TitmanFinMan12e_Chapter 1_Study Question Solutions

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1、1-3Titman/Keown/Martin•FinancialManagement,TwelfthEditionChapter1SolutionstoStudyQuestions1-1.Thesolutiontothisproblemisdependentuponthestudent’sexperiences.1-2.Therearethreebasictypesofissuesthatareaddressedbythestudyoffinance:a.Whatlong-terminvestmentsshoul

2、dthefirmundertake?Thisareaoffinanceisgenerallyreferredtoascapitalbudgeting.b.Howshouldthefirmraisemoneytofundtheseinvestments?Thefirm’sfundingchoicesaregenerallyreferredtoascapitalstructuredecisions.c.Howcanthefirmbestmanageitscashflowsastheyariseinitsday-to-

3、dayoperations?Thisareaoffinanceisgenerallyreferredtoasworkingcapitalmanagement.1-3.First,investorsdemandaminimumreturnfordelayingconsumptionthatmustbegreaterthantheanticipatedrateofinflation.Iftheydidn’treceiveenoughtocompensateforanticipatedinflation,investo

4、rswouldpurchasewhatevergoodstheydesiredaheadoftime.Thereisn’tmuchincentivetopostponeconsumptionifyoursavingsaregoingtodeclineintermsofpurchasingpower.Investmentalternativeshavedifferentamountsofriskandexpectedreturns.Investorssometimeschoosetoputtheirmoneyinr

5、iskyinvestmentsbecausetheseinvestmentsofferhigherexpectedreturns.Themoreriskaninvestmenthas,thehigherwillbeitsexpectedreturn–that’sbecauseriskinvestorsdon’tlikerisk,inparticular,theydon’tlikethechancethattheymightlosetheirmoney.Thatmakesriskyinvestmentslessat

6、tractive,whichmeansthattoattractinvestors,riskierinvestmentsmustbepricedtoofferinvestorsahigherexpectedrateofreturn.ThisrelationshipbetweenriskandexpectedreturnisshowninFigure1.3.Noticethatwekeepreferringtoexpectedreturnratherthanactualreturn.Wemayhaveexpecta

7、tionsofwhatthereturnsforinvestingwillbe,butwecan’tpeerintothefutureandseewhatthosereturnsareactuallygoingtobe.Untilafterthefact,youareneversurewhatthereturnonaninvestmentwillbe.ThatiswhyGeneralMotorsbondspaymoreinterestthanU.S.Treasurybondsofthesamematurity.T

8、headditionalinterestinducessomeinvestorstotakeontheaddedriskofpurchasingaGeneralMotorsbond.1-4.Whenevaluatinganinvestmentopportunityitisthecashflows,notaccountingprofits,thatdetermineitsv