 17 September Days in March= (31-23(=8+1 for 23rd of March Month | March | April | May | June | July | August | September | Days | 9 | 30 | 31 | 30 | 31 | 31 | 17 | 179 days= 179365 years… 5000x11.6x179100x365=$284.438 P= 100xIrxT r= 100xIPxT T= 100xIPxr The amount of $3500 was invested for 42 months, returning $4394.25. What was the rate of interest earned? P=$3500 T=4212 I=$4394.25-$3500=$894.25 100xIPxT r= 100x894.253500x3.5 r= 7.3% Balance Sheet Date | Transaction | Debit($)(Withdrawal) | Credit ($)(Deposit) | Balance ($) | A $1300 freezer is purchased under a hire purchase agreement requiring a deposit of $450 and equal monthly instalments of $47.81 for two years. Find the flat rate of interest. Price=$1300, deposit $350.......

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...GHADA ALYSSA A. TADI BSAc-I Assignment in Business Math 101 Exercise 3.2 1. Given : Solution: R = P 14,500 A= (P 14,500) (18.91393) n= (6) (4) = 24 A= P274,251 i= 8/4 or 2 2. Given: Solution: R = P 60,000 A = (P 60,000) (4.10019) n = 5 A = P 246,012.00 > It is preferable to pay P 60,000 per year for 5 i = 7% (0.07) years than paying P 250,000 in cash. t = 5 years 3. Given: Solution: R = P 62, 500 A= (P 62,500)(8.21279) n = 10 A= P 513,299.38 i = 7 ½ or 3 ¾ % t = 10 semi annual payments 10/2 = 5 yrs 4. Given: Solution: R = P 30,000 A = ( P30,000) (22.63767) n = 32 A = P 679,130.10 i = 9/4 or 2 ¼ % t = 8 years 5. Given: Solution: R = P 24,800 A= (P 24,800)(93.05744) n = 180 A= P 2, 307, 824.51 i = 10/12 or 5/6% t = 15 years 6. Given: Solution: R = P 125,000 *1st 2nd* i = 7% n= 7 t= 7yrs n = 5 A = (P 125,000)(3.99271) A = (P 125,000)(5.38927) i = 8% A = P 499,088.75 A= P 673,661.25 t = 5 yrs A = A1 + A2 = P 499,088.75 + P 673,661.25 A= P 1, 172, 750 7. Given: Solution: R= P150,000 A= (P 150,000)(48.85587) n = 60 A= P 7,328,380.50 i = 8.4/12 = 7/10% t = 5 years 8. Given: Solution: R = P 750,000 A = (P 750,000)(14.08466) n = 20 A= P 10, 563, 495 i = 7.2/12 = 3 3/5 t – 20 semi annual payments or 20/2 = 10 years 9. Given: Solution: R = P60,000 A= (P60,000)(13.57771) n = 16 A = P 814,662.60 i = 8/4 = 2% t = 4 years ...

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...not an “opinion” question – you must offer evidence to support your position, using properly-cited sources. * Your answer must be between ¾-1 page in length. * You must cite and reference at least one source (book, website, periodical) using APA format. The required website counts as one source * You must state at least one clear advantage and one clear disadvantage in your essay. However more references are recommended. * Hint: Some major stock market events to consider are the crash of 1929, the flash crash of 2011, the dot com era of the late 90's, the fast drop in value in 2007-2008 then the market's climb back up in 2009 - 2012. Research into those may help you to get started. You may submit your Assignments to the Math Center for review. Tutors will not grade or correct the Assignment, but they will provide guidance for improvement. Tutors will not, however, help you find web sites for the Assignment. Be sure to submit Assignments early enough to receive feedback and make corrections before the Assignment due date (24 hour turn-around times Monday-Thursday and 48 hour turn-around times on weekends are typical). Email Assignments to: kumc@kaplan.edu. Please put “MM255 Assignment Review” in the subject line of the message....

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...If someone travels a distance d in time t, then the person’s average speed is Use this fact to solve the problem. 1. A driver travels at 50 mph for the first hour and then travels at 70 mph for the second hour. What is the average speed of the car? 2. A bicyclist rides 1 mile uphill at 5 mph and then rides 1 mile downhill at 10 mph. Find the average speed of the bicyclist. Does your answer agree with what you expected? 3. At a 3-mile cross-country race an athlete runs 2 miles at 8 mph and 1 mile at 10 mph. What is the athlete’s average speed? 4. A pilot flies an airplane between two cities and travels half the distance at 200 mph and the other half at 100 mph. Find the average speed of the airplane. A Puzzle About Coins Suppose that seven coins look exactly alike but that one coin weighs less than any of the other six coins. If you have only a balance with two pans, devise a plan to find the lighter coin. What is the minimum number of weighings necessary? Explain your answer. Yards to Inches There are 36 inches in 1 yard. Write a formula that converts Y yards to I inches. 34. Checking Account The initial balance in a checking account is $468. Find the final balance resulting from the following sequence of withdrawals and deposits: 2$14, $200, 2$73, 2$21, and $58. 35. Acid Solution How much of a 4% acid solution should be added to 150 milliliters of a 10% acid solution to dilute it to a 6% acid solution? 36. Bank Loans An individual has two......

