公司理财全书课后答案及人大金融考研

公司理财全书课后答案及人大金融考研找到答案,因为中文和英文的题目在数字上全是一致的,所以大家拿着这份答案可以很容易的找到书中的08DDMM吧如果有时间,建议大家在初试前看一看,熟悉一下,理1822关于其它三门复试课程:金融学要记忆的很多,而且很多地方都有出题的可能,商行的重点很集中就是第9章,证券和理财重叠的知识很多所以看好理财,证券也就基本拿下了,技术分析那章具体的如K线,波浪线,形态理论等看不懂就算了,考试基本不会涉及的.关于人大考研初试公共课:总的来说,你考试的成败就取决于数学上面,当然其它的你要保证上线,想靠英语政治提分很难,北京今年压分压的太厉害,唯一压不了的只有数学,数学的结果是确定的,对就是对,错就是21532DDMM,可以忽略我上面的那段话.366011400+真题就足够了2那书你做透了选择填空不会扣分4003140150基本要看发挥了32狂骂)2020基本都能压到的875英语:我只看过真题,看了很多遍.初试专业课:3EASY间的话不专门准备也可,IS-LM2度过考研的每个人.........R,KEVIN,K,小鱼...........9月人大见啦~~理财答案感谢橙子,这个答案是给我的,很不错,每个题目都有详细的过程,这样让我轻松的在英文中找到了中文原题)理财答案感谢橙子,这个答案是给我的,很不错,每CONCEPTCONCEPTQUESTIONS-CHAPTER1·Whatarethethreebasicquestionscorporatefinance?Investmentdecision(capitalbudgeting):long-terminvestmentstrategyshouldafirmadopt?Financingdecision(capitalstructure):muchcashmustberaisedfortherequiredinvestments?Short-termfinancedecision(workingcapital):Howmuchshort-termcashflowdoescompanyneedtopayitsbills.Describecapitalstructure.Capitalstructureisthemixofdifferentsecuritiesusedtofinanceafirm'sListthreereasonswhyvaluecreationdifficult.Valuecreationisdifficultbecauseitisnottoobservecashflowsdirectly.Thereasonsare:Cashflowsaresometimesdifficultidentify.Thetimingofcashflowsisdifficultdetermine.Cashflowsareuncertainandthereforerisky.·Whatisacontingentclaim?Acontingentclaimisaclaimwhosepayoffsaredependentonthevalueofthefirmattheendoftheyear.Inmoregeneralterms,contingentclaimsdependonthevalueofanDescribeequityanddebtascontingentclaims.Bothdebtandequitydependonthevalueoffirm.Ifthevalueofthefirmisgreaterthantheamountowedtodebtholders,theywillgetthefirmowesthem,whilestockholderswillthedifference.Butifthevalueofthefirmlessthanequity,bondholderswillgetthevalueofthefirmandequityholdersnothing.·Defineaproprietorship,apartnershipacorporation.Aproprietorshipisabusinessownedbyasingleindividualwithunlimitedliability.Apartnershipisabusinessownedbytwoormoreindividualswithunlimitedliability.Acorporationisabusinesswhichisa"legalperson"withmanylimitedliabilityowners.Whataretheadvantagesofthecorporateofbusinessorganization?Limitedliability,eastofownershiptransferperpetualsuccession.·WhatarethetwotypesofagencyMonitoringcostsoftheshareholdersandtheincentivefeespaidtothemanagers.Howaremanagersbondedtoshareholders?Shareholdersdeterminethemembershiptoboardofdirectors,whichselectsmanagement.Managementcontractsandincentivesareintocompensationarrangements.Ifafirmistakenoverbecausethefirm'sdropped,managerscouldlosetheirjobs.Competitioninthemanageriallabormarketmakesmanagersperforminthebestintereststockholders.Canyourecallsomemanagerialgoals?Maximizationofcorporatewealth,growthandcompanysize.Whatistheset-of-contractsperspective?Theviewofthecorporationasasetofcontractingrelationshipsamongindividualshaveconflictingobjectives.·Distinguishbetweenmoneymarketscapitalmarkets.Moneymarketsaremarketsfordebtsecuritiesthatpayoffinlessthanoneyear,whilecapitalmarketsaremarketsforlong-termdebtandshares.Whatislisting?ListingreferstotheproceduresbywhichacompanyappliesandqualifiessothatitsstockcanbetradedontheNewYorkStockExchange.Whatisthedifferencebetweenaprimaryandasecondarymarket?Theprimarymarketisthemarketwhereissuersofsecuritiessellthemforthefirsttimetoinvestors,whileasecondarymarketisaforsecuritiespreviouslyissued.CONCEPTQUESTIONS-CHAPTER2·Whatisthebalance-sheetequation?Assets=Liabilities+Stockholders'Whatthreethingsshouldbekeptinmindlookingatabalancesheet?Accountingliquidity,debtvs.equity,andvs.cost.