Questions from Corporate Finance

Q: Candle box Inc. is going to elect six board members next

Candle box Inc. is going to elect six board members next month. Betty Brown owns 17.4 percent of the total shares outstanding. How confident can she be of having one of her candidate friends elected u...

Q: List the three assumptions that lie behind the Modigliani–Miller theory

List the three assumptions that lie behind the Modigliani–Miller theory in a world without taxes. Are these assumptions reasonable in the real world? Explain.

Q: Rolston Corporation is comparing two different capital structures, an all-

Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have 265,000 shares of stock outstanding. Under...

Q: What steps can stockholders take to reduce the costs of debt?

What steps can stockholders take to reduce the costs of debt?

Q: Dream, Inc., has debt outstanding with a face value of

Dream, Inc., has debt outstanding with a face value of $6 million. The value of the firm if it were entirely financed by equity would be $17.85 million. The company also has 350,000 shares of stock ou...

Q: The yields on nonconvertible preferred stock are lower than the yields on

The yields on nonconvertible preferred stock are lower than the yields on corporate bonds. Why is there a difference? Which investors are the primary holders of preferred stock? Why?

Q: KIC, Inc., plans to issue $5 million of bonds

KIC, Inc., plans to issue $5 million of bonds with a coupon rate of 8 percent and 30 years to maturity. The current market interest rates on these bonds are 7 percent. In one year, the interest rate o...

Q: Explain what is meant by business and financial risk. Suppose Firm

Explain what is meant by business and financial risk. Suppose Firm A has greater business risk than Firm B. Is it true that Firm A also has a higher cost of equity capital? Explain.

Q: Rolston Corporation is comparing two different capital structures, an all-

Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have 265,000 shares of stock outstanding. Under...

Q: How does the existence of financial distress costs and agency costs affect

How does the existence of financial distress costs and agency costs affect Modigliani and Miller’s theory in a world where corporations pay taxes?