Questions from Corporate Finance

Q: If a textile manufacturer wanted to hedge against adverse movements in cotton

If a textile manufacturer wanted to hedge against adverse movements in cotton prices, it could buy cotton futures contracts or buy call options on cotton futures contracts. What would be the pros and...

Q: What is the duration of a bond with three years to maturity

What is the duration of a bond with three years to maturity and a coupon of 7 percent paid annually if the bond sells at par?

Q: What are the costs of shortages? Describe them.

What are the costs of shortages? Describe them.

Q: Consider the following financial statement information for the Bulldog Icers Corporation:

Consider the following financial statement information for the Bulldog Icers Corporation: Calculate the operating and cash cycles. How do you interpret your answer?

Q: Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10

Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 8 percent loan with gross proceeds of $5,850,000. The interest payments on the loan will be made annually. Flotation costs are estim...

Q: What is meant by the term off–balance sheet financing?

What is meant by the term off–balance sheet financing? When do leases provide such financing, and what are the accounting and economic consequences of such activity?

Q: The following is the sales budget for Shleifer, Inc., for

The following is the sales budget for Shleifer, Inc., for the first quarter of 2013: Credit sales are collected as follows: 65 percent in the month of the sale. 20 percent in the month after the sale...

Q: What are the deltas of a call option and a put option

What are the deltas of a call option and a put option with the following characteristics? What does the delta of the option tell you? Stock price = $67 Exercise price = $70 Risk-free rate = 5%...

Q: Super Sonics Entertainment is considering buying a machine that costs $540

Super Sonics Entertainment is considering buying a machine that costs $540,000. The machine will be depreciated over five years by the straight-line method and will be worthless at that time. The comp...

Q: You are discussing real options with a colleague. During the discussion

You are discussing real options with a colleague. During the discussion, the colleague states, “Real option analysis makes no sense because it says that a real option on a risky venture is worth more...