·Whatistheincomestatementequation?Revenue-expenses=IncomeWhatarethethreethingstokeepinmindlookingatanincomestatement?GenerallyAcceptedAccountingPrinciplesnoncashitems,andtimeandcosts.Whatarenoncashexpenses?Noncashexpensesareitemsincludedasexpensesbutwhichdonotdirectlyaffectcashflow.Themostimportantoneisdepreciation.·Whatisnetworkingcapital?Itisthedifferencebetweencurrentassetsandcurrentliabilities.Whatisthechangeinnetworkingcapital?Todeterminechangesinnetworkingcapitalsubtractusesofnetworkingcapitalfromsourcesofnetworkingcapital.·Howiscashflowdifferentfromchangesnetworkingcapital?Thedifferencebetweencashflowandchangesnewworkingcapitalisthatsometransactionsaffectcashflowandnotnetworkingcapital.Theacquisitionofinventorieswithcashisagoodexampleofachangeinworkingcapitalrequirements.Whatisthedifferencebetweenoperatingflowandtotalcashflowofthefirm?Themaindifferencebetweenthetwoiscapitalspendingandadditionstoworkingcapital,thatis,investmentinfixedassetsand"investment"inworkingcapital.CONCEPTQUESTIONS-CHAPTER3·Whatisaninterestrate?Itisthepaymentrequiredbythelenderofmoneyfortheuseofitduringadeterminedperiodtime.Itisexpressedinpercentage.Whatareinstitutionsthatmatchborrowerslenderscalled?Theyarecalledfinancialinstitutions.WhatdowemeanwhenwesayamarketWhatisanequilibriumrateofinterest?Amarketclearsiftheamountofmoneyborrowerswanttoborrowisequaltotheamountlenderswishtolend.Anequilibriumrateofinterestistheinterestrateatwhichmarketsclear.·Howdoesanindividualchangeconsumptionacrossperiodsthroughborrowingandlending.Byborrowingandlendingdifferentamountsthepersoncanachieveanyofallconsumptionpossibilitiesavailable.Howdointerestratechangesaffectdegreeofimpatience?Aperson'slevelofpatiencedependsupontheinterestrateheorshefacesinthemarket.Apersoneagertoborrowmoneyatalowinterestratewillbecomelesseagerifthatinterestisraisedandmayprefertolendmoneytotakeadvantageofhigherinterestrates.·Whatisthemostimportantfeatureofcompetitivefinancialmarket?Noinvestor,individualorcorporationcanhaveasignificanteffectontotallendingoroninterestrates.Therefore,investorsarepricetakers.Whatconditionsarelikelytoleadtothis?Tradingiscostless.InformationaboutborrowingandopportunitiesisavailableTherearemanytraders.·Describethebasicfinancialprincipleinvestmentdecision-making?Aninvestmentprojectisworthundertakingonlyifitismoresdesirablethanwhatisavailableinthefinancialmarkets.·Describehowthefinancialusedtoevaluateinvestmentalternatives?Thefinancialmarketscanbeusedasabenchmark.Iftheproposedinvestmentprovidesabetteralternativethanthefinancialmarkets,itbeundertaken.Whatistheseparationtheorem?Whyisimportant?Theseparationtheoremsaysthatthedecisionastowhethertoundertakeaproject(comparedtothefinancialmarkets)isindependentoftheconsumptionpreferencesoftheindividual.Itisimportantbecausewecanmakeinvestmentdecisionsbasedonobjectivedata,personalpreferences.·Givethedefinitionsofnetpresentfuturevalueandpresentvalue?Newpresentvalueisthedifferenceinpresentvaluetermsbetweencashinflowsandcashoutflows.Giventhefinancialmarket,thevalueisanamountequivalenttotheamountcurrentlyheld,andpresentvalueistheamountequivalenttoanamounttobereceivedorgiveninthefuture.Whatinformationdoesapersonneedtocomputeaninvestment'snetpresentvalue?Cashinflows,cashoutflowsandaninterestordiscountrate.