Solution Manual for Contemporary Financial Management 12th Edition by Moyer

Chapter 1
The Role and Objective of Financial Management

Solution Manual for Contemporary Financial

Management 12th Edition by Moyer
Download full chapter at: https://testbankbell.com/product/solution-manual-
for-contemporary-financial-management-12th-edition-by-moyer/

CHAPTER 1
THE ROLE AND OBJECTIVE
OF FINANCIAL MANAGEMENT

ANSWERS TO QUESTIONS:
1. Shareholder wealth is defined as the present value of the expected future returns to the
owners (that is, shareholders) of the firm. These returns can take the form of periodic dividend
payments and/or proceeds from the sale of the stock. Shareholder wealth is measured by the
market value (that is, the price that the stock trades in the marketplace) of the firm's common
stock.

2. Profit maximization typically is defined as a more static concept than shareholder wealth
maximization. The profit maximization objective from economic theory does not normally
consider the time dimension or the risk dimension in the measurement of profits. In contrast,
the shareholder wealth maximization objective provides a convenient framework for evaluating
both the timing and the risks associated with various investment and financing strategies.

The marginal decision rules derived from economic theory are extremely useful to a wealth
maximizing firm. Any decision, either in the short run or the long run, that results in marginal
revenues exceeding the marginal costs of the decision will be consistent with wealth
maximization. When a decision has consequences extending beyond a year in time, the
marginal benefits and marginal costs of that decision must be evaluated in a present value
framework.

3. A closely-held firm is more likely to be a wealth maximizer than a corporation with wide
ownership. In the closely-held firm, the owners and the managers will share the same
objectives because the owners are the managers. In a widely-held corporation, where the
ownership and management functions are separate, it is likely that managers may pursue
objectives that are more self-serving than owner-serving. Examples of alternative objectives
that might be pursued in this situation are extreme risk-averse behavior, size maximization,
satisficing, or personal utility function maximization. A more complete discussion of

1-1

Visit TestBankBell.com to get complete for all chapters

 Chapter 1
The Role and Objective of Financial Management
alternative objectives may be found in McGuigan, Moyer, and Harris, Managerial Economics,
10th edition (South-Western, 20059), Chapter l.

4. The goal of shareholder wealth maximization is a long-term goal. Shareholder wealth is a

function of all the future returns to the shareholders. Hence, in making decisions that maximize
shareholder wealth, management must consider the long-run impact on the firm and not just
focus on short-run (i.e., current period) effects. For example, a firm could increase short-run
earnings and dividends by eliminating all research and development expenditures. However,
this decision would reduce long-run earnings and dividends, and hence shareholder wealth,
because the firm would be unable to develop new products to produce and sell.

5. Engaging in social responsibility activities can be justified on the basis that these activities
help to create an environment in which the goal of shareholder wealth maximization more
easily can be pursued.

6. The separation of ownership and control in corporations may result in management

pursuing goals other than shareholder wealth maximization, such as maximization of their own
personal welfare (utility). Concern for their own self-interests may lead management to make
decisions that promote their long-run survival (job security), such as minimizing (or limiting)
the amount of risk incurred by the firm.

7. An agency relationship occurs when one or more individuals (the principals) hire another
individual (the agent) to perform a service on behalf of the principals. Two of the most
important agency relationships in finance are between the stockholders (principals) and
management (agent), and between the owners (agents) and creditors (principals). Agency costs
are incurred when attempting to control agency problems. Agency problems arise when the
agent makes decisions consistent with the maximization of his or her own utility rather than the
maximization of the utility of the principals.

8. Examples of agency costs incurred by shareholders include

• Expenditures to structure the organization in a way that will minimize the incentives for
management to take actions contrary to shareholder interests, such as providing a portion
of compensation in the form of the stock in the company .

• Expenditures to monitor management's performance, such as internal and external audits.

• Bonding expenditures to protect against managerial dishonesty.

• Lost profits (opportunity costs) of complex organizational structures.

9. Creditors (the principal) have a fixed financial claim on the resources of the firm whereas
owners (agents) have a residual claim on the firm's resources. As a consequence, owners may
attempt to increase the riskiness of the firm's investments in hopes of earning higher returns.
Creditors suffer from this type of behavior because they do not have an opportunity to share in

1-2
 Chapter 1
The Role and Objective of Financial Management
these higher potential returns, yet they suffer from the increased risk.

10. The controller usually has responsibility for all accounting related functions, such as
financial accounting, cost accounting, and accounting information systems. The treasurer
normally has responsibility for the acquisition, custody, and expenditure of funds, including
cash and marketable securities management, capital budgeting analysis, financial, and pension
fund management, and financial planning. Because not all companies divide the
responsibilities in this manner, the actual functions performed by the controller and treasurer
will vary from company to company.

