im14

8/11/2019 im14

http://slidepdf.com/reader/full/im14 1/24

Chapter 14Capital Structure Decisions: Part I

ANSWERS TO BEGINNINGO!C"APTER #$ESTIONS

Preface to Answers: Students often regard capital structure as being the most

difficult topic covered in this text. The empirical evidence on the effects

of capital structure are far from definitive, and the theory is controversial.

Academicians generally focus on market values, which are theoretically

correct, while many financial executives focus on book values, which are

theoretically uestionable but in some ways easier to deal with. !e wrestled

with this issue, and decided to base our "xcel model strictly on market

values. This led us to use an iterative solution process, which gets

complicated. #ur better students follow along and like the approach, because

everything works out nicely. $owever, our weaker and%or la&ier students don't

concentrate and get lost. !e went through the model in class, as it explains

the essential capital structure issues relatively well and also illustrates

the power of computer modeling. $owever, other instructors might prefer to

take a less rigorous approach and skip the "xcel model.

()*( +usiness risk is the risk inherent in the firm's operating income. t

is measured by the standard deviation of expected future operating

income. t is affected by many factors, including the firm's ability to

raise prices if costs increase, the extent to which sales can be

predicted, and operating leverage, which reflects the use of fixed

costs, or costs that do not decline with decreases in sales. f a firm

uses more operating leverage than an otherwise identical second firm,

then, other things held constant, its operating income and the rate of

return on assets will be less predictable, which suggests greater

business risk. The higher business risk would affect both bondholders

and stockholders, although the effect on bondholders is mitigated if the

firm uses relatively little debt. The first part of the +#- spreadsheetmodel illustrates this point.

enerally, higher operating leverage is correlated with higher

expected operating income and higher returns on invested capital.

enerally speaking, since more operating leverage means more risk, then

a firm would not increase its operating leverage /through capital

budgeting decisions0 unless that resulted in higher expected returns.

$owever, the analysis can be more complicated. n the preceding

paragraph we implicitly assumed that the firm's sales are independent of

its use of operating leverage. $owever, this might not be true. $igher

fixed costs are generally accompanied by lower variable costs, and

producers with low variable costs can, under certain conditions, achieve

a monopoly position by doing the following: /(0 -harge a price that is

above their own /low0 variable cost but below the variable costs of

other producers. /10 The high cost producers find themselves in a bind.

f they do not match the low*cost producers' prices, they will lose

market share, but if they do match this price, they will lose big*time

because they will not even be covering their variable costs. /20 Thus,

the high*cost producers can be driven from the market, leaving the low*

cost producer in a monopoly position in which it can raise its price and

. Answers and Solutions: 14 1

8/11/2019 im14


then earn very high rates of return. This situation is illustrated in

the model.

#ur conclusion from all this is that increasing operating leverage

generally increases both business risks and expected returns, but this

condition may not be true if other firms with low variable costs are

willing to use predatory pricing in order to achieve a monopoly

position. Therefore, it is important that strategic cost and market

conditions be analy&ed. Spreadsheet models can help in this regard.

()*1 3inancial leverage relates to the use of fixed charge securities /debt

and preferred stock0. Since the charges associated with debt and

preferred are fixed, they do not decline when sales and operating

profits decline. Therefore, the more debt and preferred the firm uses,

the greater the risk borne by the common stockholders

f the firm is exposed to a great deal of business risk, then its

operating income is sub4ect to uncertainty, and its investors will be

exposed to uite a bit of risk. f it then piles on a lot of financial

leverage, its already high business risk will be concentrated on its

stockholders, exposing them to a great deal of risk. +ondholders' risks

are also increased by both types of leverage. !ith more financial

leverage, there will be higher fixed charges to be paid out of whateveroperating income the firm has, and this means a lower times interest

earned ratio, which is one way of measuring the riskiness of debt. The

+#- shows, for an illustrative firm, how the T" is affected by

financial leverage.

5anagers can control their financial leverage, at least initially,

although leverage will change once the firm is up and running due to

changes in the market value of its debt and euity. 5anagers can also

control operating leverage to a certain extent, although in most

industries efficiency reuires at least a certain amount of operating

leverage. n the +#- model, we assume that the firm can operate with

either Plan A or Plan +, although we eventually assume that Plan A is

ruled out.

6egarding financial leverage, the firm can establish a target capital

structure and then plan to finance according to the target. $owever,

once the firm is in business, with a given amount of debt and some

number of shares outstanding, changes in its sales and earnings, and

also in capital market rates, can lead to departures from the target.

f things go well, the value of the euity will increase, and that will

lead to a lower market value debt ratio. Then, the firm could borrow,

use the funds to retire stock, and lower the debt ratio to the target

level. $owever, if conditions deteriorate, causing euity values go

down and the debt ratio goes up, it may be extremely difficult to get

back to the target. Still, in a planning sense, firms can control their

capital structures and financial leverage.

()*2 5odigliani and 5iller are 7obel Pri&e winning financial economists who

did pioneering work on capital structure theory. They concluded that,under a specific set of assumptions, including the assumption of no

taxes, capital structure is irrelevant because it has no effect on

either the !A-- or the value of a firm. !hen they add in corporate

taxes, their model leads to the conclusion that a firm's cost of capital

is minimi&ed, and its value maximi&ed, at (889 debt.

Answers and Solutions: 14 %

8/11/2019 im14


()*) f managers thought 55 were correcti.e., that their assumptions were

truethen they would use (889 debt. Since firms do not generally set

capital structures with (889 debt, this demonstrates that executives see

a problem with the pure 55 model. 55's assumptions are clearly not

correct, hence no one should expect the results of their model to be

correct in the real world. Still, the beauty of 55's work is that it

shows us what does cause capital structure to affect !A-- and value

things like taxes, brokerage costs, bankruptcy, and so on.

()*; The trade*off theory modifies 55 and brings in the effects of

bankruptcy, taxes, and so forth. !hereas 55 produce precise results

under specific assumptions, the trade*off theory produces nebulous,

imprecise results. Still, the trade*off results are more consistent

with real world observations than are the 55 results. See the graph on a

separate tab in the model /3igure 10 for the relationship between cost

of capital and capital structure nder the trade*off theory, and 3igure (

toward the bottom of the <5ain 5odel0 for value versus capital structure

under 55 and trade*off. !e don't show a graph of stock price versus

capital structure, but one of the data tables in the model shows that

the firm's stock price is maximi&ed at )89 debt, where the stock's price

is =(>.)>, up from =(; if no debt is used. n the case of an P#, whichis the first situation analy&ed in the model, the stock price is set at

=(; and then different percentages of the company are given to outside

investors to bring in the needed euity capital.

55's model leads to the conclusion that firms should finance entirely

with debt, whereas the tradeoff model reaches the more logical and

empirically correct conclusion that firms should not finance entirely

with debt, and that there is some optimal capital structure /which

varies from firm to firm depending on its operating conditions and its

access to debt and euity capital markets and the cost of those funds0.