·Intermsofthenet-present-valuewhatistheessentialdifferencebetweentheindividualandthecorporation.Themaindifferenceisthatfirmshavenoconsumptionendowment.CONCEPTQUESTIONS-CHAPTER4·Definefuturevalueandpresentvalue.Futurevalueisthevalueofasumafterinvestingoveroneormoreperiods.Presentvalueisthevaluetodayofcashflowstobereceivedinthefuture.Howdoesoneusenetpresentvaluewhenaninvestmentdecision?Onedeterminesthepresentvalueoffutureflowsandthensubtractsthecostoftheinvestment.Ifthisvalueispositive,theinvestmentshouldbeundertaken.IftheNPVisnegative,thentheinvestmentshouldberejected.·Whatisthedifferencebetweeninterestandcompoundinterest?Withsimpleinterest,theinterestontheoriginalinvestmentisnotreinvested.Withcompoundinterest,eachinterestpaymentisreinvestedandoneearnsinterestoninterest.Whatistheformulaforthenetpresentofaproject?TNPV=-C0+åCt/(1+I)tt=1·WhatisastatedannualinterestThestatedannualinterestrateistheinterestratewithoutconsiderationofcompounding.Whatisaneffectiveannualinterestrate?Aneffectiveannualinterestrateisaratethattakescompoundingintoaccount.Whatistherelationshipbetweentheannualinterestrateandtheeffectiveannualinterestrate?Effectiveannualinterestrate=(1+(r/m))m-1.Definecontinuouscompounding.Continuouscompoundingcompoundsinvestmentseveryinstant.·Whataretheformulasforperpetuity,growing-perpetuity,annuity,andgrowingannuity?Perpetuity:PV=C/rGrowingPerpetuity:PV=C/(r-g)Annuity:PV=(C/r)[1-1/(1+r)T]GrowingAnnuity:PV=[C/(r-g)][1-((1+g)/(1+r))T]Whatarethreeimportantpointsconcerninggrowingperpetuityformula?Thenumerator.Theinterestrateandthegrowthrate.Thetimingassumption.Whatarefourtricksconcerningannuities?Adelayedannuity.AnannuityinadvanceAninfrequentannuityTheequatingofpresentvaluesofannuities.CONCEPTQUESTIONS-CHAPTER5·Definepurediscountbonds,bonds,andconsols.Apurediscountbondisonethatmakesinterveninginterestpayments.Onereceivesasinglelumpsumpaymentatmaturity.Alevel-couponbondisacombinationofanannuityandalumpsumatmaturity.Aconsolisabondmakesinterestpaymentsforever.Contrastthestateinterestrateandeffectiveannualinterestrateforbondspangsemi-annualinterest.Effectiveannualinterestrateonabondtakesintoaccounttwoperiodsofcompoundingperyearreceivedonthecouponpayments.Thestatedoesnottakethisintoaccount.·Whatistherelationshipbetweeninterestratesandbondprices?Thereisaninverserelationship.Whenonegoesup,theothergoesdown.Howdoesonecalculatetheeldtomaturityabond?Onefindsthediscountratethatequatesthepromisedfuturecashflowswiththepriceofthebond.·Whatarethethreefactorsdeterminingfirm'sP/Eratio?Today'sexpectationsoffutureopportunities.Thediscountrte.Theaccountingmethod.·WhatistheclosingpriceofGeneralTheclosingpriceofGeneralDatais63/16.WhatisthePEofGeneralThePEofGeneralHouseis29.WhatistheannualdividendofGeneralTheannualdividendofGeneralHostiszero.CONCEPTQUESTIONS-AppendixtoChapter5Whatisthedifferencebetweenaspotinterestrateandtheeldtomaturity?Theeldtomaturityisthegeometricaverageofthespotratesduringthelifeofthebond.Definetheforwardrate.Givenaone-yearbondandatwo-yearbond,oneknowsthespotratesforboth.Theforwardistherateofreturnimplicitonaone-yearbondpurchasedinthesecondyearthatwouldequatetheterminalwealthofpurchasingtheone-yeartodayandanotherinoneyearwiththatofthetwo-yearbond.Whatistherelationshipbetweentheone-yearspotrate,thetwo-yearspotrateandtheforwardrateoverthesecondyear?Theforwardratef2=[(1+r2)2/(1+r1)]-1Whatistheexpectationhypothesis?Investorssetinterestratessuchthattheforwardrateoveragivenperiodequalsthespotrateforthatperiod.Whatistheliquidity-preferencehypothesis?Thishypothesismaintainsthatinvestorsrequireariskpremiumforholdinglonger-termbondstheyprefertobeliquidorshort-terminvestors).Thisimpliesthatthemarketsetstheforwardrateforagivenperiodabovetheexpectedspotrateforthatperiod.CONCEPTQUESTIONS-CHAPTER66.2·Listtheproblemsofthepaybackperiodrule.Itdoesnottakeintoaccountthetimeofmoney.Itignorespaymentsafterthepaybackperiod.Thecutoffperiodisarbitrary.Whataresomeadvantages?Itissimpletoimplement.Itmayhelpincontrollingandevaluatingmanagers.