Complete the following graded homework assignment in a Word document named “FI515_Homework1_yourname." Show the details of your calculations/work in your answer to the problems.
- Mini Case (p. 45)
- Problems (p. 79)
- 2-6 Statement of Retained Earnings
- 2-7 Corporate Tax Liability (calculate tax liability and AT income)
- 2-9 Corporate After-Tax Yield (muni, corp, PS)
Sunday, September 4, 2011
wk1 Assignment
Homework Assignment
FI515 week 1 Mini case p. 45 on text
Mini Case
Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm's clients is Michelle DellaTorre, a professional tennis player who has just come to the United States who has just come to the United States from Chile. DellaTorre is a highly ranked tennis player who would like to start a company to produce and market apparel she designs. She also expects to invest substantial amounts of money through Balik and Kiefer.
DellaTorre is very bright, and she would like to understand in general terms what will happen to her money. Your boss has developed the following set of questions you must answer to explain the U.S. financial system to DellaTorre.
a. Why is corporate finance important to all managers?
Answer: Corporate finance deals with the strategic financial issues associated with achieving goals such as how the corporation should raise and manage its capital, what investments the firm should make, what portion of profits should be returned to shareholders in the form of dividends, and whether it makes sense to merge with or acquire another firm.
b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form.
Answer: (1) A proprietorship, or sole proprietorship, is a business owned by one individual. A partnership exists when two or more persons associate to conduct a business. In contrast, a corporation is a legal entity created by a state. The corporation is separate and distinct from its owners and managers.
(2) In a limited partnership, limited partners' liabilities, investment returns and control are limited, while general partners have unlimited liability and control. A limited liability partnership (LLP), sometimes called a limited liability company (LLC), combines the limited liability advantage of a corporation with tax advantagges of a partnership. A professional corporation (PC), known in some states as a professional association (PA), has most of the benefits of incorporation but the participants are not relieved of professional (malpractice) liability.
c. How do corporations go public and continue to grow? What are agency problems? What is corporate governance?
Corporate Governance is managing of a company. Company management techniques and processes in general, or the way a particular company is managed.
d. What should be the primary objective of managers?
Answer: The primary objective of managers should be making the employees want to work at the company. The key word here is "want", you should not force enforce or make any rules that employees would clearly hate or not follow. Be honest, sincere, and be open minded to the traits of your employees. Receive feedback and learn of your subordinate's perceptions.
(1) Do firms have any responsibilities to society at large?
Yes
(2) Is stock price maximization good or bad for society?
(3) Should firms behave ethically?
Of course.
e. What three aspects of cash flows affect the value of any investment?
f. What are free cash flows?
g. What is the weighted average cost of capital?
h. How do free cash flows and the weighted average cost of capital interact to determine a firm's value?
i. Who are the providers (savers) and users (borrowers) of capital? What is the price of equity capital? What are the four most fundamental factors that affect the cost of money, or the general level of interest rates, in the economy?
j. What do we call the price that a borrower must pay for debt capital? What is the price of equity capital? What are the four most fundamental factors that affect the cost of money, or the general level of interest rates, in the economy?
k. What are some economic conditions (including international aspects) that affect the cost of money?
l. What are financial securities? Describe some financial instruments.
m. List some financial institutions.
Bank of America, Chase, Citibank.
n. What are some different types of markets?
o. How are secondary markets organized?
(1) List some physical location markets and some computer/telephone networks.
(2) Explain the differences between open outcry auctions, dealer markets, and electronic communications network (ECNs).
p. Briefly explain mortgage securitization and how it contributed to the global economic crisis.
References:
http://www.quickmba.com/finance/cf/
http://www.docstoc.com/docs/16122369/ch1
http://www.blogger.com/post-edit.g?blogID=1523645641670045184&postID=750196866811601769
http://www.investopedia.com/terms/a/agencyproblem.asp#axzz1X2A9DTv7
http://www.bing.com/Dictionary/search?q=define+corporate+governance&qpvt=what+is+corporate+governance%3f&FORM=DTPDIA
http://www.articlesbase.com/answers/what-should-be-the-primary-objective-of-managers-86760
Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm's clients is Michelle DellaTorre, a professional tennis player who has just come to the United States who has just come to the United States from Chile. DellaTorre is a highly ranked tennis player who would like to start a company to produce and market apparel she designs. She also expects to invest substantial amounts of money through Balik and Kiefer.
