Solution Manual For Fundamentals of Corporate Finance 8CE Richard A. Brealey, Stewart C. Myers, Alan J. Marcus, Devashis Mitra, Dinesh Gajurel Chapter 1-26
Solutions for Chapter 1 1.
real plant and machinery brand names financial stocks investment capital budgeting financing
2.
A firm might cut its labour force dramatically which could reduce immediate expenses and increase profits in the short term. Over the long term, however, the firm might not be able to serve its customers properly or it might alienate its remaining workers; if so, future profits will decrease, and the stock price will decrease in anticipation of these problems. The moral of this examples is that because stock prices reflect present and future profitability, the firm should not necessarily sacrifice future prospects for short-term gains.
3.
The key advantage of separating ownership and management in a large corporation is that it gives the corporation permanence. The corporation continues to exist if managers are replaced or if stockholders sell their ownership interests to other investors. The corporation‘s permanence is an essential characteristic in allowing corporations to obtain the large amounts of financing required by many business entities. Both public and private corporations are distinct legal entities, separate from its owners (i.e.., its shareholders). The key difference between public and private corporations is the rules governing the sale of their common shares. The common shares of a public corporation are listed for trading on a stock exchange and investors can freely buy and sell the corporation‘s shares at the current stock price. The common shares of a private corporation are not listed for trading on a stock exchange. Shareholders of private corporations must negotiate directly with potential buyers and are subject to resale restrictions.
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