Questions from Corporate Finance

Q: Imprudential, Inc., has an unfunded pension liability of $550

Imprudential, Inc., has an unfunded pension liability of $550 million that must be paid in 20 years. To assess the value of the firm’s stock, financial analysts want to discount this liability back to...

Q: On the balance sheet, the net fixed assets (NFA)

On the balance sheet, the net fixed assets (NFA) account is equal to the gross fixed assets (FA) account, which records the acquisition cost of fixed assets, minus the accumulated depreciation (AD) ac...

Q: Risks In broad terms, why is some risk diversifiable? Why

Risks In broad terms, why is some risk diversifiable? Why are some risks nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level...

Q: If a portfolio has a positive investment in every asset, can

If a portfolio has a positive investment in every asset, can the expected return on the portfolio be greater than that on every asset in the portfolio? Can it be less than that on every asset in the p...

Q: Suppose a financial manager is quoted as saying, “Our firm

Suppose a financial manager is quoted as saying, “Our firm uses the stand-alone principle. Because we treat projects like mini firms in our evaluation process, we include financing costs because they...

Q: The shareholders of the Stackhouse Company need to elect seven new directors

The shareholders of the Stackhouse Company need to elect seven new directors. There are 960,000 shares outstanding currently trading at $48 per share. You would like to serve on the board of directors...

Q: Why does traditional NPV analysis tend to underestimate the true value of

Why does traditional NPV analysis tend to underestimate the true value of a capital budgeting project?

Q: Are there any circumstances under which an investor might be more concerned

Are there any circumstances under which an investor might be more concerned about the nominal return on an investment than the real return?

Q: Is it possible for the risk premium to be negative before an

Is it possible for the risk premium to be negative before an investment is undertaken? Can the risk premium be negative after the fact? Explain.

Q: Is it possible that a risky asset could have a beta of

Is it possible that a risky asset could have a beta of zero? Explain. Based on the CAPM, what is the expected return on such an asset? Is it possible that a risky asset could have a negative beta? Wha...