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It involves introduction to financial management and problem faced with it. The excercises in the text book are solved and can be found here
Typology: Exercises
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The values shown in the solutions may be rounded for display purposes. However, the answers were derived using a spreadsheet without any intermediate rounding.
Answers to Problem Sets
b. executive airplanes
c. brand names
d. financial
e. bonds
*f. investment or capital budgeting
*g. capital budgeting or investment
h. financing
*Note that f and g are interchangeable in the question.
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b. Capital budgeting means investment in real assets. Financing means raising the cash for this investment.
by a wide range of investors. The shares of closely held corporations are not publicly traded and are held by a small group of private investors.
d. Unlimited liability: Investors are responsible for all the firm’s debts. A sole proprietor has unlimited liability. Investors in corporations have limited liability. They can lose their
investment, but no more.
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b. Unless their financial assets are as safe as U.S. government securities, their cost of capital would be higher. The CFO could consider what the expected return is on assets with similar risk.
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