Question

> ZOOM 1 + - of 2 Page < > QUESTIONS FROM CHP 7 1. In terms of their ownership structure, what are the different kinds of firms that are discussed in Chapter 7? How can firms transition from one of these ownership structures to another one? 2. What does "Corporate Social Responsibility" (CSR) mean? Why would firms engage in CSR? 3. Is profit maximization the only possible objective for the owners of a firm? What other targets may they pursue? 4. What is present value? What is future value? 5. Suppose that when you are 25 years old, you set up a saving account at a commercial bank to purchase a big-ticket item, perhaps a sports car, when you reach your 30th birthday. Further suppose that your initial investment in your savings account is $10,000 and you are planning to deposit an additional $10,000 each year until you are 30 years old. If the interest rate is 5% per year, calculate the future value of the savings that will accumulate in your savings account by the time you are 30 years old? What is the present value of the total savings you will have in your account when you are 30 years old? 6. A perpetuity is a financial instrument that pays a fixed amount of money to its owner infinitely. Governments of countries that were at war in the past issued them to finance their war efforts. (Ex: Great Britain during Napoleonic Wars) Now suppose that you inherit a perpetuity from your family. Further suppose that this perpetuity pays $50 to its owner every year for etemity. What is the present value of the total payments that you and the future owners of this perpetuity will receive? 7. Now consider a bond issued by the United States Treasury. Assume that the price you paid for the bond is $1,000 and that the bond has a maturity of 3 years, ie: it will make a payment to its owner every year during the next 3 years. At the end of the maturity period, the owner of the bond returns the bond to the US treasury and collects back the initial $1,000 investment. Further assume that the coupon payment of the bond, ie: the amount of money paid by the US treasury to the owner of this bond, is $100 per year and that the interest rate is 5%. a. What is the future value of the total of money that this investor will have at the end of the maturity period? b. What is the present value of the total of money that this investor will have at the end of the maturity period? c. If the price of a bond today ($1,000 in this example) is greater than the present value of the total of money that an investor will have at the end of the maturity period, we would say that this bond is trading at premium. If it is less, we would say that the bond is trading at a discount. Is in the bond in this example trading at a premium or at a discount?
Questions are for chapter 7 & 8 from Managerial Economics and Strategy”by J. Perloff and J. Brander, 2ndedition

Answer 1

to do Corporate Social good to or any vuesponsibility is way to the society by the corporate forms. by establishing a school, college or organisation by the forms who taken CSR initiative it increase their format trustness and confident to buy their product Firms engage in CSR to maintain good relations with the public and also to decrease their taxes which are the government . paid to