Questions from Corporate Finance

Q: You own $15,000 of Opsware, Inc. stock

You own $15,000 of Opsware, Inc. stock that has a beta of 3.8. You also own $10,000 of Lowe’s Companies (beta = 1.6) and $10,000 of New York Times (beta = 0.8). Assume that the market return will be 1...

Q: What is the theoretical minimum value for MAPE?

What is the theoretical minimum value for MAPE?

Q: Consider a firm with an EBIT of $850,000.

Consider a firm with an EBIT of $850,000. The firm finances its assets with $2,500,000 debt (costing 7.5 percent) and 400,000 shares of stock selling at $5.00 per share. To reduce firm’s risk associat...

Q: Consider a firm with an EBIT of $550,000.

Consider a firm with an EBIT of $550,000. The firm finances its assets with $1,000,000 debt (costing 5.5 percent) and 200,000 shares of stock selling at $12.00 per share. The firm is considering incre...

Q: What’s the source of firm-specific risk? What’s the source

What’s the source of firm-specific risk? What’s the source of market risk?

Q: A firm does not pay a dividend. It is expected to

A firm does not pay a dividend. It is expected to pay its first dividend of $0.20 per share in three years. This dividend will grow at 11 percent indefinitely. Using a 12 percent discount rate, compu...

Q: Oakdale Fashions, Inc., had $245,000 in 2018

Oakdale Fashions, Inc., had $245,000 in 2018 taxable income. Using the tax schedule in Table 2.3, calculate the company’s 2018 income taxes. What is the average tax rate? What is the marginal tax rate...

Q: Hunt Taxidermy, Inc., is concerned about the taxes paid by

Hunt Taxidermy, Inc., is concerned about the taxes paid by the company in 2018. In addition to $42.4 million of taxable income, the firm received $2,975,000 of interest on state-issued bonds and $1,00...

Q: Ramakrishnan Inc. reported 2018 net income of $15 million and

Ramakrishnan Inc. reported 2018 net income of $15 million and depreciation of $2,650,000. The top part of Ramakrishnan, Inc.’s 2018 and 2017 balance sheets is listed below (in millions of dollars).

Q: You are considering an investment in Fields and Struthers, Inc.,

You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm’s free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $62 mill...