11. a. Financial management employs the marginal revenue -- marginal cost relationships of
microeconomics in making long-term investment (capital budgeting) decisions and short-term
investment (working capital) decisions.

b. Financial management requires an understanding of macroeconomic concepts dealing with

monetary and fiscal policy. Knowledge of these concepts is necessary in making company
sales forecasts and in raising funds in the money and capital markets.

12. Earnings per share figures can be misleading because factors such as (1) reductions in the
number of shares; (2) a decline in the return being earned on the company's equity; and (3) an
increase in the risk of the firm, all could lead to increased earnings per share, but not
necessarily to an increase in the value of the firm's shares in the marketplace.

13. The bondholders in the RJR Nabisco takeover case wanted to block the transaction because
the takeover was to be financed with a substantial increase in the amount of debt, and therefore
an increase in the risk of default. The case of the bondholders was rejected in the courts
because, it was argued, these knowledgeable investors knew they were exposed to this type of
event risk when they purchased the bonds, and presumably were compensated for the expected
risk in the form of the risk premium earned on the bonds.

14. The three major factors that determine the market value of a firm's stock are (1) the amount
of the cash flows expected to be generated for the benefit of stockholders; (2) the timing of
these cash flows; and (3) the risk of the cash flows.

15. The market’s reaction may have reflected (1) an expectation that there would ultimately be
a splitting up and spin-off of the natural resources business from the steel business, thereby
assuring that cash flows generated by Marathon Oil would not be wasted on reinvestment in the
low return steel business; or (2) the potential that this separation would make it more difficult
for the steel segment of USX to tap the cash flows of Marathon Oil.

16. By declaring bankruptcy, General Motors (GM) hoped to protect itself from the claims of
creditors while it sought a way to either sell or restructure its assets. Presumably, the
management at GM thought that the bankruptcy declaration would provide it with an
opportunity to restructure itself, while it was protected from the pressures of making
burdensome interest and other payments to creditors.

