Solutions for Corporate Finance, Sixth Canadian Edition, 6th Edition Berk (All Chapters included)
6 views 0 purchase
Module
Corporate Finance
Institution
Corporate Finance
Complete Solutions Manual for Corporate Finance, Sixth Canadian Edition, 6th Edition by Jonathan Berk, Peter DeMarzo, David Stangeland ; ISBN13: 9780138173968... (Full Chapters included Chapter 1 to 31)....1.The Corporation and Financial Markets 2.Introduction to Financial Statement Analysis 3.Arbi...
VE
Chapter 9 Fundamentals of Capital Budgeting 103
Part IV: Risk and Return
Chapter 10 Capital Markets and the Pricing of Risk 113
Chapter 11
Chapter 12
Model
Estimating the Cost of Capital
IE
Optimal Portfolio Choice and the Capital Asset Pricing 122
137
H
Chapter 13 Investor Behaviour and Capital Market Efficiency 143
AC
Part V: Options
Chapter 14 Financial Options 150
Chapter 15 Option Valuation 159
Chapter 16 Real Options 169
M
Part VI: Capital Structure and Dividend Policy
EA
Chapter 17 Capital Structure in a Perfect Market 192
Chapter 18 Debt and Taxes 199
Chapter 19 Financial Distress, Managerial Incentives, and 206
Information
R
Chapter 20 Payout Policy 214
D
Part VII: Advanced Valuation
Chapter 21 Capital Budgeting and Valuation with Leverage 220
Chapter 22 Valuation and Financial Modelling: A Case Study 234
Part VIII: Long-Term Financing
Chapter 23 Raising Equity Capital 242
Chapter 24 Debt Financing 247
Chapter 25 Leasing 250
ii
2
, Page 3 of 285
Part IX: Short-Term Financing
Chapter 26 Working Capital Management 256
Chapter 27 Short-Term Financial Planning 260
Part X: Special Topics
Chapter 28 Mergers and Acquisitions 264
Chapter 29 Corporate Governance 267
Chapter 30 Risk Management 270
Chapter 31 International Corporate Finance 279
S
R
VE
IE
H
AC
M
EA
R
D
iii
3
, Page 4 of 285
Chapter 1
The Corporation and Financial Markets
1-1. A corporation is a legal entity separate from its owners. This means ownership shares in the corporation
can be freely traded. None of the other organizational forms share this characteristic.
1-2. Owners’ liability is limited to the amount they invested in the firm. Shareholders are not responsible for
any encumbrances of the firm; in particular, they cannot be required to pay back any debts incurred by the
firm.
S
1-3. Corporations (all shareholders have limited liability). Limited partnerships provide limited liability for the
R
limited partners, but not for the general partners.
VE
1-4. Advantages: Limited liability, liquidity, infinite life. Disadvantages: Double taxation, separation of ownership
and control.
1-5. The corporation that only holds real estate must pay corporate income taxes. The real estate investment
trust (REIT) does not pay corporate taxes but must pass through substantially all of the income to the trust
1-6.
unit holders to whom it is taxable.
All calculations are on a ‘per-share basis’.
IE
H
At the business level, corporate tax will be paid. Corporate Tax = $2 .34 = $0.68. After corporate tax,
there is $2 − $0.68 = $1.32 to be paid out as a dividend.
AC
At the personal level, $1.32 is received as a dividend. Personal tax on the dividend is $1.32 .18 = $0.24.
This leaves $1.08 after all taxes.
M
If the shares were held in a TFSA, there would be no personal taxes and thus the amount left after all taxes
would be $1.32.
EA
1-7. All calculations are on a ‘per-unit basis’.
At the business level, no corporate tax will be paid as this is a REIT. Thus, there is the full $2 to be paid out
as a distribution.
R
At the personal level, $2 is received as a distribution from the REIT. Personal tax on the distribution is
$2 .40 = $0.80. This leaves $1.20 after all taxes.
D
If the units were held in a TFSA, there would be no personal taxes and thus the amount left after all taxes
would be $2.00. So no taxes would be paid at either the business or personal level and you would get to
keep the full amount!
1-8. As the manager of an iPhone applications developer, you will make three types of financial decisions.
i. You will make investment decisions such as determining which type of iPhone application projects
will offer your company a positive NPV and should, therefore, be developed by your company.
ii. You will make the decision on how to fund your iPhone application investments and what mix of debt
and equity your company will have.
4
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller DreamAchievers. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £16.23. You're not tied to anything after your purchase.
