Questions from Corporate Finance

Q: Monitoring alone can never completely eliminate agency costs in capital investment.

Monitoring alone can never completely eliminate agency costs in capital investment. Briefly explain why.

Q: True or false? Explain briefly. a. Book profitability

True or false? Explain briefly. a. Book profitability measures are biased measures of true profitability for individual assets. However, these biases “wash out” when firms hold a balanced mix of old a...

Q: Consider the following project:
The internal rate

Consider the following project:
The internal rate of return is 20%. The NPV, assuming a 20% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreci...

Q: Explain what each of the following terms or phrases means:

Explain what each of the following terms or phrases means: a. Venture capital b. Book building c. Underwriting spread d. Registration statement e. Winner’s curse

Q: True or false? a. Venture capitalists typically provide first

True or false? a. Venture capitalists typically provide first-stage financing sufficient to cover all development expenses. Second-stage financing is provided by stock issued in an IPO. b. Underpric...

Q: You need to choose between making a public offering and arranging a

You need to choose between making a public offering and arranging a private placement. In each case the issue involves $10 million face value of 10-year debt. You have the following data for each: A...

Q: Associated Breweries is planning to market alcohol-free beer. To

Associated Breweries is planning to market alcohol-free beer. To finance the venture it proposes to make a rights issue at $10 of one new share for each two shares held. (The company currently has out...

Q: Here is a further vocabulary quiz. Briefly explain each of the

Here is a further vocabulary quiz. Briefly explain each of the following: a. Zero-stage vs. first- or second-stage financing b. Carried interest c. Rights issue d. Road show e. Best-efforts offer...

Q: a. “A signal is credible only if it is costly

a. “A signal is credible only if it is costly.” Explain why management’s willingness to invest in Marvin’s equity was a credible signal. Was its willingness to accept only part of the venture capital...

Q: In some U.K. IPOs any investor may be able

In some U.K. IPOs any investor may be able to apply to buy shares. Mr. Bean has observed that on average these stocks are underpriced by about 9% and for some years has followed a policy of applying f...