corporate finance 11th edition solutions manual 10 20 15
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corporate finance 11th edition solutions manual 10 20 15
Solutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 ont UniversityCHAPTER ĩINTRODUCTION TO CORPORATEFINANCEAnswers tv Concept Questions1In the corporate form of ownership, the shareholders arc the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm's management. Ibis separation of ownership from c corporate finance 11th edition solutions manual 10 20 15 ontrol 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,corporate finance 11th edition solutions manual 10 20 15
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.2SucSolutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 ization: Í.C.. provide whatever goods and services are offered at the lowest possible cost to society. A better approach might be to observe tliat even a not-for-profit business has equity. Thus, one answer is that the appropriate goal is to maximize the value of the equity.3Presumably, the current corporate finance 11th edition solutions manual 10 20 15 stock value reflects the risk, timing, and magnitude of all future cash flows, both short-term and long-term. If this is correct, then the statement icorporate finance 11th edition solutions manual 10 20 15
s false.4An argument can be made either way. At the one extreme, we could argue that in a market economy, all of these things are priced. There is thuSolutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 eme, we could argue tliat these are non-economic phenomena and are best handled through the political process. A classic (and highly relevant) thought question that illustrates this debate goes something like this: "A firm has estimated that the cost of improving the safety of one of its products is corporate finance 11th edition solutions manual 10 20 15 $30 million. However, the firm believes that improving the safety of the product will only save $20 million in product liability claims. What shouldcorporate finance 11th edition solutions manual 10 20 15
the firm do?"5The goal will be the same, but the best course of action toward that goal may be different because of differing social, political, and eSolutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 prove the profitability of the firm so that the share price will exceed $.35. then they should fight the offer from the outside company. If management believes that this bidder or other unidentified bidders will actually pay more than $35 per share to acquire the company, then they should still figh corporate finance 11th edition solutions manual 10 20 15 t the offer. However, if the current management cannot increase the value of the firm beyond the bid price, and no other higher bids come in. then mancorporate finance 11th edition solutions manual 10 20 15
agement is not acting in the interests of the shareholders by fighting the offer. Since current managers often lose their jobs when the corporation isSolutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 ANUAL7We would expect agency problems to be less severe in other countries, primarily due to the relatively small percentage of individual ownership. Fewer individual owners should reduce the number of diverse opinions concerning corporate goals. The high percentage of institutional ownership might corporate finance 11th edition solutions manual 10 20 15 lead to a higher degree of agreement between owners and managers on decisions concerning risky projects, in addition, institutions may be belter ablecorporate finance 11th edition solutions manual 10 20 15
to implement effective monitoring mechanisms on managers titan can individual owners, based on the institutions’ deeper resources and experiences withSolutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 s may lead to a reduction in agency problems for U.S. corporations and a more efficient market for corporate control. However, this may not always be the case. If the managers of the mutual fund or pension plan are not concerned with the interests of the investors, the agency problem could potential corporate finance 11th edition solutions manual 10 20 15 ly remain Che same, or even increase since there is the possibility of agency problems between the fund and its investors.9How much is too much? Who icorporate finance 11th edition solutions manual 10 20 15
s worth more. Larry Ellison or Tiger Woods? The simplest answer is that there is a market for executives just as there is for all types of labor. ExecSolutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 sation deserves comment. A primary reason executive compensation has grown so dramatically is that companies have increasingly moved to stock-based compensation. Such movement is obviously consistent with the attempt to better align stockholder and management interests. In recent years, stock prices corporate finance 11th edition solutions manual 10 20 15 have soared, so management has cleaned up. It is sometimes argued that much of this reward is due to rising stock prices in general, not managerial pcorporate finance 11th edition solutions manual 10 20 15
erformance. Perhaps in the future, executive compensation will be designed to reward only differential performance, i.e.. stock price increases in excSolutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 of a share of stock depends on all of the future cash flows of company. Another way to look at this is that, bail ing large cash payments to shareholders, the expected price of the stock must be higher in the future than it is today. Who would buy a stock for s IIX) today when the share price in one corporate finance 11th edition solutions manual 10 20 15 year is expected to be $80?CHAPTER 2ACCOUNTING STATEMENTS, TAXES,AND CASH FLOWAnswers to Concepts Review and Critical Thinking Questions1True. Ever}-corporate finance 11th edition solutions manual 10 20 15
asset can be converted to cash at some price. However, when we arc referring to a liquid asset, the added assumption that the asset can be quickly coSolutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 associated with producing those revenues, to be "booked" when the revenue process is essentially complete, not necessarily when the cash is collected or bills arc paid. Note that this way is ncorporate finance 11th edition solutions manual 10 20 15
erest expense. The accounting statement of cash flows treats interest as an operating cash flow, while the financial cash flows treat interest as a fiSolutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira Belmo corporate finance 11th edition solutions manual 10 20 15 ons for the period, it is an operating cash flow. In reality, interest is a financing expense, which results from the company's choice of debt and equity. We will have more to say about this in a later chapter. When comparing the two cash flow statements, the financial statement of cash flow's is a corporate finance 11th edition solutions manual 10 20 15 more appropriate measure of the company's performance because of its treatment of interest.5Market values can never be negative. Imagine a share of stcorporate finance 11th edition solutions manual 10 20 15
ock selling for -S20. This would mean that if you placed an order for lcorporate finance 11th edition solutions manual 10 20 15
d be fairly ordinary for a start-up, so it depends.Solutions ManualCorporate FinanceRoss, Westerfield, Jaffe, and Jordan I l,h edition42297Prepared by:Brad JordanUniversity of KentuckyJoe Smolira BelmoGọi ngay
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