Answer:(b) 16.The basic unit of analysis in capital structure decisions is the (a)firm as a whole (b)investment project (c)firm's personnel (d)financial system Answer:(a) Short Problems 1.Give a brief description of the wide range of financial instruments and claims a firm can issue. Answer:These include common stock,preferred stock,bonds and convertible securities (standardized securities that can be traded in organized markets).Financial instruments and claims can also include nonmarketable claims such as bank loans,employee stock options,leases and pension liabilities. 2.Siggy owns a house worth $200,000,a car worth $25,000 and has an $18,000 bank account.He also has furniture worth $4,000 and jewelry worth $10,000.However,Siggy owes $145,000 to the bank on a home mortgage loan,$17,000 on the car loan,$40,000 on student loans and has an $16,000 credit card debt outstanding.Calculate Siggy's net worth. Answer:Net Worth Total Assets-Total Liabilities = S200,000+S25,000+S18,000+S4,000+$10,000)- S145,000+S17,000+S40,000+816,000) =S39.000 Longer Problems 1.Describe the four basic types of financial decisions faced by householders Answer:Investment decisions-whether to invest in stocks or bonds Consumption/Savings Decisions-how much to save for one's retirement or a child's education Risk management decisions-whether to buy disability insurance Financing decisions-what type of loan to adopt in order to finance the purchase of a home or car. 2. Discuss the types of decisions that firms must make. Answer:Capital budgeting decisions-whether to build a new plant or produce a new product. Financing decisions-how much equity and how much debt a firm should adopt in its capital structure. Working Capital decisions-whether credit should be extended to a customer or cash demanded on delivery. 1-41-4 Answer: (b) 16. The basic unit of analysis in capital structure decisions is the ________. (a) firm as a whole (b) investment project (c) firm’s personnel (d) financial system Answer: (a) Short Problems 1. Give a brief description of the wide range of financial instruments and claims a firm can issue. Answer: These include common stock, preferred stock, bonds and convertible securities (standardized securities that can be traded in organized markets). Financial instruments and claims can also include nonmarketable claims such as bank loans, employee stock options, leases and pension liabilities. 2. Siggy owns a house worth $200,000, a car worth $25,000 and has an $18,000 bank account. He also has furniture worth $4,000 and jewelry worth $10,000. However, Siggy owes $145,000 to the bank on a home mortgage loan, $17,000 on the car loan, $40,000 on student loans and has an $16,000 credit card debt outstanding. Calculate Siggy’s net worth. Answer: Net Worth = Total Assets – Total Liabilities = ($200,000 + $25,000 + $18,000 + $4,000 + $10,000) – ($145,000 + $17,000 + $40,000 + $16,000) = $39,000 Longer Problems 1. Describe the four basic types of financial decisions faced by householders. Answer: Investment decisions – whether to invest in stocks or bonds Consumption/Savings Decisions – how much to save for one’s retirement or a child’s education Risk management decisions – whether to buy disability insurance Financing decisions – what type of loan to adopt in order to finance the purchase of a home or car. 2. Discuss the types of decisions that firms must make. Answer: Capital budgeting decisions – whether to build a new plant or produce a new product. Financing decisions – how much equity and how much debt a firm should adopt in its capital structure. Working Capital decisions – whether credit should be extended to a customer or cash demanded on delivery