·WhatarethethreestepsincalculatingAAR?Determineaveragenetincome.DetermineaverageinvestmentDivideaveragenetincomebyaverageinvestment.WhataresomeflawswiththeAARapproach?Itusesaccountingfigures.Ittakesnoaccountoftiming.Thecutoffperiodisarbitrary.·HowdoesonecalculatetheIRRofaproject?Usingeithertrial-and-errororafinancialcalculator,onefindsthediscountrateproducesanNPVofzero.·Whatisthedifferencebetweenindependentprojectsandmutuallyexclusiveprojects?Anindependentprojectisonewhoseacceptancedoesnotaffecttheacceptanceofanother.Amutuallyexclusiveproject,ontheotherhandisonewhoseacceptanceprecludestheacceptanceanother.WhataretwoproblemswiththeIRRapproachthatapplytobothindependentandmutuallyexclusiveprojects?Thedecisionruledependsonwhetheroneinvestingoffinancing.Multipleratesofreturnarepossible.·Whataretwoadditionalproblemsapplngonlytomutuallyexclusiveprojects?1.TheIRRapproachignoresissuesofscale.2.TheIRRapproachdoesnotaccommodatethetimingofthecashflowsproperly.·Howdoesonecalculateaproject'sprofitabilityindex?Dividethepresentvalueofthecashflowssubsequenttotheinitialinvestmentbyinitialinvestment.Howistheprofitabilityindexappliedtoindependentprojects,mutuallyexclusiveprojects,andsituationsofcapitalrationing?Withindependentprojects,accepttheprojectifthePIisgreaterthan1.0andrejectifthan1.0.Withmutuallyexclusiveprojects,useincrementalanalysis,subtractingthecashflowsofproject2fromproject1.FindthePI.IfPIisgreaterthan1.0,acceptproject1.Iflessthan1.0,acceptproject2.Incapitalrationing,thefirmshouldranktheprojectsaccordingtotheirrespectivePIsandaccepttheprojectswiththehighestPIs,subjecttothebudgetconstrain.CONCEPTQUESTIONS-CHAPTER7·Whatarethethreedifficultiesdeterminingincrementalcashflows?Sunkcosts.OpportunitycostsSideeffects.Definesunkcosts,opportunitycosts,andeffects.Sunkcostsarecoststhathavealreadyincurredandthatwillnotbeaffectedbythedecisionwhethertoundertaketheinvestment.Opportunitycostsarecostsincurredbythefirmbecause,ifitdecidestoundertakeaproject,itwillforegootheropportunitiesforusingtheassets.Sideeffectsappearwhenaprojectnegativelyaffectscashflowsfromotherpartsofthe·Whataretheitemsleadingtocashflowanyyear?Cashflowfromoperations(revenue-operatingcosts-taxes)pluscashflowofinvestment(costofnewmachines+changesinnetworkingcapital+opportunitycosts).WhydidwedetermneincomewhenNPVdiscountscashflows,notincome?Becauseweneedtodeterminehowmuchispaidintaxes.Whyisworkingcapitalviewedasaoutflow?Becauseincreasesinworkingcapitalmustbefundedbycashgeneratedelsewhereinthefirm.·Whatisthedifferencebetweenthenominalandtherealinterestrate?Thenominalinterestrateistherealinterestratewithapremiumforinflation.Whatisthedifferencebetweennominalandcashflows?Realcashflowsarenominalcashflowsadjustedforinflation.