【正文】 Chapter 01 Goals and Governance of the Corporation 11 169。 2020 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Solutions to Chapter 1 Goals and Governance of the Corporation 1. Investment decisions: ? Should a new puter be purchased? ? Should the firm develop a new drug? ? Should the firm shut down an unprofitable factory? Financing decisions: ? Should the firm borrow money from a bank or sell bonds? ? Should the firm issue preferred stock or mon stock? ? Should the firm buy or lease a new machine that it is mitted to acquiring? Est time: 01–05 2. A corporation is a distinct legal entity, separate from its owners (., stockholders). The stockholders have limited liability for the debts and other obligations of the corporation. The liability of the individual stockholder is generally limited to the amount of the stockholder’s investment in the shares of the corporation. Creation of a corporation is a legal process that requires the preparation of articles of incorporation. On the other hand, a sole proprietorship is not distinct from the individual who operates the business. Therefore, the sole proprietor (., the individual) directly owns the business assets, manages the business, and is personally responsible for the debts of the sole proprietorship. Est time: 01–05 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. Est time: 01–05 Chapter 01 Goals and Governance of the Corporation 12 169。 2020 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 4. The individual stockholders of a corporation (., the owners) are legally distinct from the corporation itself, which is a separate legal entity. Consequently, the stockholders are not personally liable for the debts of the corporation。 the stockholders’ liability for the debts of the corporation is limited to the investment each stockholder has made in the shares of the corporation. Est time: 01–05 5. Double taxation means that a corporation’s ine is taxed first at the corporate tax rate, and then, when the ine is distributed to shareholders as dividends, the ine is taxed again at each shareholder’s personal tax rate. Est time: 01–05 6. a. A share of stock financial b. A personal IOU financial c. A trademark real d. A truck real e. Undeveloped land real f. The balance in the firm’s checking account financial g. An experienced and hardworking sales force real h. A bank loan agreement financial 7. b and c. Est time: 01–05 8. The objective of value maximization makes sense because access to modern financial markets and institutions gives shareholders the flexibility to manage their own savings and consumption plans. The corporation’s financial managers therefore need only be concerned with efforts to increase market value. Riskaverse shareholders, for example, can easily switch to less risky assets offered in financial markets when the firm takes on more highrisk projects. Est time: 01–05 Chapter 01 Goals and Governance of the Corporation 13 169。 2020 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 9. A corporation might cut its labor 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, and the market value of the firm, will decrease in anticipation of these problems. Similarly, a corporation can boost profits over the short term by using less costly materials even if this reduces the quality of the product. Once customers catch on, sales will decrease and profits will fall in the future. The stock price will fall. The moral of these examples is that, because stock prices reflect present and future profitability, the corporation should not necessarily sacrifice future prospects for shortterm gains. Est time: 01–05 10. Financial managers refer to the opportunity cost of capital because corporations increase value for their shareholders only by accepting all investment projects that earn more than this rate. If the pany earns below this rate, the market value of the pany’s stock falls and stockholders look for other places to invest. To find the opportunity cost of capital for a safe investment, managers and investors look at current interest rates on safe debt securities, such as . Treasury debt. Est time: 01–05 11. Agency costs are caused by conflicts of interest between managers and shareholders, who are the owners of the firm. In most large corporations, the principals (., the stockholders) hire the agents (., managers) to act on behalf of the principals in making many of the major decisions affecting the corpor