()*> !hen companies finance with stock, they bring in new investors. f

management thinks that things in the future will be a lot better, they

would not want to bring in new euity investors, as this would mean more

shares outstanding and a dilution of the current euity. So, if

management sees good times ahead, the preferred financing vehicle is

debt. Therefore, if a firm announces that it plans to sell a new stock

issue, investors take this as a negative signala signal that things

might now go very well in the future. #n the other hand, the

announcement of a large debt offering is taken as a positive signal.

-onseuently, when a firm announces a significant new stock offering,

its price typically declines, whereas the announcement of a debt

offering is likely to lead to a stock price increase.

?nowing this, managers are reluctant to finance with new stock. This

influences dividend policy, causing companies to retain more earnings so

as to build euity that will support additional debt offerings at times

when new capital is needed. n the financial 4argon, a strong balance

sheet /i.e., a relatively low debt ratio0 provides financialflexibility, which means the ability to raise capital as debt if the

need arises.

The end result is that signaling considerations cause companies to

carry a lower debt ratio during <normal@ times than the trade*off theory

would suggest as the optimal.

. Answers and Solutions: 14 &

8/11/2019 im14


The differential knowledge between stockholders and managers that

leads to the signaling effect is called asymmetric information in the

finance literature.

()* The optimal capital structure is the debt%euity mix that causes the

firm's value to be maximi&ed. This same structure also minimi&ed the

!A--.

()*B The primary focus should be on the market value capital structure for a

number of reasons:

3irms are interested in maximi&ing market values, so decisions should

be based on market values and the effects of different actions on those

values.

+ook values measure historical costs, whereas market values reflect

expected cash flows. #ftentimes, book values are really meaningless in

the sense that an asset with a book value /historical cost0 of =(

million could actually be worth =8 or as much as =(88 million. 5arket

values are simply more relevant than book values for financial

management decision purposes.

5arket value weights should be used when determining the !A-- for use

in capital budgeting.+ook values are needed for tax purposes, but not for decision

purposes except as they affect cash flows due to tax considerations.

f a firm has primarily intangible assets such as intellectual

property, then its book value may be truly meaningless. #n the other

hand, if a firm's assets consist of tangible assets such as real estate

or inventories, and if those assets' market values are close to their

book values, then analysts may focus on book values because they are

easier to uantify. $owever, in this instance, it really doesn't matter

if one uses book or market values, because book values are a good proxy

for market values. $owever, when book and market values depart, no

competent analyst pays much attention to book value figures.

!e should note that the +#- model is set up entirely on the basis of

market values. !e first did the analysis using book values, but nothing

worked out right in the sense that the capital structure that minimi&ed

!A-- was not the capital structure that maximi&ed the firm's value and

stock price. t was easier to work with book values, but we 4ust didn't

get consistent and correct answers as to the appropriate capital

structure. So, we finally gave up and set up the model correctly, using

market values. !e felt that the added complexity was worth the effort.

!e should also note that technology is making it increasingly

feasible to <do things right.@ !ith "xcel, we set up an iterating model

that worked out the market value relationships. A few years ago it

would have been far more difficult to do this. Students coming out of

school today should be learning how to use the available technology to

make technically correct decisions.

3inally, we should note that the tab labeled 5*+ in the model /also

shown in the output at the end of these answers0 shows the errors in!A--s based on book values. f the market and book values of the firm's

securities are approximately eual, there is no error, but as market and

book values diverge, errors become uite large. Since the average SCP

company sells at about ) time its book value, this suggests that a !A--

based on a book value capital structure will be about 289 below the

correct !A--. This downward bias results from giving too little weight

to higher cost common euity.

Answers and Solutions: 14 4

8/11/2019 im14


()*D 3inance theory suggests that firms should use at least some debt in

order to gain the benefits of interest deductibility and perhaps other

advantages. 5ost firms do indeed use some debt. So, if a firm

announced a recapitali&ation in which it will issue some debt and use

the proceeds to retire common euity, investors would probably respond

favorably, raising the firm's stock price. #f course, there is such a

thing as too much leverage, but if the firm conducted an appropriate

analysis, it would probably be safe to assume that the stock price would

rise after the announcement.

. Answers and Solutions: 14 '

8/11/2019 im14


ANSWERS TO ENDO!C"APTER #$ESTIONS

()*( a. -apital structure is the manner in which a firm's assets are

financedE that is, the right*hand side of the balance sheet. -apital

structure is normally expressed as the percentage of each type of

capital used by the firm**debt, preferred stock, and common euity.

+usiness risk is the risk inherent in the operations of the firm,

prior to the financing decision. Thus, business risk is the

uncertainty inherent in a total risk sense, future operating income,

or earnings before interest and taxes /"+T0. +usiness risk is

caused by many factors. Two of the most important are sales

variability and operating leverage. 3inancial risk is the risk added

by the use of debt financing. Febt financing increases the

variability of earnings before taxes /but after interest0E thus,

along with business risk, it contributes to the uncertainty of net

income and earnings per share. +usiness risk plus financial risk

euals total corporate risk.

b. #perating leverage is the extent to which fixed costs are used in a

firm's operations. f a high percentage of a firm's total costs are

fixed costs, then the firm is said to have a high degree of operating

leverage. #perating leverage is a measure of one element of business

risk, but does not include the second ma4or element, sales

variability. 3inancial leverage is the extent to which fixed*income

securities /debt and preferred stock0 are used in a firm's capital

structure. f a high percentage of a firm's capital structure is in

the form of debt and preferred stock, then the firm is said to have a

high degree of financial leverage. The breakeven point is that level

of unit sales at which costs eual revenues. +reakeven analysis may

be performed with or without the inclusion of financial costs. f

financial costs are not included, breakeven occurs when "+T euals

&ero. f financial costs are included, breakeven occurs when "+T

euals &ero.

c. 6eserve borrowing capacity exists when a firm uses less debt under

<normal@ conditions than called for by the tradeoff theory. This

allows the firm some flexibility to use debt in the future when

additional capital is needed.

()*1 +usiness risk refers to the uncertainty inherent in pro4ections of

future 6#"G.

()*2 3irms with relatively high nonfinancial fixed costs are said to have a

high degree of operating leverage.

()*) #perating leverage affects "+T and, through "+T, "PS. 3inancial

leverage has no effect on "+T**it only affects "PS, given "+T.

()*; f sales tend to fluctuate widely, then cash flows and the ability to

service fixed charges will also vary. Such a firm is said to have high

business risk. -onseuently, there is a relatively large risk that the

Answers and Solutions: 14 (

8/11/2019 im14


firm will be unable to meet its fixed charges, and interest payments are

fixed charges. As a result, firms in unstable industries tend to use

less debt than those whose sales are sub4ect to only moderate

fluctuations.

