Questions from Corporate Finance


Q: True or false? a. One of the first tasks

True or false? a. One of the first tasks of an LBO’s financial manager is to pay down debt. b. Once an LBO or MBO goes private, it almost always stays private. c. Targets for LBOs in the 1980s tend...

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Q: What advantages have been claimed for public conglomerates?

What advantages have been claimed for public conglomerates?

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Q: Phoenix Motors wants to lock in the cost of 10,000

Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter’s production of catalytic converters. It buys three-month futures contracts for 10,000 ounces at a pric...

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Q: Private-equity partnerships have a limited term. What are the

Private-equity partnerships have a limited term. What are the advantages of this arrangement?

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Q: True or false? a. When a company becomes bankrupt

True or false? a. When a company becomes bankrupt, it is usually in the interests of stockholders to seek a liquidation rather than a reorganization. b. In Chapter 11 a reorganization plan must be p...

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Q: True, false, or “It depends on. . .”?

True, false, or “It depends on. . .”? a. Carve-out or spin-off of a division improves incentives for the division’s managers. b. Private-equity partnerships have limited lives. The main purpose is t...

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Q: The Sealed Air leveraged restructuring is described in the Chapter 18 Beyond

The Sealed Air leveraged restructuring is described in the Chapter 18 Beyond the Page feature. Outline the similarities and differences between the RJR Nabisco LBO and the Sealed Air restructuring. We...

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Q: Read Barbarians at the Gate (Further Reading). What agency costs

Read Barbarians at the Gate (Further Reading). What agency costs can you identify? Do you think the LBO was well-designed to reduce these costs?

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Q: Explain the structure of a private-equity partnership. Pay particular

Explain the structure of a private-equity partnership. Pay particular attention to incentives and compensation. What types of investment were such partnerships designed to make?

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Q: We described carried interest as an option. What kind of option

We described carried interest as an option. What kind of option? How does this option change incentives in a private-equity partnership? Can you think of circumstances where these incentive changes wo...

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