DellaTorre is very bright, and she would like to understand in general terms what will happen to her money. Your boss has developed the following set of questions you must answer to explain the U.S. financial system to DellaTorre.
a. Why is corporate finance important to all managers?
b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form.
Answer: (1) A proprietorship, or sole proprietorship, is a business owned by one individual. A partnership exists when two or more persons associate to conduct a business. In contrast, a corporation is a legal entity created by a state. The corporation is separate and distinct from its owners and managers.
(2) In a limited partnership, limited partners' liabilities, investment returns and control are limited, while general partners have unlimited liability and control. A limited liability partnership (LLP), sometimes called a limited liability company (LLC), combines the limited liability advantage of a corporation with tax advantagges of a partnership. A professional corporation (PC), known in some states as a professional association (PA), has most of the benefits of incorporation but the participants are not relieved of professional (malpractice) liability.
c. How do corporations go public and continue to grow? What are agency problems? What is corporate governance?
Answer: There are a number of ways to go public with your business:
- IPO (Initial Public Offering) - This is the most commonly utilized method of going public with a business. It involves registering your stock with the Securities and Exchange Commission to sell shares to the public.
- Small Corporate Offering Registration - This is a less costly and simpler alternative to filing a traditional IPO, making it a more viable option for many small businesses.
- ACE-Net (Angel Capital Electronic Network) - Through the SBA, this network allows small businesses to list their stock offerings. Contact the SBA for details.
Corporate Governance is managing of a company. Company management techniques and processes in general, or the way a particular company is managed.
d. What should be the primary objective of managers?
Answer: The primary objective of managers should be making the employees want to work at the company. The key word here is "want", you should not force enforce or make any rules that employees would clearly hate or not follow. Be honest, sincere, and be open minded to the traits of your employees. Receive feedback and learn of your subordinate's perceptions.
(1) Do firms have any responsibilities to society at large?
Yes
(2) Is stock price maximization good or bad for society?
(3) Should firms behave ethically?
Of course.
e. What three aspects of cash flows affect the value of any investment?
f. What are free cash flows?
g. What is the weighted average cost of capital?
h. How do free cash flows and the weighted average cost of capital interact to determine a firm's value?
i. Who are the providers (savers) and users (borrowers) of capital? What is the price of equity capital? What are the four most fundamental factors that affect the cost of money, or the general level of interest rates, in the economy?
j. What do we call the price that a borrower must pay for debt capital? What is the price of equity capital? What are the four most fundamental factors that affect the cost of money, or the general level of interest rates, in the economy?
k. What are some economic conditions (including international aspects) that affect the cost of money?
l. What are financial securities? Describe some financial instruments.
m. List some financial institutions.
Bank of America, Chase, Citibank.
n. What are some different types of markets?
o. How are secondary markets organized?
(1) List some physical location markets and some computer/telephone networks.
(2) Explain the differences between open outcry auctions, dealer markets, and electronic communications network (ECNs).
p. Briefly explain mortgage securitization and how it contributed to the global economic crisis.
References:
http://www.quickmba.com/finance/cf/
http://www.docstoc.com/docs/16122369/ch1
http://www.blogger.com/post-edit.g?blogID=1523645641670045184&postID=750196866811601769
http://www.investopedia.com/terms/a/agencyproblem.asp#axzz1X2A9DTv7
http://www.bing.com/Dictionary/search?q=define+corporate+governance&qpvt=what+is+corporate+governance%3f&FORM=DTPDIA
http://www.articlesbase.com/answers/what-should-be-the-primary-objective-of-managers-86760
Subscribe to:
Comments (Atom)