Questions from Corporate Finance

Q: In a replacement problem, will incremental net depreciation always be less

In a replacement problem, will incremental net depreciation always be less than the gross depreciation on the new piece of equipment?

Q: Would it be possible for a firm to announce a “reverse

Would it be possible for a firm to announce a “reverse stock dividend”?

Q: Why does allowing for the existence of corporate taxation cause firms to

Why does allowing for the existence of corporate taxation cause firms to prefer the maximum amount of debt possible?

Q: In a cost-cutting proposal, what might cause you to

In a cost-cutting proposal, what might cause you to sometimes have negative EBIT?

Q: How many TVM formulas do you use every time you calculate EAC

How many TVM formulas do you use every time you calculate EAC for a project?

Q: Will an increase in flotation costs increase or decrease the initial cash

Will an increase in flotation costs increase or decrease the initial cash flow for a project?

Q: Explain why the divisional cost of capital approach may cause problems if

Explain why the divisional cost of capital approach may cause problems if new projects are assigned to the wrong division.

Q: How would you handle calculating the cost of capital if a firm

How would you handle calculating the cost of capital if a firm were planning to issue two different classes of common stock?

Q: Why don’t we multiply the cost of preferred stock by one minus

Why don’t we multiply the cost of preferred stock by one minus the tax rate, as we do for debt?

Q: Expressing WACC in terms of iE, iP, and iD,

Expressing WACC in terms of iE, iP, and iD, what is the theoretical minimum for the WACC?