公司理财全书课后答案及人大金融考研(7)

CONCEPT QUESTIONS – CHAPTER 25

25.1 · What is a forward contract?

An agreement to trade at a set price in the future.

· Give examples of forward contracts in your life.

A forward contract is formed when you contract an artisan to construct a banjo and agree to pay him $1,200 on delivery.

25.2 · What is a futures contract?

Futures contracts are like forward contracts except that: 1. They are traded on organized exchanges.

2. They let the seller choose when to make delivery on any day during the delivery month. 3. They are marked to market daily.

· How is a futures contract related to a forward contract?

In both contracts, it is the obligation of both the buyer and seller to settle the contract at the future date.

· Why do exchanges require futures contracts to be marked to the market?

Because there is no accumulation of loss, the mark to the market convention reduces the risk of default.

25.3 · Define short and long hedges.

A short futures hedge involves selling a futures contract. A long futures hedge involves bung a futures contract.

· Under what circumstances is each of the two hedges used?

Short hedges are used when you will be making delivery at a future date and wish to minimize the risk of a drop in price. Long hedges are used when you must purchase at a future date and wish to minimize the risk of a rise in price.

· What is a rolling stock strategy?

A rolling stock strategy involves bung a short-term futures contract and simultaneously selling a long-term futures contract. After the short-term elapses, the rolling stock involves bung another short-term futures contract. The strategy is implemented over a series of short-term contracts.

25.4 · How are forward contracts on bonds priced?

The same as any other cash flow stream – as the sum of discounted cash flows: P FORW.CONT= (1 + r1)[åt=1 (It/(1+rt)t + PAR/(1 + rT)T]

· What are the differences between forward contracts on bonds and futures contracts on bonds?

Futures contracts on bonds have the following characteristics:

1. They are traded on organized exchanges.

2. The seller can make delivery on any day during the month. 3. They are marked to market daily.

· Give examples of hedging with futures contracts on bonds.

Your partnership has just leased commercial space in a downtown hotel to a department store chain. The lessee has agreed to pay $1 million per year for 8 years. You can hedge the risk of a rise in inflation (and hence a fall in the value of the lease contract) over this period by forming a short hedge in the T-bond futures market.

25.5 · What is duration?

The weighted average maturity of a cash flow stream in present value terms.

· How is the concept of duration used to reduce interest rate risk?

By matching the duration of financial assets and liabilities, a change in interest rates has the same impact on them value of the assets and liabilities.

25.6 · Show that a currency swap is equivalent to a series of forward contracts.

Assume the swap is for five year at a fixed term of 100 million DM for $50 million each year. This is equivalent to a series of forward contracts. In year one, for example, it is equivalent to a one-year forward contract of 100 million DM at 2 DM/$.

CONCEPT QUESTIONS – CHAPTER 26

26.1 · What are the two dimensions of the financial-planning process? The time frame and the level of aggregation.

· Why should firms draw up financial plans? It accomplishes various goals:

1. It improves interactions between investment proposals for the different operating activities of the firm.

2. It provides opportunities for the firm to work through various investment and financial alternatives. 3. It provides greater flexibility. 4. It avoids surprises.

· When might the goals of growth and value maximization be in conflict and when would they be aligned?

They might be in conflict if management is willing to accept negative NPV projects just for the sake of growth. They would be aligned if growth is an indeterminate goal that leads to higher value.

· What are the determinants of growth? 1. Profit margin 2. Asset utilization 3. Payout ratio 4. Debt ratio

CONCEPT QUESTIONS – CHAPTER 27

27.2 · What is the difference between net working capital and cash? Net working capital includes not only cash, but also other current assets minus current liabilities.

· Will net working capital always increase when cash increases? No. There are transactions such as collection of accounts receivable that increase cash but leave net working capital unchanged. Any transaction that will increase cash but produce a corresponding decrease in another current asset account or an increase in a current liability will have the same effect.

· List the potential uses of cash. 1. Acquisition of capital

2. Acquisition of marketable securities 3. Acquisition of working capital 4. Payment of dividends 5. Retirement of debt

6. Payment for labor, management and services rendered

· List the potential sources of cash. 1. Sale of services or merchandise 2. Collection of accounts receivable 3. Issuance of debt or stock 4. Sale of marketable securities 5. Sale of fixed assets 6. Short-term bank loans

7. Increased accrued expenses, wages, or taxes.

27.3· What does it mean to say that a firm has an inventory-turnover ratio of four?

It means that on average the inventory is kept on hand for (365 days per year/4

times per year) = 91.25 days.

hDescribe operating cycle and cash cycle. What are the differences between them?

The operating cycle is the period of time from the acquisition of raw material

until the collection of cash from sales. It includes conversion of raw materials

into finished goods, inventories, sales and collection of accounts receivable. The

cash cycle is the period of time from the cash payment for raw materials to the

collection of cash. The difference between the two is the accounts payable stage,

the time between the acquisition of raw materials and the cash payment for them.

27.4· What keeps the real world from being an ideal on where net working capital could always be zero?

A long-term rise is sales level will result in permanent investment in current

assets. In addition, any day-to-day and month-to-month fluctuation in the level

of sales will produce a nonzero NWC.

· What considerations determine the optimal compromise between flexible

and restrictive net-working-capital policies?

1. Cash reserves: How much cash does management want? 2. Matching of asset and liability maturity (maturity hedging) 3. Term structure: The difference between short-term and long-term interest rates

27.5 · How would you conduct a sensitivity analysis for Fun Toys’ net cash balance?

By determining the net cash balance under different scenario assumptions – changing factors that will affects net cash balance and figuring out the result.

· What could you learn from such an analysis?

It will give you an idea of what the range of net cash balances will be under the different scenarios and how sensitive the net cash balance is to each of the factors that affect it.

27.6 · What are the two basic forms of short-term financing? Unsecured bank borrowing and secured bank borrowing.

· Describe two types of secured loans.

1. Accounts receivable financing. In this type of borrowing, accounts receivable

are either assigned or factored. In the latter case receivables are actually sold at a discount.

2. Trust receipt. This is one of the three types of inventory loans in which the

borrower holds the inventory in “trust” for the lender.

CONCEPT QUESTIONS – CHAPTER 28

28.1 · What is the transactions motive, and how does it lead firms to hold cash?

It is the necessity to hold cash for disbursements to pay wages, trade debts, taxes and dividends. A firm that does not have cash for these transactions will not be able to meet its obligations. Because cash inflows and outflows are seldom synchronized, firms need cash balances to serve as a buffer.

· What is a compensating balance?

It is the amount of cash banks require firms to keep permanently in their accounts to compensate the bank for services rendered.

28.2 · What is a target cash balance?

It is a firm’s desired level of cash holdings to satisfy the transactions and compensating balance needs.

· What are the strengths and weaknesses of the Baumol model and the Miller- Orr model?

The Baumol model is a very simple and straightforward model with sensible conclusions, but it assumes a constant disbursement rate, lack of cash receipts during the projected period, and makes no

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