TitmanFinMan12e_Chapter 11_Study Question Solutions

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1、11-6Titman/Keown/Martin•FinancialManagement,TwelfthEditionChapter11SolutionstoStudyQuestions11-1.Overyourcareeryouwillbefacedwithinvestmentopportunitiesthatrequiresometypeofevaluationandanalysis.Whetherthedecisionistopurchaseapieceofpropertythatyouhopetodevelopandreselloritinvo

2、lvesstartingandrunningabusiness,capitalbudgetinganalysiswillhelpyoumaketherightdecision.Intheintroductionwedescribedaverysimplerealestateinvestmentopportunity.Moretypicallysuchaninvestmentwouldrequiresubstantialinvestmentstoimprovetheproperty,withrenovationsoveranextendedperiod

3、oftime(perhapsasmuchasayear).Havingcompletedtherenovationyoumightconsideratleasttwoalternatives:sellingthepropertytosomeoneelsetorentandmanageorkeepthepropertyandmanagingtherentalsyourself.Thetoolswedevelopinthischapterwillhelpyouevaluatetheinitialpropertyinvestmentaswellasthed

4、ecisionofwhetherornottokeepandmanagetheproperty.11-2.Investmentideascancomefromavarietyofsources.Forexample,ideasoftencomefromthemanagementandemployeesofthefirm.Employeeswhoworkcloselywiththefirm’scustomers(generally,themarketingdepartment)andrunthefirm’soperations(theproductio

5、nmanagementdepartment)areoftentheideagenerators.11-3.RevenueEnhancingInvestmentsInvestmentsthatleadtohigherrevenuesofteninvolvetheexpansionofexistingbusinesses,suchasApple’s(APPL)decisiontoaddthesmallerNanoiPods.Alternatively,whenAppleoriginallydecidedtobeginsellingMP3playerswi

6、thitsiPodlineofproductstheycreatedanentirelynewlineofbusiness.Cost-ReductionInvestmentsThemajorityofafirm’scapitalexpenditureproposalsareaimedatreducingthecostofdoingbusiness.Forexample,whenWalMart(WMT)decidedtolocatearegionaldistributioncenterinSanMarcos,Texas,thisinvestmentpr

7、obablydidnotexpandfirmrevenuessincetheregionwasalreadypopulatedwithWalMartstores.Instead,theprimarybenefitderivedfromthedistributioncentercamefromlowercostsofsupportingstoreswithintheregion.Othertypesofcost-reducinginvestmentsarisewhenequipmenteitherwearsoutorbecomesobsoletedue

8、tothedevelopmentofnewandimprovedequipment.Forexample,I