1-3
 Another random document
un-related content on Scribd:
leg and said, with a broad grin:
“My soul. Why shouldn’t I sell her?”
“Yes, why not? Then you can buy a new one.”
“That’s so,” said Björn, and nodded to the skipper.
“How much do you want for her?” asked the latter.
“Two hundred dollars as she swims now.”
“One hundred and eighty,” was bidden.
Björn did not answer, but prepared to let go the mooring.
“Who made her sails?” was asked.
“The man with the rudder,” answered Björn, and cut the after-ropes loose.
“All right. Tie up again and let me come aboard.”
Then came a turning upside down and a ransacking of everything inside
“The Pail.” The bulkheads, the flooring, the combing, the seats, nails,
cleats, and painting, masts and oars were examined, and about an hour later
Björn and Anders stood outside the tavern, where the bargain had been
sealed with a drink. The summer sun shone down on their burning faces and
beaming eyes, but when Björn looked toward the harbor and saw “The Pail”
being taken away from its place his expression changed, and, turning to
Anders, he asked: “What do you think they will say when we come home
without 'The Pail’?”
Anders put on a thoughtful mien. “I don’t know. But, anyway, it was your
boat, and the skipper promised to be good to her, and keep her scraped and
tarred and painted when she needs it.”
“You are right,” said Björn. “But are we to walk home?”
It was very hot and the sun burned. It was a good twelve miles to the fishing
village, and the road was for the most part flat, sandy, and open.
“Do you want to ride?” asked Anders. “I am afraid the most of the wagons
have gone home, unless you want to hire one.”
Björn stood a moment without answering. It was perhaps not such a bad
idea to postpone the home-coming and the explanations for a little.
“I propose we go to the capital.”
“Do you treat?” asked Anders, cautiously.
“Certainly,” answered Björn, and slapped his pocket where the money lay.
They went through the town to the railway station, where a train was just
about to start. The two were like two big children. They had been to the
capital already, but neither of them had ever ridden on the railroad.
Someone showed them the way to the ticket office. Björn planted himself in
front of the opening, with his pocketbook in his hands.
“Can I get a cabin for two men to the capital?” he asked, in a tone which he
took for a whisper, but which could be heard throughout the hall. “Return?”
was asked.
“What’s that he says?” asked Björn of his comrade.
“Second or third?” came again from the office, in rather an angry tone.
“Take what you can get,” whispered Anders, who, as his expenses were
paid for him, saw no reason for being economical.
“All right, give me the whole thing,” said Björn, and pushed a bill in at the
impatient voice.
“Two excursions, second. You can come back on the evening train, do you
hear?” said the voice.
Björn received a number of silver coins for his bill. He took it all but one
piece. “We can afford to tip to-day,” he said to his cousin, in the same loud
voice.
The ticket seller put his head out of the opening. “Take your money!” he
called angrily.
“All right,” said Björn, crestfallen. He put the coin in his pocket, and as
they walked through the waiting rooms to the platform he muttered: “That
villain of an innkeeper at home told me that if you want to ride comfortably
on the railroad you must tip the conductors. But it doesn’t seem to go here.”
They entered the compartment, where sat a stout man, with close cropped
hair, white neckband, and long black coat. His face was red and good-
natured.
“Whew, it’s warm here,” said Björn, and opened a window. The stout man
coughed. The engine whistled, and the train began to move.
“There she goes, d—— me,” said Anders.
“Some speed in her,” answered Björn with a similar oath as the car began to
lurch.
“Open the other porthole,” cried Björn, after a while. “I’ll suffocate in this
box. This is a new sort of sailing on dry land.” The stout man coughed still
more.
“Does it trouble you, sir?” asked Björn, politely.
“Yes.”
Björn gave orders for Anders to close the porthole. The stout gentleman
eyed him sharply.
They came to a sharp curve in the road, the car swung round, and Björn
nearly fell off his seat.
“Well, I’ll be blasted eternally,” he cried, half surprised and half in sly
cunning. “Do you think they’ll send us to hell in this hurry, Anders?”
“Do you always swear like this, my man?” asked the stout gentleman. Björn
looked at him with a wink.
“That’s as it happens, my good sir, but I generally do when on shore. Meat
goes with bread, as the baker’s dog said when he stole the steak.”
“I do not think it is quite necessary,” said the stout gentleman. “I know, for I
am a clergyman.”
“A clergyman?” repeated Björn, looking at him. “Beg pardon, but will you
swear to that?”
The stout gentleman looked severely at him at first. But the big child was in
such a good humor that day that he was quite irresistible, with his half-
simple, half-roguish smile, and his good-nature, from which all severity ran
off like water from a duck’s back.
In five minutes they were the best of friends. Björn told, in his own style,
his story of “The Pail,” and the jolly priest laughed until his asthma nearly
choked him, and before they reached the capital he had Björn’s promise to
visit him next day in his little village rectory near the city.
Anders went home that night on his excursion ticket, and Björn set out
alone next day for the country. Then it happened that after that day Björn
undertook several excursions to Copenhagen with corresponding
journeyings to the rectory, until, according to his own version, he was
“caught by a petticoat.”
But this was all he would say about it. He went around wearing a broad,
shining gold ring, which pinched his fat finger. How the ring was ever
squeezed on that finger in the beginning was a mystery, but there it sat, and
there sat Björn.
All winter long he pondered over his thoughts of marriage. The innkeeper
and his wife teased him, at which he grew angry in jest and then in earnest.
And then, when his anger had passed, he showed them first the photograph
of a girl with a very dark face and two bright pink hat ribbons. The picture
appeared to need much polishing of Björn’s coat sleeve, to give it, as he
said, “the proper point of view.” He did not at all like any sport being made
of this picture, but was honest enough to acknowledge that it looked more
like “the portrait of a nigger than of a respectable country girl.”
During the winter he bought himself a new boat. With all necessary
ceremonies this boat was christened the “Flying Fish”. But during the