·Whatistheequivalentannualofcapitalbudgeting?Thedecisionastowhichofvariousmutuallyexclusivemachinestobuyisbasedontheequivalentannualcost.TheEACisdetermineddividingthenetpresentvalueofcostsbyanannuityfactorthathasthesamelifeasthemachines.ThemachinewiththelowestEACbeacquired.CanyoulisttheassumptionsthatwemustuseEAC?Allmachinesdothesamejob.TheyhavedifferentoperatingcostsandlivesThemachinewillbeindefinitelyreplaced.CONCEPTQUESTIONS-CHAPTER8·WhatarethewaysafirmcancreatepositiveNPV.Befirsttointroduceanewproduct.Furtherdevelopacorecompetencytogoods or services at lower costs thancompetitors.Createabarrierthatmakesitdifficulttheotherfirmstocompeteeffectively.IntroducevariationonexistingproductstakeadvantageofunsatisfieddemandCreateproductdifferentiationbyaggressiveadvertisingandmarketingnetworks.Useinnovationinorganizationalprocessesdoalloftheabove.HowcanmanagersusethemarkettohelpscreenoutnegativeNPVprojects?·Whatisadecisiontree?Itisamethodtohelpcapitalbudgetingdecision-makersevaluatingprojectsinvolvingsequentialdecisions.Ateverypointinthetree,therearedifferentalternativesthatshouldanalyzed.Whatarepotentialproblemsinusingadecisiontree?Potentialproblems1)thatadifferentrateshouldbeusedfordifferentbranchesinthetreeand2)itisdifficultfordecisiontreestocapturemanagerialoptions.·Whatisasensitivityanalysis?Itisatechniqueusedtodeterminehowtheofadecisionchangeswhensomeoftheparametersorassumptionschange.Whyisitimportanttoperformasensitivityanalysis?Becauseitprovidesananalysisoftheconsequences of possible prediction orassumptionerrors.Whatisabreak-evenanalysis?Itisatechniqueusedtodeterminethevolumeofproductionnecessarytobreakeven,thatis,tocovernotonlyvariablecostsbutfixedcostswell.Describehowsensitivityanalysisinteractswithbreak-evenanalysis.Sensitivityanalysiscandeterminehowthefinancialbreak-evenpointchangeswhenfactors(suchasfixedcosts,variablecosts,revenue)change.CONCEPTQUESTIONS-CHAPTER9·WhatarethetwopartsoftotalDividendincomeandcapitalgain(orloss)Whyareunrealizedcapitalgainsorincludedinthecalculationofreturns?Becauseitisasmuchapartofreturnsasdividends,eveniftheinvestordecidestoholdontothestockandnottorealizethecapitalgain.Whatisthedifferencebetweenadollarreturnandapercentagereturn?Adollarreturnistheamountofmoneytheoriginalinvestmentprovided,whilepercentagereturnisthepercentageoftheoriginalinvestmentrepresentedbythetotalreturn.·Whatisthelargestreturnthe63-yearhistoryofcommonstockswehavedisplayed,andwhendidWhatisthesmallestreturn,andwhendiditoccur?Largestcommonstockreturn:53.99%in1933.Smallestcommonstockreturn:-43.34%in1931.Inhowmanyyearsdidthecommonstockexceed30percent,andinhowmanyyearswasitbelow20percent?Itexceeded30%in16years.Itwasbelow20%in39years.Forcommonstocks,whatistheoftimewithoutasinglelosingyear?Whatisthelongeststreakoflosingyears?Thereare6consecutiveyearsofpositivereturns.Thelongestlosingstreakwas4years.Whatisthelongestperiodoftimesuchifyouhaveinvestedatthebeginningoftheperiod,youwouldstillnothadapositivereturnonyourcommon-stockinvestmentbytheend?Thelongestperiodoftimewas14years(fromto1942).·Whatisthemajorobservationaboutcapitalmarketsthatwewillseektoexplain?Thatthereturnonriskyassetshasbeenhigheronaveragethanthereturnonrisk-freeassets.Whatdoestheobservationtellusinvestorsfortheperiodfrom1926through1994.AninvestorinthisperiodwasrewardedforinvestmentinthestockmarketwithanextraorexcessreturnoverwhatwouldhaveachievedbysimplyinvestinginT-bills.·Whatisthedefinitionofsampleestimatesofvarianceandstandarddeviation?VarianceisgivenbyVar(R)=(1/(T-1))St(Rt-R)2whereTisthenumberofperiods,RtistheperiodreturnandRisthesamplemean.StandarddeviationisgivenbySD=Var1/2.Forlarge(T-1)maybeapproximatedbyT.Howdoesthenormaldistributionhelpinterpretstandarddeviation?Foranormaldistribution,theprobabilityofhavingareturnthatisaboveorbelowthemenacertainamountonlydependsonthestandarddeviation.