()*> Public utilities place greater emphasis on long*term debt because they

have more stable sales and profits as well as more fixed assets. Also,

utilities have fixed assets which can be pledged as collateral.

3urther, trade firms use retained earnings to a greater extent, probably

because these firms are generally smaller and, hence, have less access

to capital markets. Public utilities have lower retained earnings

because they have high dividend payout ratios and a set of stockholders

who want dividends.

()* "+T depends on sales and operating costs. nterest is deducted from

"+T. At high debt levels, firms lose business, employees worry, and

operations are not continuous because of financing difficulties. Thus,

financial leverage can influence sales and costs, and hence "+T, if

excessive leverage is used.

()*B The tax benefits from debt increase linearly, which causes a continuousincrease in the firm's value and stock price. $owever, financial

distress costs get higher and higher as more and more debt is employed,

and these costs eventually offset and begin to outweigh the benefits of

debt.

. Answers and Solutions: 14 )

8/11/2019 im14


SO*$TIONS TO ENDO!C"APTER PROB*E+S

()*( a. $ere are the steps involved:

/(0 Fetermine the variable cost per unit at present, H:

Profit I P/J0 * 3- * H/J0

=;88,888 I /=(88,8880/;80 * =1,888,888 * H/;80

;8/H0 I =1,;88,888

H I =;8,888.

/10 Fetermine the new profit level if the change is made:

7ew profit I P1/J10 * 3-1 * H1/J10

I =D;,888/80 * =1,;88,888 * /=;8,888 * =(8,8880/80

I =(,2;8,888.

/20 Fetermine the incremental profit:

Profit I =(,2;8,888 * =;88,888 I =B;8,888.

/)0 "stimate the approximate rate of return on new investment:

6# I Profit%nvestment I =B;8,888%=),888,888 I 1(.1;9.

Since the 6# exceeds the (; percent cost of capital, this analysis

suggests that the firm should go ahead with the change.

Answers and Solutions: 14 ,

8/11/2019 im14


b. f we measure operating leverage by the ratio of fixed costs to total

costs at the expected output, then the change would increase

operating leverage:

#ld:0J/H3-

3-

+

I888,;88,1=888,888,1=

888,888,1=

+

I )).))9.

7ew:0J/H3-

3-

111

1

+

I888,B88,1=888,;88,1=

888,;88,1=

+

I ).(9.

The change would also increase the breakeven point:

#ld: J+" IHP

3

−

I888,;8=888,(88=

888,888,1=

−

I )8 units.

7ew: J+" I888,)8=888,D;=

888,;88,1=

−

I );.); units.

$owever, one could measure operating leverage in other ways, say by

degree of operating leverage:

#ld: F#K I30HP/J

0HP/J

−−

− I

888,888,1=0888,;8/=;8

0888,;8/=;8

−

I ;.8.

7ew: The new F#K, at the expected sales level of 8, is

888,;88,1=0888,;;/=A8

0888,)8=888,D;/=A8

−

− I 1.B;.

The problem here is that we have changed both output and sales price,

so the F#Ks are not really comparable.

c. t is impossible to state uneuivocally whether the new situation

would have more or less business risk than the old one. !e would

need information on both the sales probability distribution and the

uncertainty about variable input cost in order to make this

determination. $owever, since a higher breakeven point, other things

held constant, is more risky, the change in breakeven points**and

also the higher percentage of fixed costs**suggests that the new

situation is more risky.

. Answers and Solutions: 14 -

8/11/2019 im14


()*1 a. "xpected 6#" for 3irm -:

6#"- I /8.(0/*;.890 L /8.10/;.890 L /8.)0/(;.890

L /8.10/1;.890 L /8.(0/2;.890 I (;.89.

7ote: The distribution of 6#"- is symmetrical. Thus, the answer to

this problem could have been obtained by simple inspection.

Standard deviation of 6#" for 3irm -:

(1)818818)8018/(.80(8/1.808/).80(8/1.8018/(.8

(.808.(;8.1;/1.808.(;8.(;/).808.(;8.;/1.808.(;8.;/(.8

11111

1111

-

=++++=+++−+−=

+−+−+−+−−=σ

b. According to the standard deviations of 6#", 3irm A is the least

risky, while - is the most risky. $owever, this analysis does not

take into account portfolio effects**if -'s 6#" goes up when most

other companies' 6#"s decline /that is, its beta is negative0, its

apparent riskiness would be reduced.

c. 3irm A's σ6#" I σ+"P I ;.;9. Therefore, 3irm A uses no financial

leverage and has no financial risk. 3irm + and 3irm - have σ6#" M

σ+"P, and hence both use leverage. 3irm - uses the most leverage

because it has the highest σ6#" * σ+"P I measure of financial risk.

$owever, 3irm -'s stockholders also have the highest expected 6#".

()*2 a. #riginal value of the firm /F I =80:

H I F L S I 8 L /=(;0/188,8880 I =2,888,888.

#riginal cost of capital:

!A-- I wd rd/(*T0 L wers

I 8 L /(.80/(890 I (89.

!ith financial leverage /wdI2890:


I /8.20/90/(*8.)80 L /8.0/((90 I B.D>9.

+ecause growth is &ero, the value of the company is:

H I .286.214,348,3$0896.0

)40.01)(000,500($

WACC

)T1)(EBIT(

WACC

FCF=

−=

−= .

ncreasing the financial leverage by adding =D88,888 of debt results

in an increase in the firm's value from =2,888,888 to =2,2)B,1().1B>.

Answers and Solutions: 14 1.

8/11/2019 im14


b. Gsing its target capital structure of 289 debt, the company must have

debt of:

F I wd H I 8.28/=2,2)B,1().1B>0 I =(,88),)>).1B>.

Therefore, its debt value of euity is:

S I H N F I =1,2)2,;8.

Alternatively, S I /(*wd0H I 8./=2,2)B,1().1B>0 I =1,2)2,;8.

The new price per share, P, is:

P I OS L /F N F80%n8 I O=1,2)2,;8 L /=(,88),)>).1B> N 80%188,888

I =(>.)(.

c. The number of shares repurchased, Q, is:

Q I /F N F80%P I =(,88),)>).1B> % =(>.)( I >8,888.1;> ≈ >8,888.

The number of remaining shares, n, is:

n I 188,888 N >8,888 I ()8,888.

nitial position:

"PS I O/=;88,888 N 80/(*8.)80 % 188,888 I =(.;8.

!ith financial leverage:

"PS I O/=;88,888 N 8.8/=(,88),)>).1B>00/(*8.)80 % ()8,888

I O/=;88,888 N =8,2(1.;0/(*8.)80 % ()8,888

I =1;,B(1.; % ()8,888 I =(.B)1.

