习题答案Principles of Corporate Finance第十版 Chapter14.doc

CHAPTER 14An Overview of Corporate FinancingAnswers to Problem Sets1. a. False b. True c. True2. a. 40,000/.50 = 80,000 shares b. 78,000 shares c. 2,000 shares are held as Treasury stock d. 20,000 shares e. See table below f. See table below 3. a. 80 votes b. 10 X 80 = 800 votes.4. a. subordinated b. floating rate c. convertible d. warrant e. common stock; preferred stock.5. a. False b. True c. False6. a. Par value is $0.05 per share, which is computed as follows:$443 million/8,863 million sharesb. The shares were sold at an average price of:[$443 million + $70,283 million]/8,863 million shares = $7.98c. The company has repurchased:8,863 million – 6,746 million = 2,117 million sharesd. Average repurchase price:$57,391 million/2,117 million shares = $27.11 per share.e. The value of the net common equity is:$443 million + $70,283 million + $44,148 million – $57,391 million= $57,483 million7. a. The day after the founding of Inbox:Common shares ($0.10 par value)$50,000Additional paid-in capital1,950,000Retained earnings0Treasury shares0 Net common equity$2,000,000b. After 2 years of operation:Common shares ($0.10 par value)$50,000Additional paid-in capital1,950,000Retained earnings120,000Treasury shares0 Net common equity$2,120,000c. After 3 years of operation:Common shares ($0.10 par value)$150,000Additional paid-in capital6,850,000Retained earnings370,000Treasury shares0 Net common equity$7,370,0008. a.Common shares ($1.00 par value)$1,008Additional paid-in capital5,444Retained earnings16,250Treasury shares(14,015)Net common equity$8,687b.Common shares ($1.00 par value)$1,008Additional paid-in capital5,444Retained earnings16,250Treasury shares(14,715) Net common equity$7,9879. One would expect that the voting shares have a higher price because they have an added benefit/responsibility that has value.10. a.Gross profits$760,000Interest100,000EBT$660,000Tax (at 35%)231,000Funds available to common shareholders$429,000b.Gross profits (EBT)$760,000Tax (at 35%)266,000Net income$494,000Preferred dividend80,000Funds available to common shareholders$414,00011. Internet exercise; answers will vary.12. a. Less valuableb. More valuablec. More valuabled. Less valuable13. Answers may differ. Some key events of the financial crisis through the end of 2021 include:June 2007: Bear Stearns pledges $3.2 billion to aid one of its ailing hedge fundsSept. 2007: Northern Rock receives emergency funding from the Bank of EnglandOct. 2007: Citigroup begins a string of writedowns based on mortgage lossesDec. 2007: Fed establishes Term Auction Facility linesJan. 2021: Ratings agencies threaten to downgrade Ambac and MBIA (major bond issuers)Feb. 2021: Economic stimulus package signed into lawMar. 2021: JPMorgan purchases Bear Stearns with support from the FedMar. 2021: SEC proposes ban on naked short sellingJuly 2021: FDIC takes over IndyMac BankSept. 2021: Lehman forced into bankruptcy B of A purchases Merrill Lynch 10 banks create $70 billion liquidity fund AIG debt downgraded RMC money market fund “breaks the buck〞 Treasury bailout plan voted down in the HouseOct. 2021: 9 large banks agree to capital injection from Treasury Revised bailout plan passes in House Consumer confidence hits lowest point on record The NY Fed has an excellent timeline of events at:14. Answers will differ. Some purported causes of the financial crisis include:· Long periods of very low interest rates leading to easy credit conditions· High leverage ratios· The bursting of the US housing market bubble· High rates of default on subprime mortgages· Massive losses on investments in mortgage backed securities· Opaque derivative markets and amplified losses through credit default swaps· High rates of unemployment and job losses15. a. For majority voting, you must own or otherwise control the votes of a simple majority of the shares outstanding, i.e., one-half of the shares outstanding plus one. Here, with 200,000 shares outstanding, you must control the votes of 100,001 shares.b. With cumulative voting, the directors are elected in order of the total number of votes each receives. With 200,000 shares outstanding and five directors to be elected, there will be a total of 1,000,000 votes cast. To ensure you can elect at least one director, you must ensure that someone else can elect at most four directors. That is, you must have enough votes so that, even if the others split their votes evenly among five other candidates, the number of votes your ca。