christening feast there was considerable of a row. The otherwise so good-
natured Björn fired up about some chance teasing words, some mocking
nickname given the boat. Without knowing just why the matter excited him
so, he became first sarcastic, and then rude and threatening. Next day,
however, he was much dissatisfied with himself, and went to consult with
his friend the innkeeper, accusing himself of having forgotten his duties as
host. But the innkeeper comforted him, and told him that was all the fault of
his approaching marriage. A man in that condition can’t keep the right
balance, and is liable to slop over either way on the slightest provocation.
That was always so. The thing to do was to close the matter as soon as
possible.
Björn did not answer. He muttered something about spring, and sheets and
linen, etc., and then went for a sail in his new boat. She was a flyer and no
mistake, he could prove that to the scoffers on shore any day!
Then spring came at last, and now “this nonsense should have an end.” He
had a good new boat; all he wanted was a wife, so Björn swore to himself.
Thus the marriage came about.
The ceremony, naturally, was to be held in the little country church. A
relative of Stine—Stine was the bride—had suggested that as Stine’s
parents were both dead, and he himself was an innkeeper in Copenhagen,
he should give the wedding feast in his house. Björn protested vigorously
against this. He and his brother were to sail to the city, and lay up the boat
at Kroyer’s Wharf. Niels would take care of the boat, and he himself would
“play monkey just long enough for the splice”; then back to the city, and on
board the boat to take his wife home.
Stine and her party protested against this arrangement with equal energy, if
not with equal warmth of expression. A wedding without a feast was an
impossibility, and there would always be time enough for the sail, thought
Stine to herself. So she clung to her decision, supported by her cousin of the
Gilded Tarpot, and for the first time in his life, even before the “splice,”
Björn learned what unlooked-for obstacles can be put in our way by the so-
called weaker sex. At least, so the old poets call it.
Björn grumbled, but was clever enough to hold his peace. In all secrecy he
laid a counter-mine, telling his brother to take the “Flying Fish” out as far
as the custom-house and lay her up in the ferry harbor, with all ropes clear
for sailing, and when that was done to come himself to the Gilded Tarpot,
which was a favorite place of refreshment for country people, soldiers, and
petty officials.
In this way each party felt sure of the eventual victory, and the marriage
could come off. The minister tied the knot in his little country church and
gave them a glass of sherry and a silver soup-ladle in the rectory. Björn put
both “inside his vest,” and then the innkeeper drove them into town. The
village people gave them a hurrah, and finally the merry company sat down
in the Gilded Tarpot’s basement rooms to a board laden with roasts of lamb
and pork, ham and vegetables, and all manner of other good things. Sweet
cordials were there for the ladies, and French wines, while for the men there
was brandy and punch.
Through the basement window one could see a high brick wall, gleaming in
the strong sunlight, and if one laid one’s self over the table, with one’s head
in the neighbor’s lap, ’way high up one could see a tiny piece of blue sky as
large as a handkerchief perhaps, with feathery clouds driving over it.
Some of Stine’s female relatives were there, and the innkeeper’s family and
best friends. Among the family was a ship’s-joiner, who proved his
sympathetic comprehension of the importance of the occasion by getting
drunk at once and making pathetic speeches. And among the good friends
was a “former officer of justice,” as he called himself, a man with a
decoration in his buttonhole; also a drunken-looking jailer, who wore a stiff
collar and his service medal to remind the world that he had once been a
non-commissioned officer. He looked as if he had his serious doubts about
the company, and expected the one or the other of them to make away with
the spoons. Probably because of this doubt therefore he kept a distance
between himself and the rest of the company, and poured out an endless
series of small whiskies for himself, “on the top of the glass,” as he
expressed it, without any appreciable effect. He laughed a sudden and
ferocious-sounding laugh, drank half his glass, cleared his throat, poked his
elbows in the host’s ribs, and said: “Old comrade, here’s to the good old
times.” This for him was the height of sociability.
He called Björn “Captain,” but after a few repetitions of the word the
bridegroom laid down his fork, with a large slice of beet on it, and
remarked:
“Port your helm, friend, and let up on that 'Captain,’ if you don’t want to
make me angry.”
After this admonition he compromised on “Boatsman.”
Björn was decidedly out of sorts. He had the impression of being left out in
the cold, which was probably due to his deafness. He certainly filled his
place in the literal sense, but Niels did not come, and Stine, the bride—well,
Stine sat there at his side in a black merino gown, with wreath and veil, her
red hands in her lap, as straight up and down in her chair as if she had
swallowed a yardstick.
That was probably the correct thing to do, for a northern bride should not be
too vivacious. But there seemed to be in her nature a certain dignity, which
would be a good thing in a home no doubt, but which seemed out of place
here between roast and cordial.
“One certainly could not call her too affectionate,” Björn said afterward,
when describing the occasion.
He sat alone and she sat alone. She ate very little; he ate enough for two.
The ship’s-joiner made one speech after another, the sun shone down on the
brick wall, and Björn leaned over on Stine and looked up out of the
window.
Stine pulled her veil aside, smoothed her dress, and asked: “What are you
looking at?”
“Fine opportunity that,” said Björn. Her eyes followed his.
“You mean that fourth story to let up there? Yes, I would rather like to live
there. Then one would not have to be on the water so much.”
“A fine opportunity to sail home, I mean,” explained Björn. “The wind is
strong from the south.”
Stine glanced at him uneasily, and then at the innkeeper.
“A stiff south breeze,” continued Björn. “It has been a north wind for some
time, and will be to-night again. We don’t have a chance like this every
day.”
At a glance from Stine the innkeeper proposed a “good, old-time Danish
cheer” for Björn, in the attempt to change the train of his thoughts, and the
ship’s-joiner made his fifth speech.