Thus, by adding debt, the firm increased its "PS by =8.2)1.

d. 289 debt: T" I

"+T I

5.312,70$

EBIT.

Probability T"

8.(8 / (.)10

8.18 1.B)

8.)8 .((

8.18 ((.2B

8.(8 (;.>)

The interest payment is not covered when T" R (.8. The probability

of this occurring is 8.(8, or (8 percent.

. Answers and Solutions: 14 11

8/11/2019 im14


()*) a. Present situation /;89 debt0:


I /8.;0/(890/(*8.(;0 L /8.;0/()90 I ((.1;9.

H I

1125.0

)15.01)(24.13($

WACC

)T1)(EBIT(

WACC

FCF −=

−= I =(88 million.

8 percent debt:


I /8.0/(190/(*8.(;0 L /8.20/(>90 I ((.D)9.

H I1194.0

)15.01)(24.13($

WACC

)T1)(EBIT(

WACC

FCF −=

−= I =D).1;; million.

28 percent debt:


I /8.20/B90/(*8.(;0 L /8.0/(290 I ((.()9.

H I1114.0

)15.01)(24.13($

WACC

)T1)(EBIT(

WACC

FCF −=

−= I =(8(.812 million.

()*; a. +"A's unlevered beta is bGIbK%/(L /(*T0/F%S00I(.8%/(L/(*8.)80/18%B800

I 8.B8.

b. bK I bG /( L /(*T0/F%S00.

At )8 percent debt: bK I 8.B /( L 8.>/)89%>8900 I (.1(B.

rS I > L (.1(B/)0 I (8.B19

c. !A-- I wd rd/(*T0 L wers

I /8.)0/D90/(*8.)0 L /8.>0/(8.B190 I B.>B29.

H I08683.0

)4.01)(933.14($

WACC

)T1)(EBIT(

WACC

FCF −=

−= I =(82.(BB million.

Answers and Solutions: 14 1%

8/11/2019 im14


()*> Tax rate I )89 r63 I ;.89

bG I (.1 r5 N r63 I >.89

3rom data given in the problem and table we can develop the following

table:

F%A "%A F%" rd rd/( N T0 Keveraged

betaa

rsb !A--c

8.88 (.88 8.8888 .889 ).189 (.18 (1.189 (1.189

8.18 8.B8 8.1;88 B.88 ).B8 (.2B (2.1B ((.;B

8.)8 8.>8 8.>>> (8.88 >.88 (.>B (;.8B ((.);

8.>8 8.)8 (.;888 (1.88 .18 1.1B (B.>B ((.D

8.B8 8.18 ).8888 (;.88 D.88 ).8B 1D.)B (2.(8

7otes:a These beta estimates were calculated using the $amada euation, b I

bGO( L /( N T0/F%"0.b These rs estimates were calculated using the -AP5, rs I r63 L /r5 N

r630b.c These !A-- estimates were calculated with the following euation:

!A-- I wd/rd0/( N T0 L /wc0/rs0.

The firm's optimal capital structure is that capital structure which

minimi&es the firm's !A--. "lliott's !A-- is minimi&ed at a capital

structure consisting of )89 debt and >89 euity. At that capital

structure, the firm's !A-- is ((.);9.

. Answers and Solutions: 14 1&

8/11/2019 im14


SO*$TION TO SPREADS"EET PROB*E+

()* The detailed solution for the problem is available both on the

instructor's resource -F*6#5 /in the file Solution for Ch 14 P7 Build a

Model.xls0 and on the instructor's side of the web site,

http://brigham.swcollege.com.

Answers and Solutions: 14 14

8/11/2019 im14


+INI CASE

ASSUME YOU HAVE JUST BEE H!"E# AS BUS!ESS MAA$E" O% &!''A&A(A)E* A &!''A

"ESTAU"AT (O)ATE# A#JA)ET TO )AM&US. THE )OM&AY+S EB!T ,AS -* (ASTYEA"* A# S!)E THE U!VE"S!TY+S E"O((MET !S )A&&E#* EB!T !S E0&E)TE# TO"EMA! )OSTAT 1! "EA( TE"MS2 OVE" T!ME. S!)E O E0&AS!O )A&!TA( ,!(( BE"E3U!"E#* &!''A&A(A)E &(AS TO &AY OUT A(( EA"!$S AS #!V!#E#S. THE

MAA$EMET $"OU& O,S ABOUT &E")ET O% THE STO)4* A# THE STO)4 !S T"A#E#! THE OVE"5THE5)OUTE" MA"4ET.

THE %!"M !S )U""ET(Y %!A)E# ,!TH A(( E3U!TY6 !T HAS 7* SHA"ESOUTSTA#!$6 A# & 8 -9 &E" SHA"E. ,HE YOU TOO4 YOU" MBA )O"&O"ATE %!A)E)OU"SE* YOU" !ST"U)TO" STATE# THAT MOST %!"MS+ O,E"S ,OU(# BE %!A)!A((YBETTE" O%% !% THE %!"MS USE# SOME #EBT. ,HE YOU SU$$ESTE# TH!S TO YOU" E, BOSS* HE E)OU"A$E# YOU TO &U"SUE THE !#EA. AS A %!"ST STE&* ASSUME THAT YOUOBTA!E# %"OM THE %!"M+S !VESTMET BA4E" THE %O((O,!$ EST!MATE# )OSTS O%#EBT %O" THE %!"M AT #!%%E"ET )A&!TA( ST"U)TU"ES:

%!A)E# ,!TH #EBT r;

5559 <.= <.> 7. 79.

!% THE )OM&AY ,E"E TO "E)A&!TA(!'E* #EBT ,OU(# BE !SSUE#* A# THE %U#S"E)E!VE# ,OU(# BE USE# TO "E&U")HASE STO)4. &!''A&A(A)E !S ! THE > &E")ETSTATE5&(US5%E#E"A( )O"&O"ATE TA0 B"A)4ET* !TS BETA !S 7.* THE "!S45%"EE "ATE!S ? &E")ET* A# THE MA"4ET "!S4 &"EM!UM !S ? &E")ET.

A. &"OV!#E A B"!E% OVE"V!E, O% )A&!TA( ST"U)TU"E E%%E)TS. BE SU"E TO!#ET!%Y THE ,AYS ! ,H!)H )A&!TA( ST"U)TU"E )A A%%E)T THE ,E!$HTE#

AVE"A$E )OST O% )A&!TA( A# %"EE )ASH %(O,S.

AS,E": T$" +AS- F"37T#7S A6":

/(0 H I HAKG" #3 365

/10 3-3 I 36"" -AS$ 3K#!

/20 !A-- I !"$T"F AH"6A" -#ST #3 -APTAK

/)0 6S A7F 6F A6" -#STS #3 ST#-? A7F F"+T

/;0 !" A7F !F A6" P"6-"7TA"S #3 T$" 365 T$AT A6" 37A7-"F !T$

ST#-? A7F F"+T.

