Test Bank and Instructor Resources for Corporate Finance, 5th Edition (Plus the Core Edition)

Features


About the book

Methodology that connects theory to practice

  • The Law of One Price: A Unifying Principle of Valuation. The Law of One Price is used as a framework, reflecting the modern idea that the absence of arbitrage is the unifying concept in valuation. This theme is introduced in Chapter 3, revisited in each Part Opener, and integrated throughout. It connects theory to practice, and unifies what might appear to students as disparate topics that comprise the course syllabus.
  • Options for Teaching Risk and Return. Chapter 3 briefly introduces the concept of risk and return so that it can be used in early chapters. Later, Part IV is flexible and allows instructors to opt for brief or comprehensive coverage of the topic.
  • Emphasis of Capital Budgeting and Valuation. Capital budgeting and valuation is presented in two distinct stages. In Chapter 8, the first stage focuses on cash flows, while the second stage focuses on capital budgeting and valuation in the real world in Chapter 18 and the capstone Chapter 19.
  • Study aids with a practical focus. To be successful, students need to master the core concepts and learn to solve problems that today's practitioners face.
    • Common Mistakes boxes alert students to frequently made mistakes stemming from misunderstanding core concepts and calculations -- in the classroom and in the field.
    • Worked examples accompany every important concept using a step-by-step procedure that models the solution and process.
  • Corporate Finance: The Core features real companies, leaders, and practices:
    • New - Six interviews with notable practitioners, such as Janet Yellen, Susan Athey, and Anne Martin, highlight leaders in the field and address the effects of the financial crisis and ongoing European sovereign debt crisis. Nobel Prize boxes reflect recent prizes awarded for finance.
    • Updated - General Interest boxes highlight timely material from financial publications about  business problems, real-company practices, and the latest tax rates.
    • New and Updated - Global Financial Crisis boxes examine individuals and companies in crisis around the world and include updated discussion on The Dodd-Frank Act’s implementation and relevancy.  
  • Updated - Berk and DeMarzo introduce recent advances in financial research, data, events, and technologies, including:
    • Updates consistent with the Tax Cut and Jobs Act of 2017
    • Updated discussions of fintech, cryptocurrencies, blockchain, and capital budgeting
  • New discussion on debt and taxes, and expanded information on international corporate finance

Built-in tools to encourage students to ‘think finance’

  • Updated - Personal Finance examples demonstrate how students can apply managerial finance concepts, tools, and techniques to their own personal finance decisions.
  • Nobel Prize boxes reflect recent Nobel prizes awarded for material covered in the text.
  • A simplified presentation of mathematics. One of the hardest parts of learning finance is mastering the jargon, math, and non-standardized notation. Corporate Finance: The Core systematically uses the following:
    • Updated - Chapter-Opening notation boxes define the variables and acronyms used in the chapter and serve as a 'legend' for students' reference.
    • Timelines are emphasized as an important first step in solving every problem that involves cash flows.
    • Numbered and labeled equations. The first time a full equation is given in notation form it is numbered. Key equations are titled and revisited in the summary and in end papers.
  • Practice finance to learn finance. Working problems are the proven way to cement and demonstrate an understanding of finance.
    • Updated - End-of-Chapter Excel Projects exercises help students gain important statistical skills and become more proficient in Excel. Excel exercises with an icon are assignable and auto-graded in MyLab Finance.
    • Updated - Concept Check questions at the end of each section enable students to test their understanding and target areas for further review.
    • Updated - End-of-chapter problems (and solutions) written by Jonathan Berk and Peter DeMarzo offer instructors the opportunity to assign accurate, first-rate problems that are consistent with chapter content.
      • Updated - Data Cases present in-depth business scenarios with questions to guide students' analysis. Many questions involve the use of internet resources and Excel. Cases on bitcoin, JMP, and more have been added to the 5th Edition.


 Table of Contents

PART 1: INTRODUCTION

1. The Corporation and Financial Markets

2. Introduction to Financial Statement Analysis

3. Financial Decision Making and the Law of One Price

PART II: TIME, MONEY, AND INTEREST RATES

4. The Time Value of Money

5. Interest Rates

6. Valuing Bonds

PART III: VALUING PROJECTS AND FIRMS

7. Investment Decision Rules

8. Fundamentals of Capital Budgeting

9. Valuing Stocks

PART IV: RISK AND RETURN

10. Capital Markets and the Pricing of Risk

11. Optimal Portfolio Choice and the Capital Asset Pricing Model

12. Estimating the Cost of Capital

13. Investor Behavior and Capital Market Efficiency

PART V: CAPITAL STRUCTURE

14. Capital Structure in a Perfect Market

15. Debt and Taxes

16. Financial Distress, Managerial Incentives, and Information

17. Payout Policy

PART VI: ADVANCED VALUATION

18. Capital Budgeting and Valuation with Leverage

19. Valuation and Financial Modeling: A Case Study

PART VII: OPTIONS

20. Financial Options

21. Option Valuation

22. Real Options

PART VIII: LONG-TERM FINANCING

23. Raising Equity Capital

24. Debt Financing

25. Leasing

PART IX: SHORT-TERM FINANCING

26. Working Capital Management

27. Short-Term Financial Planning

PART X: SPECIAL TOPICS

28. Mergers and Acquisitions

29. Corporate Governance

30. Risk Management

31. International Corporate Finance


What resources are included in this purchase?