Then mine host proposed a song, in which all joined, even the jailer, who
held second voice and tooted like a clarinet.
After that, in spite of some objection, the ship’s-joiner rose, and, supporting
himself by his neighbors’ shoulders, began, with tears in his eyes:
“Good friends and hearers, we are all that, I think—”
“Yes, yes,” they answered.
“We will now—something must be said to them before they leave father
and mother—I mean before they leave the circle of these kind friends—”
“They don’t go until to-morrow,” said mine host.
“No,” said Björn, banging the table with his fist.
“He’s right,” said Niels, coming in just then. “The wind is fresh from the
south, Björn.”
“I know,” said Björn, getting up.
“Hush!” whispered the innkeeper. “Let the joiner finish his speech.”
“Listen, dear friends,” continued the joiner, reeling from side to side. “We
are all mortal, and we all love our native country. I do not say fatherland; I
say native country. We do not know where our fathers came from, but we
know where we were born ourselves—”
“What nonsense is this?” whispered Niels, who grasped the situation and
was ready to fight.
“Who is that man?” asked the joiner, trying to fix his bleary gaze on Niels
and holding fast to his neighbor’s shoulder. “Is that a man who will not
drink to his native country? If he is, then I say: 'Fie, for shame,’ say I.”
Niels looked meaningly at Björn.
“Shall we clear the place and take Stine with us?”
Björn motioned to him. But one of the guests who supported the joiner
heard what Niels said. He drew away his shoulder, the joiner fell to the
floor, and in a minute the place was in an uproar. Every one spoke or
screamed at once. Niels had already collared the jailer. Then, at this highly
critical moment, the sense of duty of the women of the old days awoke in
Stine. She placed herself by the side of her chosen lord and master and
announced that “she would sail to Jutland with him rather than have a fight
on her wedding day.” That settled the matter. The joiner was carried into the
next room and put to bed, the guests shook hands cordially and drank one
another’s health. Niels and Björn became most amiable at once, and Niels
ordered more punch. The innkeeper made the best of a bad business, and
peace settled down on the spirits of the company.
Then the party broke up.
In his delight at his victory Björn invited the entire party, even to the jailer,
to take a sail on the “Flying Fish.” He would put them ashore at the
limekilns when they had had enough, he said.
The invitation was accepted, probably in the desire not to disturb the nearly
sealed peace. But when they all came up out of the Gilded Tarpot, the fresh
air and the sunshine, or the joy of his own victory, or the feelings of a
bridegroom, or all of them at once, so overcame Björn that he took Stine
round the waist and swore he would dance a waltz with her then and there.
Which he did, in spite of her obstinate protest, to the great delight of the
passers-by. Then he dropped Stine, and, seizing the jailer, danced a polka
with him. He next insisted upon carrying off a sentry-box to try the sentry’s
gun on the Amalienplads. But this last was too much for the military
feelings of the jailer. He declared it “scandalous” and walked away as red in
the face as a lobster, and took the innkeeper with him. At the next corner
was a flaring menagerie poster, with pictures of elephants, monkeys, and
bears. These last caught Björn’s attention; he declared that he must go and
see his cousins perform, and the wedding guests had difficulty in getting
him away safely. By this time quite a crowd had collected, which listened
with interest to the lively remarks made by the big fisherman, and when at
last, to the immense delight of the crowd, he gave a plastic imitation of a
dancing bear, the rest of the invited guests fled, and an assemblage of those
not invited followed Björn, Niels, and Stine down to the harbor.
“Come, now, Björn, keep quiet,” said Niels, soothingly, as a policeman
appeared interested in their movements.
“Shouldn’t I be merry on my wedding day?” queried Björn, looking around
beamingly.
Stine was ready to cry, but held out heroically. She had chosen her lot in
life, and was ready to take whatever came.
“It will be better later,” was her consoling thought.
They got down to the harbor somehow and into the boat.
“You’ll have to reef,” said the ferry-keeper.
“Full sail!” called Björn. “This is my wedding trip.”
“All right,” said the ferryman. But he whispered aside to Niels: “Can he sail
a boat?”
“Well, rather,” laughed Niels.
“All ready, Niels?” asked Björn.
“Yes.”
“Stine stowed away safely?”
“Yes.”
“All off then; let go!”
“Hurrah!” called the ferrymen, but shook their heads nevertheless.
“That will be a wet wedding trip if he doesn’t take in some of that sail,”
they commented.
And it certainly was wet.
Stine will never forget it, and Björn tells the story himself in this wise:
“We just skipped through the water. I must say the 'Flying Fish’ did fly that
day. As we went past the ferry-boats and the pilot-boats they called out to
us, but I waved my hat and asked if they could see the color of her bottom.
“'I hope she will stand it,’ said Niels.
“'She’ll have to,’ I answered.
“Stine lay in the bottom of the boat and gave up all the good dinner they
served us in the inn. It was a good thing she had not eaten more.
“I tried to cheer her up, but I don’t think she heard me.
“Niels and I were dripping wet, the sails were dripping wet, and so was
Stine. I haven’t sailed like that before or since.
“I didn’t dare sail all the way home with her like that, so put up at the dock
of the town.
“The old skipper who bought 'The Pail’ came down to the water. 'What sort
of weather is that for full sail?’ he asked. 'Have you a cargo?’
“'A wedding cargo,’ I answered, 'but it’s more dead than alive, I guess.
Come, help us get the old woman ashore, or she will give up the ghost right
here.’ We handed Stine up. She couldn’t stand on her legs at all, and we had
to leave her at the house of a good friend in the town. She stayed there three
days and nights, and I had to go round with dry mouth, couldn’t get even so
much as a kiss.
“It was all right afterward, but she was angry at me for some time because I
had 'made a fool of her in that way.’ What can one expect from such land
lubbers, who have never seen more water than a pool in a village street in
all their lives?
“Whenever I speak of that day Stine gets cross, but I rub my nose with the
back of my hand and say: 'Well, anyway, that was the most wonderful
wedding trip I ever heard of.’
“And that is why I haven’t made any more like it.”
 JALO THE TROTTER
BY JOHANN JACOB AHRENBERG