T$" 5PA-T #3 -APTAK ST6G-TG6" #7 HAKG" F"P"7FS GP#7 T$" "33"-T #3

F"+T #7: !A-- A7F%#6 3-3.

F"+T$#KF"6S $AH" A P6#6 -KA5 #7 -AS$ 3K#!S 6"KATH" T#

ST#-?$#KF"6S. F"+T$#KF"6S' <3Q"F@ -KA5 7-6"AS"S 6S? #3

ST#-?$#KF"6S' <6"SFGAK@ -KA5, S# T$" -#ST #3 ST#-?, 6S, #"S GP.

Mini Case: 14 1'

8/11/2019 im14


365'S -A7 F"FG-T 7T"6"ST "QP"7S"S. T$S 6"FG-"S T$" TAQ"S PAF,

36""S GP 5#6" -AS$ 3#6 PA5"7TS T# 7H"ST#6S, A7F 6"FG-"S A3T"6*TAQ

-#ST #3 F"+T

F"+T 7-6"AS"S T$" 6S? #3 +A7?6GPT-, -AGS7 P6"*TAQ -#ST #3 F"+T,

6F, T# 7-6"AS".

AFF7 F"+T 7-6"AS" T$" P"6-"7T #3 365 37A7-"F !T$ K#!*-#ST F"+T

/!F0 A7F F"-6"AS"S T$" P"6-"7T 37A7-"F !T$ $$*-#ST "JGT /!"0.

T$" 7"T "33"-T #7 !A-- S G7-"6TA7, S7-" S#5" #3 T$"S" "33"-TS T"7F

T# 7-6"AS" !A-- A7F S#5" T"7F T# F"-6"AS" !A--.

AFFT#7AK F"+T -A7 A33"-T 3-3. T$" AFFT#7AK F"+T 7-6"AS"S T$"

P6#+A+KT #3 +A7?6GPT-. T$" F6"-T -#STS #3 37A7-AK FST6"SS

A6" K"AK 3""S, <36"@ SAK"S, "T-. T$" 7F6"-T -#STS A6" K#ST

-GST#5"6S, 6"FG-T#7S 7 P6#FG-THT #3 5A7A"6S A7F K7" !#6?"6S,

6"FG-T#7S 7 -6"FT /."., A--#G7TS PAA+K"0 #33"6"F + SGPPK"6S.

7F6"-T -#STS -AGS" 7#PAT T# # F#!7 FG" T# K#ST -GST#5"6S A7F F6#P

7 P6#FG-THT A7F -AGS"S T$" 7H"ST5"7T 7 -APTAK T# # GP FG" T#

7-6"AS"S 7 7"T #P"6AT7 !#6?7 -APTAK /A--#G7TS PAA+K" #"S GPAS SGPPK"6S T$T"7 -6"FT0.

AFFT#7AK F"+T -A7 A33"-T T$" +"$AH#6 #3 5A7A"6S. T -A7 -AGS"

6"FG-T#7S 7 A"7- -#STS, +"-AGS" F"+T <P6"*-#55TS,@ #6 <+#7FS,@

36"" -AS$ 3K#! 3#6 GS" 7 5A?7 7T"6"ST PA5"7TS. T$GS, 5A7A"6S

A6" K"SS K?"K T# !AST" 3-3 #7 P"6JGST"S #6 7#7*HAKG" AFF7

A-JGST#7S.

+GT T -A7 -AGS" 7-6"AS"S 7 #T$"6 A"7- -#STS. F"+T -A7 5A?"

5A7A"6S T## 6S?*AH"6S", -AGS7 <G7F"67H"ST5"7T@ 7 6S? +GT

P#STH" 7PH P6#"-TS.

T$"6" A6" AKS# "33"-TS FG" T# AS55"T6- 73#65AT#7 A7F S7AK7.

5A7A"6S ?7#! T$" 365'S 3GTG6" P6#SP"-TS +"TT"6 T$A7 7H"ST#6S.

T$GS, 5A7A"6S !#GKF 7#T SSG" AFFT#7AK "JGT 3 T$" T$#G$T T$"

-G66"7T ST#-? P6-" !AS K"SS T$A7 T$" T6G" HAKG" #3 T$" ST#-? /H"7

T$"6 7SF" 73#65AT#70. $"7-", 7H"ST#6S #3T"7 P"6-"H" A7

AFFT#7AK SSGA7-" #3 ST#-? AS A 7"ATH" S7AK, A7F T$" ST#-?

P6-" 3AKKS.

B. 172 ,HAT !S BUS!ESS "!S4@ ,HAT %A)TO"S !%(UE)E A %!"M+S BUS!ESS"!S4@

AS,E": +GS7S"SS 6S? S G7-"6TA7T A+#GT "+T. 3A-T#6S T$AT 73KG"7-"

+GS7"SS 6S? 7-KGF": G7-"6TA7T A+#GT F"5A7F /G7T SAK"S0EG7-"6TA7T A+#GT #GTPGT P6-"SE G7-"6TA7T A+#GT 7PGT -#STSE

P6#FG-T A7F #T$"6 TP"S #3 KA+KTE F"6"" #3 #P"6AT7 K"H"6A"

/F#K0.

Mini Case: 14 1(

8/11/2019 im14


B. 192 ,HAT !S O&E"AT!$ (EVE"A$E* A# HO, #OES !T A%%E)T A %!"M+S BUS!ESS"!S4@ SHO, THE O&E"AT!$ B"EA4 EVE &O!T !% A )OM&AY HAS %!0E#)OSTS O% -9* A SA(ES &"!)E O% -7* A# VA"!AB(ES )OSTS O% -7.

AS,E": #P"6AT7 K"H"6A" S T$" -$A7" 7 "+T -AGS"F + A -$A7" 7

JGA7TT S#KF. T$" $$"6 T$" P6#P#6T#7 #3 3Q"F -#STS !T$7 A365'S #H"6AKK -#ST ST6G-TG6", T$" 6"AT"6 T$" #P"6AT7 K"H"6A".

$$"6 #P"6AT7 K"H"6A" K"AFS T# 5#6" +GS7"SS 6S?, +"-AGS" A

S5AKK SAK"S F"-K7" -AGS"S A KA6"6 "+T F"-K7".

J S JGA7TT S#KF, 3 S 3Q"F -#ST, H S HA6A+K" -#ST, T- S T#TAK

-#ST, A7F P S P6-" P"6 G7T.

#P"6AT7 +6"A?"H"7 I J+"

J+" I 3 % /P N H0

"QA5PK": 3I=188, PI=(;, A7F HI=(8:

J+" I =188 % /=(; N =(80 I )8.

