Foundations of Investments
1st Edition
by Troy Adair
Complete Chapter Solutions Manual
are included (Ch 1 to 17)
** Immediate Download
** Swift Response
** All Chapters included
** Cases / Exercises and Problems
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 01: Introduction to Investments
Solution and Answer Guide
Adair/Nofsinger, Foundations of Investments, 1e, Chapter 01: Introduction to
Investments
Table of Contents
Questions .......................................................................................................................................... 2
Case Study ......................................................................................................................................... 7
1
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 01: Introduction to Investments
Questions
1. Real vs. Financial Assets. Compare and contrast real assets with financial assets.
(LO 1-1)
Answer:
Real assets are assets that either contribute to production or create income or
wealth. Most real assets have a physical existence, with the most common examples
being real estate and land, machinery, precious metals, and commodities. However,
certain intangible assets, such as patents, trademarks, and intellectual property, can
also create income, so they are considered real assets, too.
Financial assets are nonphysical assets whose values are derived from either a
contractual claim on real assets or the cash flows produced by those real assets.
Examples of financial assets include stocks, bonds, cash, bank deposits, certificate of
deposits (CDs), loans made, corporate receivables, derivative securities, and
cryptocurrencies.
The difference between real and financial assets is that real assets are used to
produce economic output, while financial assets serve to allocate how that output is
divided up.
2. Capital Flow: Corporate vs. Investor View. Regarding the flow of capital between
investors, corporations, and the government, how does the view of the corporation
differ from the view of the investor? (LO 1-2)
Answer:
Investors provide money to companies as capital. The companies use that capital to
invest in projects. When the projects return cash flows to the firm, any profits are
usually subject to taxation by federal, state, and/or local governments. Some of the
remaining after-tax profits are retained in the firm to fund future operations and
the rest are paid out to investors.
The corporation view of this system focuses on decisions concerning (1) the form
and amount of funding received from investors, (2) which projects to put the funds
in, (3) how to manage taxes, and (4) how much of the revenues of existing projects
to keep versus paying back the firm’s investors.
The investors view of this system focus on decisions such as (1) which firms and
what types of financial instruments to invest in, (2) what terms and maturities of
return cash flows to seek, and (3) how to best manage the timing and amounts of
taxes paid.
2
1st Edition
by Troy Adair
Complete Chapter Solutions Manual
are included (Ch 1 to 17)
** Immediate Download
** Swift Response
** All Chapters included
** Cases / Exercises and Problems
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 01: Introduction to Investments
Solution and Answer Guide
Adair/Nofsinger, Foundations of Investments, 1e, Chapter 01: Introduction to
Investments
Table of Contents
Questions .......................................................................................................................................... 2
Case Study ......................................................................................................................................... 7
1
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 01: Introduction to Investments
Questions
1. Real vs. Financial Assets. Compare and contrast real assets with financial assets.
(LO 1-1)
Answer:
Real assets are assets that either contribute to production or create income or
wealth. Most real assets have a physical existence, with the most common examples
being real estate and land, machinery, precious metals, and commodities. However,
certain intangible assets, such as patents, trademarks, and intellectual property, can
also create income, so they are considered real assets, too.
Financial assets are nonphysical assets whose values are derived from either a
contractual claim on real assets or the cash flows produced by those real assets.
Examples of financial assets include stocks, bonds, cash, bank deposits, certificate of
deposits (CDs), loans made, corporate receivables, derivative securities, and
cryptocurrencies.
The difference between real and financial assets is that real assets are used to
produce economic output, while financial assets serve to allocate how that output is
divided up.
2. Capital Flow: Corporate vs. Investor View. Regarding the flow of capital between
investors, corporations, and the government, how does the view of the corporation
differ from the view of the investor? (LO 1-2)
Answer:
Investors provide money to companies as capital. The companies use that capital to
invest in projects. When the projects return cash flows to the firm, any profits are
usually subject to taxation by federal, state, and/or local governments. Some of the
remaining after-tax profits are retained in the firm to fund future operations and
the rest are paid out to investors.
The corporation view of this system focuses on decisions concerning (1) the form
and amount of funding received from investors, (2) which projects to put the funds
in, (3) how to manage taxes, and (4) how much of the revenues of existing projects
to keep versus paying back the firm’s investors.
The investors view of this system focus on decisions such as (1) which firms and
what types of financial instruments to invest in, (2) what terms and maturities of
return cash flows to seek, and (3) how to best manage the timing and amounts of
taxes paid.
2