Among Scandinavians it seems to be a common thing for the artistic impulse to

drive in many directions at once. The Swedish-Finnish novelist Ahrenberg is
architect as well as writer. He was born in 1847 at Wiborg, and studied in
Helsingfors and at the Art Academy in Stockholm. He is now chief Government
architect for his state. The first novels and tales that brought him into literary
prominence were published in 1880, followed since then by many other East
Finland pictures. Among these, “Jalo the Trotter,” the story of a superb horse
and his two masters, is characteristic not only of the author’s style, but of his
country as well.
 JALO THE TROTTER
A FINNISH TALE
BY JACOB AHRENBERG
Translated by Mary J. Safford. Copyright, 1902, by The Current Literature
Publishing Company.

It was late in the afternoon of an August day, but the sun was still pouring
its hot slanting rays into Christian’s sitting-room. The flies were buzzing
merrily around the head of the landlord, who sat by the window, apparently
watching the two balsams blooming in broken china pots on the sill.
Christian had been there a long time, staring between the leaves and flowers
of the plants at the little gate of the fence, as if he was expecting some one.
He had already reached middle life, but looked considerably older. His eyes
were sunk deep in their sockets, and wrinkles seamed his face. His wife,
who was working busily at the loom, did not seem to have her mind wholly
on her task; for, whenever Christian made the slightest movement, she
glanced anxiously toward the door as if she, too, was expecting somebody.
Suddenly Laurikamen, the assessor of the district court, entered, greeted the
couple, and shook hands ceremoniously with them. This guest, whose visit
seemed to afford neither pleasure nor surprise, sat down at the table, and,
after a short silence, lighted his pipe, and finally remarked that it really was
far too hot for five o’clock in the afternoon, to which undeniably truthful
remark Christian replied that the heat would at least do the oats good.
Gradually the conversation grew more fluent; they discussed the questions
of the day, the fall of stocks, the price of grain at home and in Russia, and
the sessions of the court. Then the assessor had reached the point at which
he was aiming. Rising deliberately, he went to the hearth, knocked the ashes
from his pipe, and remarked, as if casually:
“By the way, you are summoned there.”
“I? To the court? By whom?”
“By Jegor Timofitsch Ivanov, your neighbor.”
“H’m! What is he after? Is it about the beating I gave him last spring?”
“Not at all; he must put up with that. It’s the affair of Jalo, his trotter, you
know.”
“Well, what’s that to me?”
“I don’t know. Come to-morrow, and you’ll find out.”
The assessor uttered a sigh of relief, rose, took his leave, and went away.
Christian scratched himself behind the ear, and went out thoughtfully.
Sighing heavily, he wandered restlessly over the pastures and meadows
until late in the evening.
As it was still too warm in the room, he sat down on the steps to enjoy the
cool evening air. It was a damp, hot night; the stars shone dimly through the
air, which lay like a thin veil on the horizon. The full moon was rising in
majesty above the moor, looming in a large, reddish gold disk through the
firwood, which grew sparse and stunted upon the moss-covered hill. The
last birds were twittering sleepily, and the night-jar flew clumsily, as if
drunk, first to the right, and then to the left, sometimes vanishing in the
gloom. Country folk hate the night-jar, and this aversion probably made
Christian’s whole surroundings suddenly seem unspeakably desolate. His
mood was transmitted to the scene about him. He could not possibly drive
that business of Jalo the trotter out of his head. All the memories of his life
were associated with the name. Everything he had dreamed and hoped,
everything which had disturbed and alarmed him, had revolved wholly
around Jalo. How well he recollected the day Jegor Timofitsch Ivanov
opened his shop in the village of Tervola. Everything that previously was
brought from the city could now be bought at Jegor Timofitsch’s. How
humble and cringing the fellow had been then; how well he understood how
to ingratiate himself with everybody.
At that time Jalo was nearly three years old.
Jegor had been everybody’s most humble servant. Doubling up like a
pocket-knife in his obsequiousness, he had treated his customers to tobacco
and sbitin,[2] promised them unlimited credit, and thereby won all hearts.
“You haven’t any money? Oh, that makes no difference—we’ll charge it;
you can pay another time.” It was all so easy and simple, but when a year
had gone by, Jegor’s account book was full, and all the insignificant entries
were found to amount to an enormous sum.
If anybody needed a loan, who but Jegor had the money? True, he asked
twelve per cent, but then there was no bothering with lawyers, judges,
assessors, and such people. And who did not need money in these times?
Everybody wanted it, and Christian, perhaps, most of all.
But when four years had passed, Jegor Timofitsch from being everybody’s
servant had become everybody’s master. Now he carried his back as stiff as
a ramrod; now he used a very different tone: “Lout, do you mean to sow
rye? No, you must sow oats; I can’t sell rye in these times. You want money
to buy a cow? You have scarcely enough feed for the one you own. No, that
won’t do.”
He sold the peasant’s grain from the fields before it was mowed. He felled