). O,* TO #EVE(O& A E0AM&(E ,H!)H )A BE &"ESETE# TO &!''A&A(A)ES MAA$EMET TO !((UST"ATE THE E%%E)TS O% %!A)!A( (EVE"A$E* )OS!#E" T,O HY&OTHET!)A( %!"MS: %!"M U* ,H!)H USES O #EBT %!A)!$* A#%!"M (* ,H!)H USES -7* O% 79 &E")ET #EBT. BOTH %!"MS HAVE-9* ! ASSETS* A > &E")ET TA0 "ATE* A# A E0&E)TE# EB!T O%-=*.

7. )OST"U)T &A"T!A( !)OME STATEMETS* ,H!)H STA"T ,!TH EB!T* %O" THET,O %!"MS.

AS,E": $"6" A6" T$" 3GKK -#5PK"T"F STAT"5"7TS:

365 G 365 K

ASS"TS =18,888 =18,888

"JGT =18,888 =(8,888

"+T = 2,888 = 2,888

7T /(190 8 (,188

"+T = 2,888 = (,B88

TAQ"S /)890 (,188 18

7 = (,B88 = (,8B8

). 9. O, )A()U(ATE "OE %O" BOTH %!"MS.

AS,E": 365 G 365 K +"P (;.89 (;.89

6# D.89 ((.)9

6#" D.89 (8.B9

T" ∞ 1.;×

Mini Case: 14 1)

8/11/2019 im14


8/11/2019 im14


E. O, )OS!#E" THE %A)T THAT EB!T !S OT 4O, ,!TH )E"TA!TY* BUT"ATHE" HAS THE %O((O,!$ &"OBAB!(!TY #!ST"!BUT!O:

E)OOM!) STATE &"OBAB!(!TY EB!T BA# .9 -9*

AVE"A$E . =*

$OO# .9 >*

"E#O THE &A"T A AA(YS!S %O" %!"MS U A# (* BUT A## BAS!) EA"!$&O,E" 1BE&2* "ETU" O !VESTMET 1"O!2* #E%!E# AS 1ET !)OME C!TE"EST2/1#EBT C E3U!TY2D* A# THE T!MES5!TE"EST5EA"E# 1T!E2"AT!O TO THE OUT)OME MEASU"ES. %!# THE VA(UES %O" EA)H %!"M !EA)H STATE O% THE E)OOMY* A# THE )A()U(ATE THE E0&E)TE# VA(UES.%!A((Y* )A()U(ATE THE STA#A"# #EV!AT!O A# )OE%%!)!ET O%

VA"!AT!O O% "OE. ,HAT #OES TH!S E0AM&(E !((UST"ATE ABOUT THE!M&A)T O% #EBT %!A)!$ O "!S4 A# "ETU"@

AS,E": $"6" A6" T$" P6# 3#65A 7-#5" STAT"5"7TS:

365 G 365 K

+AF AH. ##F +AF AH. ##F

P6#+. 8.1; 8.;8 8.1; 8.1; 8.;8 8.1;

"+T =1,888 =2,888 =),888 =1,888 =2,888 =),888

7T"6"ST 8 8 8 (,188 (,188 (,188

"+T =1,888 =2,888 =),888 = B88 =(,B88 =1,B88

TAQ"S /)890 B88 (,188 (,>88 218 18 (,(18

7 =(,188 =(,B88 =1,)88 = )B8 =(,8B8 =(,>B8

+"P (8.89 (;.89 18.89 (8.89 (;.89 18.89

6#- >.89 D.89 (1.89 >.89 D.89 (1.89

6#" >.89 D.89 (1.89 ).B9 (8.B9 (>.B9

T" ∞ ∞ ∞ (.× 1.;× 2.2×

"/+"P0 (;.89 (;.89

"/6#-0 D.89 D.89"/6#"0 D.89 (8.B9

σ6#- 1.(19 1.(19

σ6#" 1.(19 ).1)9

T$S "QA5PK" KKGST6AT"S T$AT 37A7-AK K"H"6A" -A7 7-6"AS" T$"

"QP"-T"F 6"TG67 T# ST#-?$#KF"6S. +GT, AT T$" SA5" T5", T 7-6"AS"S

T$"6 6S?.

• 365 K $AS A !F"6 6A7" #3 6#"s A7F A $$"6 STA7FA6F F"HAT#7

#3 6#", 7F-AT7 T$AT TS $$"6 "QP"-T"F 6"TG67 S A--#5PA7"F

+ $$"6 6S?. T# +" P6"-S":

σ6#" /G7K"H"6A"F0 I 1.(19, A7F σ6#" /K"H"6A"F0 I ).1)9.

T$GS, 7 A STA7F*AK#7" 6S? S"7S", 365 K S T!-" AS 6S? AS

365 G**TS +GS7"SS 6S? S 1.(1 P"6-"7T, +GT TS STA7F*AK#7"

6S? S ).1) P"6-"7T, S# TS 37A7-AK 6S? S ).1)9 * 1.(19 I

1.(19.

Mini Case: 14 1-

8/11/2019 im14


%. ,HAT #OES )A&!TA( ST"U)TU"E THEO"Y ATTEM&T TO #O@ ,HAT (ESSOS )ABE (EA"E# %"OM )A&!TA( ST"U)TU"E THEO"Y@ BE SU"E TO A##"ESS THE MM

MO#E(S.

AS,E": 55 T$"#6 +"7S !T$ T$" ASSG5PT#7 #3 U"6# TAQ"S. 55 P6#H", G7F"6

A H"6 6"ST6-TH" S"T #3 ASSG5PT#7S, T$AT A 365'S HAKG" SG7A33"-T"F + TS 37A7-7 5Q:

HK I HG.

T$"6"3#6", -APTAK ST6G-TG6" S 66"K"HA7T. A7 7-6"AS" 7 6#"

6"SGKT7 36#5 37A7-AK K"H"6A" S "QA-TK #33S"T + T$" 7-6"AS"

7 6S? /."., ?S0, S# !A-- S -#7STA7T.

55 T$"#6 KAT"6 7-KGF"S -#6P#6AT" TAQ"S. -#6P#6AT" TAQ KA!S 3AH#6

F"+T 37A7-7 #H"6 "JGT 37A7-7. !T$ -#6P#6AT" TAQ"S, T$"

+"7"3TS #3 37A7-AK K"H"6A" "Q-""F T$" 6S?S +"-AGS" 5#6" "+T

#"S T# 7H"ST#6S A7F K"SS T# TAQ"S !$"7 K"H"6A" S GS"F. 55 S$#!

T$AT:

HK I HG L TF.

3 TI)89, T$"7 "H"6 F#KKA6 #3 F"+T AFFS )8 -"7TS #3 "QT6A HAKG" T#

365.