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...Question 2 (10 points) 2. Two people, Ella and Jane, decide to start saving for retirement. Ella decides to invest $4000 a year into an annuity at the age of 25. At the age of 35 she stops making investments and just leaves the money there. Jane on the other hand, decides to start investing $4000 a year at the age of 40 and invests that money for every year thereafter. Assuming both retire at 70, and that the interest rate both get on their investments is 10% (compounded annually) who has the most money in their account at age 70? Explain why you pick the answer you pick. Have to caculate the future value for both Ella and Jane. The RATE you have to use for this question is found on Tables 14-1 and 13-1 so use table method. Table method: for ella there are two caluclations. First find future value of her annuity (from 25 to 35) using table 14-1. The amount becomse the present value for finding the future value (from 35 to 0) using table 13-1. Jane only has one calculation. Find the future value of her annuity (40 to 70) using table 14-1. Question 3 (10 points) 3. At the age of 30 you decide to start saving money. At first you can only afford to deposit $200 per month. However, at the age of 38 you are able to deposit $300 per month. Then at the age of 45 you raise your monthly deposit again to $500 per month. Finally at the age of 50 you get promoted to president of the company and are able to deposit $2000 per month into the account. Assuming your account is......

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...think it is misleading. Is there a way to improve the statistic so that it is no longer misleading? Suggest some plausible ideas for improvement. Requirements for essay * Write your essay in this document – do not save it in a separate file. * You must clearly state your position with well-structured paragraphs using proper grammar, spelling, and sentence structure. * This is not an “opinion” question – you must offer evidence to support your position, using properly cited sources. * Your answer must be between ¾-1 page in length. * You must cite and reference at least one source (book, website, periodical) using APA format. The required website counts as one source. You may submit your Assignments to the Math Center for review. Tutors will not grade or correct the Assignment, but they will provide guidance for improvement. Tutors will not, however, help you find web sites for the Assignment. Be sure to submit Assignments early enough to receive feedback and make corrections before the Assignment due date (24 hour turn-around times Monday-Thursday and 48 hour turn-around times on weekends are typical)....

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...Unit 1: Instructor Graded Assignment Basic Math In this class, you will complete an Instructor Graded Assignment in Units 1-8. These Assignments give you a chance to apply the skills you have learned in the unit so far. You will have a chance to solve problems using a combination of math and internet searching. This unit you will focus on how to find things on the internet that will be relevant to the class in the future. You must post all links you find in your document, as well as the date you find those links. In the event your link is dead when the teacher grades it, you may be asked to provide a new link, so prepare some backup links, just in case. Note: For questions 1 - 7 you need to cite a reliable source, which means you cannot use sites like Wikipedia, Ask.com®, and Yahoo® answers. If you do use those sites the instructor may award 0 points for your response. The Assignment problems must have the work shown at all times. The steps for solving the problems must be explained. Failure to do so could result in your submission being given a 0. If you have any questions about how much work to show, please contact your instructor. Assignments must be submitted as a Microsoft Word® document and uploaded to the Dropbox for Unit 1. Type all answers directly in this Assignment below the question it applies to. All Assignments are due by Tuesday at 11:59 PM ET of the assigned Unit. Basic Internet Searching (6 questions, 5 points each) 1.......

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...misleading statics. The small amount of difference makes the difference seem much more but, really its not much at all. When someone looks at a graph like this it from just the look of the eye makes it look like much difference when in reality there is not much.. http://www.statisticshowto.com/misleading-graphs/.com This website gives many different types of graphs but good and bad and i found this website amazing. I found this graph that i thought was very well prepared and clear for the viewer to see and have a clear view on what it is they are reading or trying to discover the difference between the different categories. http://www.stat.auckland.ac.nz/~ihaka/120/Lectures/lecture03.pdf.com You may submit your Assignments to the Math Center for review. Tutors will not grade or correct the Assignment, but they will provide guidance for improvement. Tutors will not, however, help you find web sites for the Assignment. Be sure to submit Assignments early enough to receive feedback and make corrections before the Assignment due date (24 hour turn-around times Monday-Thursday and 48 hour turn-around times on weekends are typical). Email Assignments to: kumc@kaplan.edu. Please put “MM255 Assignment Review” in the subject line of the message....

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...Unit 8: Instructor Graded Assignment Mortgages In this and future Instructor Graded Assignments you will be asked to use the answers you found in the Unit 1 Assignment. Note: For these questions you need to cite a reliable source for information, which means you cannot use sites like Wikipedia, Ask.com®, and Yahoo® answers. If you do use those sites the instructor may award 0 points for your response. The Assignment problems must have the work shown at all times. The steps for solving the problems must be explained. Failure to do so could result in your submission being given a 0. If you have any questions about how much work to show, please contact your instructor. Assignments must be submitted as a Microsoft Word® document and uploaded to the Dropbox for Unit 8. Please type all answers directly in this Assignment below the question it applies to. All Assignments are due by Tuesday at 11:59 PM ET of the assigned Unit. Note: All interest rates are to be assumed to be yearly interest rates. For this assignment you will need the prime interest rate, as posted in the Wall Street Journal®. Use the internet to search for the current prime interest rate. • List the current prime interest rate:_______________ Question 1 (15 points) 1. Using the internet, research and find a house listing that you would not mind living in. Any house will work, but it must be selling for more than $10,000. a) Post a link to your house listing. You can also cut...

