Questions from Corporate Finance


Q: Which is higher, the ask quote or the bid quote?

Which is higher, the ask quote or the bid quote? Why?

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Q: Illustrate through examples how trading commission costs impact an investor’s return.

Illustrate through examples how trading commission costs impact an investor’s return.

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Q: Describe the difference in the timing of trade execution and the certainty

Describe the difference in the timing of trade execution and the certainty of trade price between market orders and limit orders.

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Q: What are the differences between common stock and preferred stock?

What are the differences between common stock and preferred stock?

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Q: How important is growth to a stock’s value? Illustrate with examples

How important is growth to a stock’s value? Illustrate with examples.

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Q: The expected return derived from the constant growth rate model relies on

The expected return derived from the constant growth rate model relies on dividend yield and capital gain. Where do these two parts of the return come from?

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Q: A firm recently paid a $0.45 annual dividend.

A firm recently paid a $0.45 annual dividend. The dividend is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock price is expected to be $80. If the requi...

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Q: Describe, in words, how to use the variable growth rate

Describe, in words, how to use the variable growth rate technique to value a stock.

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Q: Can the variable growth rate model be used to value a firm

Can the variable growth rate model be used to value a firm that has a negative growth rate in Stage 1 and a stable and positive growth rate in Stage 2? Explain.

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Q: Explain why using the P/E relative value approach may be

Explain why using the P/E relative value approach may be useful for companies that do not pay dividends.

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