5KK"6 KAT"6 7-KGF"F P"6S#7AK TAQ"S. P"6S#7AK TAQ"S K"SS"7 T$"

AFHA7TA" #3 -#6P#6AT" F"+T. -#6P#6AT" TAQ"S 3AH#6 F"+T 37A7-7

S7-" -#6P#6AT#7S -A7 F"FG-T 7T"6"ST "QP"7S"S, +GT P"6S#7AK TAQ"S

3AH#6 "JGT 37A7-7, S7-" 7# A7 S 6"P#6T"F G7TK ST#-? S

S#KF, A7F K#7*T"65 A7S A6" TAQ"F AT A K#!"6 6AT". 5KK"6'S

-#7-KGS#7S !T$ P"6S#7AK TAQ"S A6" T$AT T$" GS" #3 F"+T 37A7-7

6"5A7S AFHA7TA"#GS, +GT +"7"3TS A6" K"SS T$A7 G7F"6 #7K -#6P#6AT"

TAQ"S. 365S S$#GKF STKK GS" (889 F"+T. 7#T": $#!"H"6, 5KK"6

A6G"F T$AT 7 "JGK+6G5, T$" TAQ 6AT"S #3 5A67AK 7H"ST#6S !#GKF

AFGST G7TK T$"6" !AS 7# AFHA7TA" T# F"+T.

55 T$"#6 7#6"S +A7?6GPT- /37A7-AK FST6"SS0 -#STS, !$-$7-6"AS" AS 5#6" K"H"6A" S GS"F. AT K#! K"H"6A" K"H"KS, TAQ

+"7"3TS #GT!"$ +A7?6GPT- -#STS. AT $$ K"H"KS, +A7?6GPT- -#STS

#GT!"$ TAQ +"7"3TS. A7 #PT5AK -APTAK ST6G-TG6" "QSTS T$AT

+AKA7-"S T$"S" -#STS A7F +"7"3TS. T$S S T$" T6AF"*#33 T$"#6.

55 ASSG5"F T$AT 7H"ST#6S A7F 5A7A"6S $AH" T$" SA5" 73#65AT#7.

+GT 5A7A"6S #3T"7 $AH" +"TT"6 73#65AT#7. T$GS, T$" !#GKF S"KK

ST#-? 3 ST#-? S #H"6HAKG"F, A7F S"KK +#7FS 3 ST#-? S G7F"6HAKG"F.

7H"ST#6S G7F"6STA7F T$S, S# H"! 7"! ST#-? SAK"S AS A 7"ATH"

S7AK. T$S S S7AK7 T$"#6.

#7" A"7- P6#+K"5 S T$AT 5A7A"6S -A7 GS" -#6P#6AT" 3G7FS 3#6 7#7*

HAKG" 5AQ5U7 PG6P#S"S. T$" GS" #3 37A7-AK K"H"6A" +#7FS <36""

-AS$ 3K#!,@ A7F 3#6-"S FS-PK7" #7 5A7A"6S T# AH#F P"6?S A7F 7#7*

HAKG" AFF7 A-JGST#7S.

A S"-#7F A"7- P6#+K"5 S T$" P#T"7TAK 3#6 <G7F"67H"ST5"7T@. F"+T

7-6"AS"S 6S? #3 37A7-AK FST6"SS. T$"6"3#6", 5A7A"6S 5A AH#F

6S? P6#"-TS "H"7 3 T$" $AH" P#STH" 7PHS.

Mini Case: 14 %.

8/11/2019 im14


$. ,!TH THE ABOVE &O!TS ! M!#* O, )OS!#E" THE O&T!MA( )A&!TA(ST"U)TU"E %O" &!''A&A(A)E.

$. 172 %O" EA)H )A&!TA( ST"U)TU"E U#E" )OS!#E"AT!O* )A()U(ATE THE (EVE"E#

BETA* THE )OST O% E3U!TY* A# THE ,A)).

AS,E": 55 T$"#6 5PK"S T$AT +"TA -$A7"S !T$ K"H"6A". +G S T$" +"TA

#3 A 365 !$"7 T $AS 7# F"+T /T$" G7K"H"6"F +"TA. $A5AFA'S "JGAT#7

P6#HF"S T$" +"TA #3 A K"H"6"F 365: +K I +G O( L /( * T0/F%S0. 3#6

"QA5PK", T# 37F T$" -#ST #3 "JGT 3#6 !F I 189, !" 36ST GS"

$A5AFA'S "JGAT#7 T# 37F +"TA:

+K I +G O( L /( * T0/F%S0

I (.8 O( L /(*8.)0 /189 % B890

I (.(;

T$"7 GS" -AP5 T# 37F T$" -#ST #3 "JGT:

6S I 663 L +K /6P50

I >9 L (.(; />90 I (1.D9

!" -A7 6"P"AT T$S 3#6 T$" -APTAK ST6G-TG6"S G7F"6 -#7SF"6AT#7.

!F F%S +K 6S

89 8.88 (.888 (1.889

189 8.1; (.(;8 (1.D89

289 8.)2 (.1; (2.;)9

)89 8.> (.)88 ().)89

;89 (.88 (.>88 (;.>89

7"QT, 37F T$" !A--. 3#6 "QA5PK", T$" !A-- 3#6 !F I 189 S:

!A-- I !F /(*T0 6F L !" 6S

!A-- I 8.1 /( N 8.)0 /B90 L 8.B /(1.D90

!A-- I ((.1B9

T$"7 6"P"AT T$S 3#6 AKK -APTAK ST6G-TG6"S G7F"6 -#7SF"6AT#7.

!F 6F 6S !A--

89 8.89 (1.889 (1.889

189 B.89 (1.D89 ((.1B9

289 B.;9 (2.;)9 ((.8(9

)89 (8.89 ().)89 ((.8)9

;89 (1.89 (;.>89 ((.)89

Mini Case: 14 %1

8/11/2019 im14


$. 192 O, )A()U(ATE THE )O"&O"ATE VA(UE* THE VA(UE O% THE #EBT THAT ,!(( BE!SSUE#* A# THE "ESU(T!$ MA"4ET VA(UE O% E3U!TY.

AS,E": 3#6 "QA5PK" T$" -#6P#6AT" HAKG" 3#6 !F I 189 S:

H I 3-3 % /!A--*0

I8, S# 7H"ST5"7T 7 -APTAK S U"6#E S# 3-3 I 7#PAT I "+T /(*T0.7 T$S "QA5PK", 7#PAT I /=;88,8880/(*8.)80 I =288,888.

GS7 T$"S" HAKG"S, H I =288,888 % 8.((1B I =1,>;D,;).

6"P"AT7 T$S 3#6 AKK -APTAK ST6G-TG6"S H"S T$" 3#KK#!7 TA+K":

!F !A-- -#6P. HAKG"

89 (1.889 =1,;88,888

189 ((.1B9 =1,>;D,;)

289 ((.8(9 =1,1),D>

)89 ((.8)9 =1,(,2D(

;89 ((.)89 =1,>2(,;D

AS T$S S$#!S, HAKG" S 5AQ5U"F AT A -APTAK ST6G-TG6" !T$ 289F"+T.