  • Instructor's Resource Manual
  • Instructor's Solutions Manual
  • Solutions Manual Excel Update for CH8 & CH9
  • Test Bank - Word & PDF

Random Sample of the Test Bank

Corporate Finance, 5e (Berk/DeMarzo)

Chapter 3   Financial Decision Making and the Law of One Price

 

3.1   Valuing Decisions

 

1) Due to a pre-existing contract, Recycle America Inc. has the opportunity to acquire 10,000 pounds of scrap aluminum and 2500 pounds of scrap lead for $10,750. If the current market price for scrap aluminum is $0.83 per pound and the current market price for lead is $1.06 per pound, then the added benefit (cost) to you if you acquire this metal is:

A) ($200).

B) $200.

C) ($1925).

D) $1925.

Answer:  B

Explanation:  Added Benefit = 10,000 × $0.83 + 2500 × $1.06 - $10,750 = $200

Diff: 1

Section:  3.1 Valuing Decisions

Skill:  Analytical

 

2) Which of the following statements regarding the valuing of costs and benefits is NOT correct?

A) The first step in evaluating a project is to identify its costs and benefits.

B) In the absence of competitive markets, we can use one-sided prices to determine exact cash values.

C) Competitive market prices allow us to calculate the value of a decision without worrying about the tastes or opinions of the decision maker.

D) Because competitive markets exist for most commodities and financial assets, we can use them to determine cash values and evaluate decisions in most situations.

Answer:  B

Diff: 2

Section:  3.1 Valuing Decisions

Skill:  Conceptual

 

3) Recycle America Inc. has the opportunity to trade 8000 pounds of plastic pellets made from recycled soda bottles for 5000 pounds of aluminum cans. If the current market price of scrap aluminum is $0.83 per pound and the current market price for plastic pellets is $0.57 per pound, then the added benefit (cost) of making this trade is:

A) ($410).

B) $410.

C) ($780).

D) $780.

Answer:  A

Explanation:  Added Benefit (cost) = 5000 × $0.83 - 8000 × $0.57 = -$410

Diff: 1

Section:  3.1 Valuing Decisions

Skill:  Analytical

 


 

Use the information for the question(s) below.

 

Alaska North Slope Crude Oil (ANS)

   $71.75/Bbl

West Texas Intermediate Crude Oil (WTI)

       $73.06/Bbl

 

As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS) crude oil.  Because of its lower sulfur content, you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI) crude.

 

4) Another oil refiner is offering to trade you 10,150 Bbls of Alaska North Slope (ANS) crude oil for 10,000 Bbls of West Texas Intermediate (WTI) crude oil. Assuming you currently have 10,000 Bbls of WTI crude, the added benefit (cost) to you if you take the trade is closest to:

A) ($1400).

B) $1400.

C) ($3908).

D) $3908.

Answer:  B

Explanation:  Total Benefits

 

No trade and refine WTI crude (base case)

10,000 Bbls × $77 of gasoline/Bbl = $770,000

 

Trade WTI for ANS crude

10,150 Bbls × $76 of gasoline/Bbl = $771,400

 

Added Benefits = Total Benefits - Base Case

 

Trade WTI for ANS crude

= $771,400 - $770,000 = $1400

Diff: 2

Section:  3.1 Valuing Decisions

Skill:  Analytical

 


 

5) Assuming you currently have 10,000 Bbls of WTI crude, the added benefit (cost) to you if you were to sell the 10,000 Bbls of WTI crude and use the proceeds to purchase and refine ANS crude is closest to:

A) ($1400).

B) $1400.

C) ($3908).

D) $3908.

Answer:  D

Explanation:  Total Benefits

 

No trade and refine WTI crude (base case)

10,000 Bbls × $77 of gasoline/Bbl = $770,000

 

Sell WTI and use proceeds to buy ANS

10,000 Bbls WTI × $73.06/Bbl = $730,600

Buy ANS crude

$730,600/$71.75/Bbl ANS = 10,182.57 or approx 10,183 Bbls ANS

10,183 Bbls × $76 of gasoline/Bbl = $773,908

 

Added Benefits = Total Benefits - Base Case

 

Sell WTI and use proceeds to buy ANS

= $773,908 - $770,000 = $3908

Diff: 2

Section:  3.1 Valuing Decisions

Skill:  Analytical

 

6) Assuming you just purchased 10,000 Bbls of WTI crude at the current market price, the added benefit (cost) to you if you were to refine this crude oil and sell the unleaded gasoline is closest to:

A) $730,600.

B) $39,400.

C) $770,000.

D) -$39,400.

Answer:  B

Explanation:   Benefits

10,000 Bbls × $77/Bbl = $770,000

Costs

10,000 Bbls × $73.06/Bbl = $730,600

Added Benefit

$770,000 - $730,600 = $39,400

Diff: 1

Section:  3.1 Valuing Decisions

Skill:  Analytical

Test Bank and Instructor Resources for Corporate Finance, 5th Edition (Plus the Core Edition)

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