Questions from Corporate Finance

Q: A coworker claims that looking at so much marginal this and incremental

A coworker claims that looking at so much marginal this and incremental that is just a bunch of nonsense, and states, “Listen, if our average revenue doesn’t exceed our average cost, then we will have...

Q: What is the relationship between the one-factor model and the

What is the relationship between the one-factor model and the CAPM?

Q: What are the implications of the efficient market hypothesis for investors who

What are the implications of the efficient market hypothesis for investors who buy and sell stocks in an attempt to “beat the market”?

Q: What is a proxy?

What is a proxy?

Q: Last month, Central Virginia Power Company, which had been having

Last month, Central Virginia Power Company, which had been having trouble with cost overruns on a nuclear power plant that it had been building, announced that it was “temporarily suspending dividend...

Q: Zipcar, the car sharing company, went public in April 2011

Zipcar, the car sharing company, went public in April 2011. Assisted by the investment bank Goldman Sachs, Zipcar sold 9.68 million shares at $18 each, thereby raising a total of $174.24 million. By t...

Q: True or false: The unsystematic risk of a share of stock

True or false: The unsystematic risk of a share of stock is irrelevant for valuing the stock because it can be diversified away; therefore, it is also irrelevant for valuing a call option on the stock...

Q: Companies pay rating agencies such as Moody’s and S&P to

Companies pay rating agencies such as Moody’s and S&P to rate their bonds, and the costs can be substantial. However, companies are not required to have their bonds rated in the first place; doing so...

Q: In the context of the dividend growth model, is it true

In the context of the dividend growth model, is it true that the growth rate in dividends and the growth rate in the price of the stock are identical?

Q: Are the capital budgeting criteria we discussed applicable to not-for

Are the capital budgeting criteria we discussed applicable to not-for-profit corporations? How should such entities make capital budgeting decisions? What about the U.S. government? Should it evaluate...