$. 1=2 )A()U(ATE THE "ESU(T!$ &"!)E &E" SHA"E* THE UMBE" O% SHA"ES"E&U")HASE#* A# THE "EMA!!$ SHA"ES.

AS,E": 36ST,37F T$" F#KKA6 HAKG" #3 F"+T A7F "JGT. 3#6 "QA5PK", 3#6 !F

I 189, T$" F#KKA6 HAKG" #3 F"+T S:

F I !F H I 8.1 /=1,>;D,;)0 I =;2(,D(;.

!" -A7 T$"7 37F T$" F#KKA6 HAKG" #3 "JGT:

S I H N F

S I =1,>;D,;) * =;2(,D(; I =1,(1,>;D.

!" 6"P"AT T$S P6#-"SS 3#6 AKK T$" -APTAK ST6G-TG6"S.

!F F"+T, F ST#-? HAKG", S

89 =8 =1,;88,888

189 =;2(,D(; =1,(1,>>8

289 =B(,)2D =(,D8,2;

)89 =(,8B>,D; =(,>28,)2;

;89 =(,2(;,BD =(,2(;,BD

7#T": T$"S" A6" 6#G7F"FE S"" -$ () 57 -AS".QKS 3#6 3GKK

-AK-GKAT#7S.

7#T-" T$AT T$" HAKG" #3 T$" "JGT F"-K7"S AS 5#6" F"+T S SSG"F,

+"-AGS" F"+T S GS"F T# 6"PG6-$AS" ST#-?. +GT T$" T#TAK !"AKT$ #3

S$A6"$#KF"6S S T$" HAKG" #3 ST#-? A3T"6 T$" 6"-AP PKGS T$" -AS$

6"-"H"F 7 6"PG6-$AS", A7F T$S T#TAK #"S GP /T S "JGAK T#

-#6P#6AT" HAKG" #7 "A6K"6 SKF"0.

Mini Case: 14 %%

8/11/2019 im14


T$" 365 SSG"S F"+T, !$-$ -$A7"S TS !A--, !$-$ -$A7"S HAKG".

T$" 365 T$"7 GS"S F"+T P6#-""FS T# 6"PG6-$AS" ST#-?. T$" ST#-?

P6-" -$A7"S A3T"6 F"+T S SSG"F, +GT F#"S 7#T -$A7" FG67 A-TGAK

6"PG6-$AS" /#6 A6+T6A" S P#SS+K"0. T$" ST#-? P6-" A3T"6 F"+T S

SSG"F +GT +"3#6" ST#-? S 6"PG6-$AS"F 6"3K"-TS S$A6"$#KF"6 !"AKT$,

!$-$ S T$" SG5 #3 T$" ST#-? A7F T$" -AS$ PAF 7 6"PG6-$AS".

3#6 "QA5PK", T# 37F T$" ST#-? P6-" 3#6 !F I 189, K"T F8 A7F 78

F"7#T" F"+T A7F #GTSTA7F7 S$A6"S +"3#6" T$" 6"-AP. F * F8 S "JGAK

T# -AS$ T$AT !KK +" GS"F T# 6"PG6-$AS" ST#-?. S L /F * F80 S T$"

!"AKT$ #3 S$A6"$#KF"6S' A3T"6 T$" F"+T S SSG"F +GT 55"FAT"K

+"3#6" T$" 6"PG6-$AS". !" -A7 "QP6"S T$" ST#-? P6-" P"6 S$A6" P6#6

T# T$" 6"PG6-$AS", P, 3#6 !F I 189, AS:

P I OS L /F N F80%78.

P I O=1,(1,>>8 L /=;2(,D(; N 80 % (88,888

P I =1>.;D> P"6 S$A6".

T$" 7G5+"6 #3 S$A6"S 6"PG6-$AS"F S:

V 6"PG6-$AS"F I /F * F80 % P V 6"P. I /=;2(,D(; N 80 % =1>.;D>

I 18,888.

T$" 7G5+"6 #3 6"5A77 S$A6"S A3T"6 T$" 6"PG6-$AS" S:

V 6"5A77 I 7 I S % P

7 I =1,(1,>>8 % =1>.;D>

I B8,888.

!" -A7 APPK T$S SA5" P6#-"FG6" T# AKK T$" -APTAK ST6G-TG6"S G7F"6

-#7SF"6AT#7.

V S$A6"S V S$A6"S

!F P 6"PG6-$. 6"5A77

89 =1;.88 8 (88,888

189 =1>.>8 18,888 B8,888

289 =1.1; 28,888 8,888

)89 =1.( )8,888 >8,888

;89 =1>.21 ;8,888 ;8,888

H. )OS!#E"!$ O(Y THE )A&!TA( ST"U)TU"ES U#E" AA(YS!S* ,HAT !S&!''A&A(A)E+S O&T!MA( )A&!TA( ST"U)TU"E@

AS,E": T$" #PT5AK -APTAK ST6G-TG6" S 3#6 !F I 289. T$S H"S T$"

$$"ST -#6P#6AT" HAKG", T$" K#!"ST !A--, A7F T$" $$"ST ST#-? P6-"

P"6 S$A6". +GT 7#T-" T$AT !F I )89 S H"6 S5KA6 T# T$" #PT5AKS#KGT#7E 7 #T$"6 !#6FS, T$" #PT5AK 6A7" S P6"TT 3KAT.

Mini Case: 14 %&

8/11/2019 im14


!. ,HAT OTHE" %A)TO"S SHOU(# MAA$E"S )OS!#E" ,HE SETT!$ THE TA"$ET)A&!TA( ST"U)TU"E@

AS,E": 5A7A"6S S$#GKF AKS# -#7SF"6 T$" F"+T 6AT#S #3 #T$"6 365S 7 T$"

7FGST6, P6# 3#65A -#H"6A" 6AT#S AT F33"6"7T -APTAK ST6G-TG6"S

G7F"6 F33"6"7T "-#7#5- S-"7A6#S, K"7F"6 A7F 6AT7 A"7-ATTTGF"S /."., T$" 5PA-T #7 +#7F 6AT7S0, 6"S"6H" +#66#!7

-APA-T, T$" "33"-TS #7 -#7T6#K /."., F#"S T$" -APTAK ST6G-TG6"

5A?" T "AS"6 #3 $A6F"6 3#6 A7 #GTSF"6 T# TA?" #H"6 T$" 3650, T$"

365'S TP"S #3 ASS"TS /."., A6" T$" TA7+K", A7F $"7-" SGTA+K"

AS -#KKAT"6AKW8, A7F T$" 365'S P6#"-T"F TAQ 6AT"S.

Mini Case: 14 %4

im14

Documents

Transcript of im14