their woods for fuel and lumber, without any further ceremony than to
notify them of his intention. And yet, how the terrible debt grew! It was as
insatiable as the Moloch of the Philistines. Everything disappeared in its
mighty jaws. It was never settled, in spite of all the sacrifices and payments
in the shape of tar, wood, tallow, sheep, crabs, game-birds, and oats.
If any one had cause to suffer from this neighbor it was Christian. Their
farms adjoined, and he knew better than all the rest what it means to be a
debtor. It seemed as though the flesh was being gnawed from his body and
the marrow sucked out of his bones. He often felt utterly defenseless against
the cruel foe, and thought seriously of going out to beg his way from door
to door, if only he could be a free man once more.
But in the hour of his sorest need help came. And his deliverer was Jalo,
who had reached his sixth year at Michaelmas.
Oh, what an animal this Jalo was! His black coat shone like silk. Looking at
his side, darker and lighter circles appeared on his back and thighs. What a
tail, and what a mane he had, both so thick and long! His hoofs were like
steel, his broad breast inhaled the air like bellows. His eyes were those of a
sea-eagle. He not only saw at a distance, but in the mist, in the whirling
snow, and in the dark. But of even greater worth than his strength and his
beauty was his noble nature. He was proud. A blow from a whip was an
insult that drove him nearly frantic. He was docile with all his strength,
loving with all his spirit. And what a grateful heart he had! How he would
rub his velvety muzzle on Christian’s arm when he offered him salt and
bread, oats, or a bit of sugar. This animal was better than many a human
being, certainly better than his disobedient daughter and his ungrateful son-
in-law. Had anybody ever seen Jalo shy? Never—he would not fear Satan
himself. Had he ever stumbled? Never, no matter how steep might be the
descent of the hill. Everybody was obliged to admit that Jalo was the finest
animal in all Finland. His equal could scarcely be found in Russia. When
Christian’s debts weighed heavily upon him, when Moloch opened his jaws
and demanded fresh sacrifices, Christian went to the stable, curried his Jalo,
blackened his hoofs, braided his mane, and patted his back. And he always
felt lighter-hearted.
When Jegor Timofitsch’s demands had gone far beyond Christian’s powers
to meet, and he saw no way of shaking off this vampire, he harnessed Jalo
into a light sleigh and set off for Wiborg, to consult a distinguished lawyer.
He could not believe that Jegor had written things down correctly. His poor
little purchases, some tobacco and grain, coffee and sugar, could never
amount to so large a sum. Something was surely wrong, and there was
Jegor’s usurious interest into the bargain!
How vividly he remembered that journey. It was a clear, cold day in
January. The snow lay on the fields and meadows as smooth and level as
the surface of the lake. The shadows of the fences, hayricks, and rollers lay
like blue spots upon the white surface. The snow-birds hopped across the
road, and the magpies chattered joyously as they ran up and down the
fences. Sipi, the bear-dog, with pointed ears and woolly tail, dashed at full
gallop before Jalo, who with a dainty movement of his hoofs, as if it were
mere play, rushed forward at lightning speed. It was all so cheering that
Christian’s depression began to pass away. He had almost reached the
Papula quarter, when suddenly he heard some one calling and shouting.
Taking the pipe from his mouth, he leaned out of the sleigh and looked
behind him. A man in a little racing sleigh was following at full gallop,
waving his hand in its fur-edged gauntlet glove. Christian stopped, and the
traveler, a short, stout man dressed in furs, driving a mouse-colored horse,
soon reached him.
“Good morning, Landlord. That is a trotter you have!” he said eagerly,
biting his frozen mustache. “To tell the truth, I’ve been driving behind you
at least a quarter of an hour without being able to overtake you. Where did
you get the animal? What is his pedigree? How old is he? Just look at that
chest and those thighs!”
The stranger left his sleigh as he spoke to examine Jalo more closely.
Christian was pleased and proud, answered to the best of his ability, and
praised the horse to the newcomer, who seemed to be perfectly delighted
with him.
“Well, of course, you’ll come to the trotting races day after to-morrow. As
the owner of an animal like yours, it’s your duty to do it. I am Captain T.,
one of the judges. Remember the first prize is a thousand marks.”
Christian had already heard of the races and even thought of them; but in
the country people usually learn facts only after they have occurred. But
now—why not, since he was already in the city?
Christian promised to come, and the men clasped hands on the agreement.
Jalo, who was already impatient to go on, vanished from the Captain’s
admiring gaze beyond the next hill like a streak of lightning.
Christian entered his horse for the races. What glorious days, what a season
of triumph and honor for Jalo and his master! There was not a newspaper in
the whole country which did not mention Jalo and his owner. Telegrams
announcing the horse’s wonderful deeds flew from city to city. His victory
was extraordinary; he carried off the first prize, outstripping famous old
trotters. Even now, as Christian sat depressed and sorrowful in his entry, a
