Brealey−Meyers: Principles of Corporate Finance, 7th Edition - Chapter 11 docx

... deliver re- wards to investors. Source: C. Loomis, “Mr. Buffett on the Stock Market,” Fortune (November 22, 1999), pp. 110 115 . Brealey−Meyers: Principles of Corporate Finance, Seventh Edition III. ... 1–25. P 0 ϭ P t 11 ϩ r 2 t P 0 ϭ P 1 1 ϩ r ϭ 1 1 ϩ r a P 2 1 ϩ r bϭ P 2 11 ϩ r 2 2 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition III. Practical...

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... satisfactory way of defining the true rate of re- turn of a long-lived asset. The best available concept is the so-called discounted- cash-flow (DCF) rate of return or internal rate of return (IRR). ... IRR ϩ C 2 11 ϩ IRR2 2 ϩ … ϩ C T 11 ϩ IRR2 T ϭ 0 Discount rate ϭ C 1 Ϫ C 0 Ϫ 1 NPV ϭ C 0 ϩ C 1 1 ϩ discount rate ϭ 0 Rate of return ϭ payoff investment Ϫ 1 Brealey−Meyers: Pr...

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... Description of Capital Stock The Company’s authorized capital stock consists of 10,000,000 shares of voting Common Stock. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition IV. ... and has been its Chief Executive Officer since that date. He is a past president of the Institute of Brealey−Meyers: Principles of Corporate Finance, Seventh Edition...

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... what causes them. Value of firm ϭ value if all-equity-financed ϩ PV1tax shield2Ϫ PV 1costs of financial 1distress2 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition V. Dividend Policy ... stream of cash flows of $28 per year. The risk of these flows is likely to be less than the risk of the operating assets of L. The tax shields Brealey−Meyers: Prin...

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... relationship is Value of callϩ present value of exercise price ϭ value of putϩ share price Ϫ present value of dividend. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition VI. Options ... use an up-to-date risk-free interest rate. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition VI. Options 20. Understanding Options © The McGraw−Hil...

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... hedge with an in- the-money option, an at-the-money option, or an out -of- the-money option. 12. Other things equal, which of these American options are you most likely to want to ex- ercise early? a. ... each tree we show a histogram of the possible six-month price changes, assuming investors are risk- neutral. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition...

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... duration of the 1-year debt is 1 year, and the duration of the 6-year debt is 4.6 years. The dura- tion of the package of 1- and 6-year debt is a weighted average of the durations of the individual ... years2ϩ 311 Ϫ x2ϫ 1 year4 ϫ duration of 1-year loan4 Duration of package ϭ 1x ϫ duration of 6-year loan2ϩ 311 Ϫ x2 11 Ϫ x2 ϭ 1.192 ϫ 12ϩ 1.808 ϫ 4.62ϭ 3.9 years ϩ18...

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... Sachs, the last of the leading investment-bank part- nerships, issued shares and became a public corporation in 1998. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I. Value ... overseas invest- ments. We discuss international corporate finance at many different points in the chapters that follow. Brealey−Meyers: Principles of Corporate Finance, Sev...

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... and Ethics: The Case of Salomon Broth- ers,” Journal of Applied Corporate Finance 5 (Summer 1992), pp. 23–28. Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I. Value 2. Present ... ϭϪ$4,350 PV ϭ 110 ,000 1.15 ϭ $95,650 Expected return ϭ expected profit investment ϭ 110 Ϫ 95.65 95.65 ϭ .15, or 15% Brealey−Meyers: Principles of Corporate Finance,...

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... r t 2 t PV ϭ C 1 1 ϩ r 1 ϩ C 2 11 ϩ r 2 2 2 ϩ C 3 11 ϩ r 3 2 3 ϩ … PV ϭ C 1 1 ϩ r 1 ϩ C 2 11 ϩ r 2 2 2 34 PART I Value Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I. Value 3. How ... ϭ 70 1.10 ϩ 70 11. 102 2 ϩ 70 11. 102 3 ϩ 70 11. 102 4 ϩ 1070 11. 102 5 ϭ $886.28 PV ϭ 70 1.02 ϩ 70 11. 022 2 ϩ 70 11. 022 3 ϩ 70 11. 022 4 ϩ 1070 11. 022 5 ϭ $1,235...

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