Errata to Book Version 0.9.1c Chapter 1: q1.8: investin -> investing p2: 2008 Camry -> 2007 Camry Chapter 2: p18: missing percent sign on 20 in formula p20: (1+213.8%)^(1/12) is missing a '-1' p34: capital gain is $5, not $4. later somewhere, a '0' had dropped from the superscript into the main text. Chapter 3: page ??: Solve-now numbering of last two solutions should be 41 and 42, not 25 and 26. page 42: future P/E is price divided by earnings, too, not by dividends page 44: 1.01.5 -> 1.015 page 49: small wording improvement to Q3.26 page 51: "eac beginning payment immediately" -> "discount the beginning payments next year" on the first term page 52: in the annuities formula, $500/1.005*... and X/1.005*... should be $500/0.005 and X/0.005*... page 53: Delete "Solve Now" header. page 61: "now now" -> "not now" page 62: 1.088% -> 1.088 Chapter 4: page 66: typo: cleanup cost should be subtracted, not added. solution is right. whether it is 292% or 287% is rounding error. Chapter 5: on limited liability for the house example, provide a warning and link to http://www.portfolio.com/views/blogs/market-movers/2008/01/02/how-ive-changed-my-mind-on-mortgages page 80, my text, under annualized rates of return: 1.0577^3 should be 1.577^3. page 85: trivial type, add a '+' to \$300 in Q 5.11 page 94: Q5.18 uses the wrong input. Q asks for 4.06\%, A uses 3.35\%. Q should have been using 3.35\%. page 102: question 5.31 should be positioned after question 5.33 which it references. page 103: question 5.41. "1 years" -> "1 year" page 104: the first table has the annualized 3-year rate of return wrong as 3.35\%, not as the 2.85\% that the rest of the example is using. page 110: typo under duration hedging. the perfect hedge bond has the same cash flows, which was previously said to be $1,500, not $2,500 page 115: Q5.18: should be 1.0406^5, not 1.0335^5. Chapter 7: page 152: numbering on bonds and stocks is missing page 158: change "graph in the third column" to "graph in the middle" to disambiguate. page 164: 2nd par under "Brokers", change "larger and institutional investorsbreak" to "investors break" page 170: on inventory -> own inventory Chapter 8: page 176: 5.5% at the top should be 6.5%. three lines lower the number is of course correct. page 176: the algebra in the equation should be w_B not w_E. NOTE: All solutions are off with respect to numbering. page 195: Q 8.24b "compute the average and risk" -> "compute the historical average rewards and risks" page 210: 14(a) should be "r_{0,2} \approx 1\cdot r_{0,1} + 1\cdot r_{1,2}" not "r_{0,2} = 1\cdot r_{0,2} + 1\cdot r_{1,2}" same errors reappear in 14(b) and later. Chapter 10: p269: 45% -> 35% Chapter 10 (frictions): p278: discussion of capital gains is mostly about long-term gains, not about other gains. in years past, the period to become long-term capgains has been longer or shorter. Solve-Now Questions: A number of them are interspersed, rather than collected at the end of each section. p291, Q9: graces -> graves. (the two concepts are not the same.) p291, Q1: delete '(1m)' p292, Q24: $124 should be discounted to $134/1.075{10}=$65, not $52. p290, Q10.42: pertains to individual taxpayers. p Q10.51: The first lottery payment occurs immediately. Answer 21 is screwed up. $80,000-$18,750=$61,250, not $68,750. Chapter 11: 10.20 is inconsistent. p319, Q 11.20: this question is so badly hosed, you may as well ignore it totally. p327, Q 11.16: this misses '-1' and the answer is per day, not per year. p328, Q 11.22: word "is" is missing. (sounds like Bill Clinton?) Page 326: #11.31 - "...you invest in the stock of you local supermarket" should be "...you invest in the stock of your local supermarket" Page 326: #8 (h) "...But you should not production" should be "...But you should not expand production" Chapter 13 ('financials'): p404, top: the example in the trailing paragraph is about earnings management, not cash management. A number of solutions also describe the 1999 cash flow statement from PepsiCo. However, the 1999 numbers were unfortunately omitted. Q14.3A: missing an 'a'. Q14.6 answer: missing spaces after 'income statement' p411+: The Coca Cola statements have an incorrect "-10,000" as extraordinary items. This should have been simply "10". Chapter 14 ('comparables'): p448: table has non-financial liabilities and financial debt reversed. explanation is right. Q4 Answer: P/E in text should be E/P. dieing should be dying. Q8 Answer: change P/E in formula to E/P. numbers are correct. Chapter 15 (corpclaims); * my discussion of preferred stock was wrong, because I just learned that common stock also qualifies for the corporate dividend exclusion rule. * the discussion of notes was misleading. "off the shelf" applies to all sorts of securities. I meant to write that (short-term) notes are constantly issued and retired. * my discussion of outstanding vs. issued shares (with the treasury shares wedge) was totally hosed. * p478: this mistakenly divided by long-term debt + all short-term liabilities, not by the correct long-term debt + debt in short-term liabilities. * p482: small addition error for 2001. also alters liab-to-assets ratio Chapter 16 (capideal): * some of the numbering (and ordering) of the solve-now solutions is off by one. * some of the answers have incorrect rounding. * p 517, Q 16.24: the 8% on the junior bond is an expected rate of return. it translates into a 26% promised rate of return. please work with the revised numbers. Chapter 18: p. Header of Table 18.1 incorrectly states $10 deadweight cost. The explanation below the table is correct. The example uses $5, instead. p.??Answer to Q 18.16: last word is of course "creditors" and not "shareholders" Chapter 20 (pro formas): p630: page reference is 381ff, not 382-381. p640: Table 20.4: "Changes in WC" -> "Decreases in WC" [same correction needed in other CF tables] 2002 numbers are wrong. $3,700 -> $4,028. $2,400 -> $2,728 These numbers also need corrections in subsequent references, such as on page 639. p649: Table 20.6. wrong numbers. 2,278/4%= $57 billion, not $43 billion. This error then permeates through the rest of this table and subsequent text. The total cash flows in 2005 should be $59 billion, PV of 2005 CF is $45 billion, and Total PV should be $50 billion. p651: $109 plus 3 is not $110, but $112. thus permeates through later, too. Epilog: p821: then -> than ---------------- Add the 4 perfect markets assumption to part-basics.tex NOTE HOW THEY MAY SEEM UNREALISTIC, BUT IN FACT MOST FORMULAS USED TODAY IN FINANCIAL MANAGEMENT ASSUME EXACTLY THIS---PERFECT MARKETS. ---------------- -------------------------------------------------------------------------------------------------------------------------------- Chapter corpclaims Define and keyword the difference between calls and options.