Questions from Corporate Finance

Q: A prestigious investment bank designed a new security that pays a quarterly

A prestigious investment bank designed a new security that pays a quarterly dividend of $4.50 in perpetuity. The first dividend occurs one quarter from today. What is the price of the security if the...

Q: Darin Clay, the CFO of MakeMoney.com, has to

Darin Clay, the CFO of MakeMoney.com, has to decide between the following two projects: The expected rate of return for either of the two projects is 12 percent. What is the range of initial investm...

Q: Dickinson Brothers, Inc., is considering investing in a machine to

Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $975,000, and its economic life is five years. The machine will be fully...

Q: Consider a project to supply Detroit with 35,000 tons

Consider a project to supply Detroit with 35,000 tons of machine screws annually for automobile production. You will need an initial $2,900,000 investment in threading equipment to get the project st...

Q: Why do you think most long-term financial planning begins with

Why do you think most long-term financial planning begins with sales forecasts? Put differently, why are future sales the key input?

Q: The YTM on a bond is the interest rate you earn on

The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period...

Q: Investment X offers to pay you $4,500 per year

Investment X offers to pay you $4,500 per year for nine years, whereas Investment Y offers to pay you $7,000 per year for five years. Which of these cash flow streams has the higher present value if t...

Q: The Stambaugh Corporation currently has earnings per share of $9.

The Stambaugh Corporation currently has earnings per share of $9.40. The company has no growth and pays out all earnings as dividends. It has a new project that will require an investment of $1.95 per...

Q: Define the following: S = Previous year’s sales

Define the following: S = Previous year’s sales A = Total assets E = Total equity g = Projected growth in sales PM = Profit margin b = Retention (plowback) ratio Assuming that all debt is constant, sh...

Q: McKeekin Corp. has a project with the following cash flows:

McKeekin Corp. has a project with the following cash flows: Year …………………Cash Flow 0 ……………………………….$20,000 1 ………………………………..−26,000 2 …………………………………..13,000 What is the IRR of the project? What is happe...