·Howcanfinancialmanagersusethehistoryofcapitalmarketstoestimatetherequiredrateofreturnoninvestmentswiththesameriskastheaveragecommonstock?Theycandeterminethehistoricalriskpremiumandaddthisamounttothecurrentrisk-freeratetodeterminetherequiredreturnoninvestmentsofthatrisk.CONCEPTQUESTIONS-CHAPTER11·Whatarethetwobasicpartsofareturn?1.Theexpectedpart2.ThesurprisepartUnderwhatconditionswillsomenewshaveeffectoncommonstockprices?Ifthereisnosurpriseinthenews,therenotbeanyeffectonprices.Thatis,thenewswasfullyexpected.· Describe the difference systematicriskandunsystematicrisk.Asystematicriskisanyriskthataffectsalargenumberofassets,eachtoagreaterorlesserdegree.Anunsystematicriskisariskthatspecificallyaffectsasingleassetorasmallgroupofassets.Whyisunsystematicrisksometimesreferredasidiosyncraticrisk?Becauseinformationsuchastheannouncementofalaborstrike,mayaffectonlysomecompanies.·Whatisaninflationbeta?AGNPbeta?interest-ratebeta?Aninflationbetaisameasureofthesensitivityofastock'sreturntochangesintheexpectedinflationrate.AGNPbetameasuresthesensitivityofastock'sreturntochangesinexpectedGNP.Aninterestratebetareflectssensitivityofastock'sreturntochangesinmarketinterestrate.Whatisthedifferencebetweenak-factorandthemarketmodel?Themaindifferenceisthatthemarketmodelassumesthatonlyonefactor,usuallyastockmarketaggregate,isenoughtoexplainstockreturns,whileak-factormodelreliesonkfactorstoexplainreturns.Definethebetacoefficient.Thebetacoefficientisameasureofthesensitivityofstock'sreturntounexpectedchangesinonefactor.·Howcanthereturnonaportfolioexpressedintermsofafactormodel?Itistheweightedaverageofexpectedreturnsplustheweightedaverageofeachsecurity'stimesafactorFplustheweightedaverageoftheunsystematicrisksoftheindividualsecurities.Whatriskisdiversifiedawayinaportfolio?Theunsystematicrisk.·Whatistherelationshipbetweenone-factormodelandCAPM?Assumingthemarketportfolioisproperlyitcanbeshownthattheone-factormodelidenticaltotheCAPM.11.7·Empiricalmodelsaresometimescalledfactormodels.Whatisthedifferencebetweenafactoraswehaveuseditpreviouslyinthischapterandanattributeasweuseitinthissection?Afactorisgenerallyamarketwideorindustrywidefactorproxngthesystematicrisk.Anattributeisrelatedwiththereturnsofthestocks.Whatisdataminingandwhymightitoverstatetherelationbetweensomestockattributeandreturns?Choosingparametersbecausetheyhavebeentoberelatedtoreturnsisdatamining.Therelationfoundbetweensomeattributeandreturnscanbeaccidental,thusoverstated.WhatiswrongwithmeasuringtheperformanceofaU.S.growthstockmanageragainstabenchmarkcomposedofEnglishstocks?UsingabenchmarkcomposedofEnglishstocksiswrongbecausethestocksincludedarenotofthesamestyleasthoseinaU.S.growthstockfund.CONCEPTQUESTIONS-CHAPTER12·Whatisthedisadvantageofusingtooobservationswhenestimatingbeta?Smallsamplescanleadtoinaccurateestimations.Whatisthedisadvantageofusingtooobservationswhenestimatingbeta?Firmsmaychangetheirindustriesovertimemakingobservationsfromthedistantpastout-of-date.Whatisthedisadvantageofusingtheindustrybetaastheestimateofthebetaofanindividualfirm?Theoperationsofaparticularfirmmaynotbesimilartotheindustryaverage.