bright smile flitted over his face as he recalled that glorious time. How
distinctly everything rose before his mind: the golden sunlight, the blue sky,
the light snow-flakes carried by the winter wind, the music and the
cheering, the heating drinks, and Jalo, the hero of the day. It had
undoubtedly been the brightest and happiest of his life. But as the highest
surges sink the lowest, and the tallest pine trees cast the longest shadows, it
also happened that the day when Jalo and his master reached the giddy
heights of joy was followed by very sad consequences.
Nothing favorable was obtained from the lawyer. Instead of encouraging
counsel he informed Christian that Jegor had already obtained the final
judgment from the Governor. Christian’s debt must be paid, principal and
interest. There was no resource except to sell Jalo, and even that would not
completely cover the amount. Christian drank till he was completely dazed,
wept, sobered up again, and, during all these varying moods, constantly
tried to raise the price. At last the bargain had to be closed. Jalo was sold to
a Russian merchant, and Christian returned home, deeply saddened and
frantic with rage, driving a mare which he detested from the first moment. It
was small consolation that his pocketbook was stuffed with hundred-mark
notes, the farewell gift Jalo’s victory had brought to his master.
Christian was inconsolable, and it seemed downright madness to pay Jegor
so much good money. It was just like throwing it into the sea. But at last he
was obliged to make up his mind to it, and went to Jegor’s shop at an hour
when he was sure of finding him alone, paid his debt, and received his note
and other papers. Jegor was incautious enough to let some offensive words
escape his lips, and nothing more was required to bring Christian’s
repressed fury to utterance. If the former had never known before what a
drubbing means, he understood it when his neighbor left the shop. From
that day there was the bitterest enmity between the two men.
Christian was free; but though he bragged of it in Jegor’s hearing, his heart
bled. What did he care for liberty without Jalo? True, he had escaped an
impending danger, but in exchange had sacrificed all the happiness of his
life. Existence had lost all charm for him; he had no more debts to trouble
him, but also no Jalo to love. The occasional notices of the animal which he
read in the newspapers were like salt in an open wound. “The famous trotter
Jalo, that won the first prize at Wiborg, has again covered himself with
glory,” or “the well-known trotter Jalo has again carried off a prize at the
races at Savastehus.” On such days Christian was like a madman. Either he
sat sullen and silent like a chaffinch in the rain, or he was angry and
irritable, blazing out at the least provocation like Juniper in the flames.
Gradually the resolution to get possession of Jalo again at any cost became
fixed in his mind. What was the use of saving and gathering to spend his
life in joyless longing? His daughter and son-in-law were waiting
impatiently for his death, that they might inherit his property. He had no
grandchildren, so, as matters stood, the best thing he could do would be to
try to get possession of Jalo once more.
After much difficulty, he found bondsmen, and pledged his land. Now he
need only secure the money, and then set off to bargain for the horse. Even
in the worst case, it could not be “dearer than gold.”[3] His present owner in
Wiborg had many horses, and would surely be willing to give up Jalo for a
satisfactory price. The day of his departure was already fixed when one
beautiful morning in July, just as Christian was in the act of removing a few
stubbly gray hairs from his chin, he heard a familiar neigh. There was no
mistake; it must be Jalo, that was just the way he always called his master
when he went into his stable late in the morning. Christian threw down the
razor and rushed out. There behind the corner of his own stable, to which
Jegor’s pasture extended, stood Jalo with dilated nostrils, tossing his head
up and down. In a second he flew over the fence, and stood upon the ground
of his former owner. Christian felt as though he was paralyzed in every
limb. He could only utter a gasp of astonishment. A joyful smile flitted over
his face like sunshine over the moorland, while all the tales of witchcraft he
had overheard flashed through his excited brain. While he still stood there,
rubbing his eyes, to convince himself that he was not dreaming, Jegor, his
enemy, entered the yard, bridle and whip in hand. “The horse belongs to
me,” he said; “beware of luring him here.”
Jegor seized Jalo by the lock of hair on his forehead, put on the bridle, and,
swearing violently, protested that he would cure him of leaping the fence.
Poor Jalo was roughly dragged away to his own barn, and after a time
Christian heard the horse snorting and stamping under the blows of Jegor’s
whip. To beat Jalo, to abuse such an animal—who ever heard of such a
thing?
From that day Christian’s life was a hell. To be compelled to do without the
horse was torture enough, but to know that it was in the hands of his worst
enemy, that he could never own it again, to see it daily without being able to
go near it, was far worse. Everything that Jegor could think of to do to the
horse in Christian’s presence to torment him he conscientiously did. Every
blow he had himself received he returned to Jalo. And when, as sometimes
happened, the horse came dashing at a gallop to his old master, as if seeking