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...INTRODUCTION Refer to the American Heritage Dictionary of the English Language, mathematics is the study of the measurement, properties, and relationships of quantities and sets, using numbers and symbols. Mathematical had been invented early in ancient Egypt, Mesopotamia and ancient India. Until today, development of mathematics still ongoing. Mathematics has become our indispensable part of daily life. Besides that, mathematics has been incorporated into the field of education. Today mathematics has been widely used in various fields such as science, medicine, engineering and business. Leonardo Da Vinci was an Italian polymath. His field of interest included invention, painting, architecture, science, music, mathematics, engineering, literature, anatomy, geology, astronomy, writing, history, and so on. He was well-known as a painter. Mona Lisa is one of his famous works. However, he also a famous mathematician in the world. He has a great contributions for the history of mathematic. Leonardo da Vinci thought that mathematics was an essential tool for painting. He had explored the laws of geometric between hexahedron, cylinder, and sphere area. He was the first person using the symbol of plus (+) and minus (-) in mathematics. Grace Hopper was a representative of a modern mathematician. She had great contributions on mathematics because mathematics was her favourite subject since childhood. She obtained her master’s degree in mathematics in 1930 and received her PhD in......

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...Simple interest is the interest that is computed on the original principal only. If I denotes the interest on a principal P (in dollars) at an interest rate of r per year for t years, then we have I = Prt The accumulated amount A, the sum of the principal and interest after t years is given by and is a linear function of t. A= P + I = P + Prt = P(1 + rt) A bank pays simple interest at the rate of 8% per year for certain deposits. a. If a customer deposits $1000 and makes no withdrawals for 3 years, what is the total amount on deposit at the end of three years? P = 1000, r = 0.08, and t = 3 A=P(I+rt)=1000[1+(0.08)(3)]=1240 or $1240 b. What is the interest earned in that period? I=Prt=1000(0.08)(3)=240 or $240. Compound interest Frequently, interest earned is periodically added to the principal and thereafter earns interest itself at the same rate. This is called compound interest. Suppose $1000 (the principal) is deposited in a bank for a term of 3 years, earning interest at the rate of 8% per year compounded annually. Using the simple interest formula we see that the accumulated amount A1 = P (1+rt) =1000[1+0.08(1)] =1080 These observations suggest the following general rule: If P dollars are invested over a term of t years earning interest at the rate of r per year compounded annually, then the accumulated amount is This formula is derived under the assumption that interest was compounded annually. In practice, however, interest is usually compounded......

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...financial and investment planning, banking, insurance, and business financial management. (3) Financial Mathematics is a course about personal money management. Students will apply critical-thinking skills to analyze personal financial decisions based on current and projected economic factors. (4) Financial Mathematics will integrate career and postsecondary education planning into financial decision making. (5)(4) The mathematical process standards describe ways in which students are expected to engage in the content. The placement of the process standards at the beginning of the knowledge and skills listed for each grade and course is intentional. The process standards weave the other knowledge and skills together so that students may be successful problem solvers and use mathematics efficiently and effectively in daily life. The process standards are integrated at every grade level and course. When possible, students will apply mathematics to problems arising in everyday life, society, and the workplace. Students will use a problem-solving model that incorporates analyzing given information, formulating a plan or strategy, determining a solution, justifying the solution, and evaluating the problem-solving process and the reasonableness of the solution. Students will select appropriate tools such as real objects, manipulatives, paper and pencil, and technology and techniques such as mental math, estimation, and number sense to solve problems.......

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...City University College of Science & Technology Faculty of Business DBQT 2013 Business Statistics Semester May 2016 ASSIGNMENT 1 Answer all questions. Kindly print the cover page and attached with your answer script. 1. Classify the following sets of data as qualitative or quantitative. a) The religious affiliations of college students b) The height of each member of a basketball team c) Students’ scores on the first statistics exam d) The color of new SUV’s on a car lot e) The Olympic track and field world records, such as the time for the steeplechase. [5 Marks] 2. Classify the following sets of data as continuous or discrete. a) The number of students enrolled in an accounting class b) The number of General Electric microwaves sold by Home Depot last month c) The acceleration time of an automobile d) The temperature of a refrigerator e) The number of people aboard a commercial airplane [5 Marks] 3. The Save More Rental Car Agency at the Cincinnati airport would like to examine records from last summer in order to plan for the coming summer demand. The data for last year’s demand, broken down by type of vehicle requested, is shown in the table below. Vehicle Type Frequency Relative Frequency Sub-compact 545 0.183 Compact 892 0.299 Full-size 740 0.248 Luxury 360 0.121 SUV 280 0.094 Van 168 0.056 Total 2985 1.001* * Total is not equal to 1.000 due to rounding error. a) Construct a frequency and relative frequency bar chart for the data. b) Construct a pie chart to......

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