·Whatarethedeterminantsofequitybetas?Theresponsivenessofafirm'srevenueseconomywidemovements.Thedegreeofafirm'soperatingleverage.Thedegreeofafirm'sfinancialleverage.Whatisthedifferencebetweenanassetandanequitybeta?Financialleverage.12.6hWhatisliquidity?Liquidityinthiscontextmeansthecostofandsellingstocks.Thosestocksthatareexpensivetotradeareconsideredlessliquid.hWhatistherelationbetweenliquidityexpectedreturn?Thereisahighexpectedreturnforilliquidstockswithhightradingcosts.hWhatisadverseselection?Adverseselectionoccurswhenindividualshaveignoranceabouttraits,trends,orotherinformationhiddeninapopulation.Forinstance,atradermaysufferfromadverseselectionifcertainmarketknowledgeishiddenfromhimisavailabletosomeinvestors.hWhatcanacorporationdotoloweritscostofcapital?Acorporationcanbeproactiveintakingactionsthatwilllowertradingcosts,therebyitscostofcapital.CONCEPTQUESTIONS-CHAPTER13·Listthethreewaysfinancingdecisionscancreatevalue.FoolinvestorsReducecostsorincreasesubsidiesCreateanewsecurity·Canyoudefineanefficientmarket?Itisamarketwherecurrentpricesreflectallavailableinformation.·Canyoudescribethethreeformsofefficient-markethypotheses?Weak-fromEMHpostulatesthatpricesallinformationcontainedinthepasthistoryofprices.SemistrongformEMHsaysthatpricesnotreflectthehistoryofpricesbutallpubliclyavailableinformation.StrongformEMHcontendsthatpricesallavailableinformation,publicandprivate(or"inside").Whatkindsofthingscouldmakeinefficient?LargecostsofacquiringandskillfullyutilizinginformationTheexistenceofprivateinformationLargetransactionscostsDoesmarketefficiencymeanyoucanthrowataWallStreetJournallistingofNewYorkStockExchangestockstopickaportfolio.No.Allitsaysisthat,onaverage,aportfoliomanagerwillnotbeabletoachieveexcessreturnsonarisk-adjustedbasis.Whatdoesitmeantosaythepriceyoupayastockisfair?ItmeansthatthestockhasbeenpricedtakingintoaccountallpubliclyavailableWhyisitsometimesdifficulttotelwhetheraparticularsecurityisdebtorequity?Becauseithascharacteristicsthatareparticulartoboth.CompaniesareveryadeptcreatinghybridsecuritiesthatareconsidereddebtbytheIRSbuthaveequityfeatures.·Whatisapreferredstock?Itisasecuritythathaspreferencestockinthepaymentofdividendsandinthedistributionofassetsinthecaseofliquidation.DoyouthinkitismorelikedebtorPreferredstockissimilartobothdebtandcommonequity.Preferredshareholdersreceiveadividendonly,andifthecorporationisliquidated,preferredreceiveastatedonly,andifthecorporationisliquidated,preferredstockholdersgetastatedvalue.However,unpaidpreferreddividendsarenotofacompanyandpreferreddividendsnotataxdeductiblebusinessexpense.Whatarethreereasonswhypreferredstockissued?Becauseofthewayutilityratesaredeterminedinregulatoryenvironments,regulatedpublicutilitiescanpassthetaxdisadvantageissuingpreferredstockontotheircustomers.CompaniesreportinglossestotheIRSmaypreferredstock.Firmsissuingpreferredstockcanavoidthethreatofbankruptcythatexiststhatfinancing.·Whatisthedifferencebetweenfinancingandexternalfinancing?Internal financing comes from generatedcashflowsanddoesnotrequiretheissuingsecurities.Whatarethemajorsourcesofcorporatefinancing?1.Internalfinancing2.Externalfinancing(newlong-termborrowing,equity)Whatfactorsinfluenceafirm'schoicesexternalversusinternalequityfinancing?The general economic specifically,businesscycles.ThelevelofstockpricesTheavailabilityofpositiveNPVprojects.Whatpeckingordercanbeobservedinhistoricalpatternsoflong-termfinancing?Thefirstformoffinancingisinternallygeneratedfunds,thenexternalfinancing;debtusedbef