Questions from Corporate Finance

Q: How does sensitivity analysis interact with break-even analysis?

How does sensitivity analysis interact with break-even analysis?

Q: You own a callable, convertible bond with a conversion ratio of

You own a callable, convertible bond with a conversion ratio of 25.18. The stock is currently selling for $47 per share. The issuer of the bond has announced a call at a call price of 110. What are yo...

Q: What are the three factors that determine a company’s price−earnings

What are the three factors that determine a company’s price−earnings ratio?

Q: The investment in Project A is $1 million, and the

The investment in Project A is $1 million, and the investment in Project B is $2 million. Both projects have a unique internal rate of return of 20 percent. Is the following statement true or false? F...

Q: A major college textbook publisher has an existing finance textbook. The

A major college textbook publisher has an existing finance textbook. The publisher is debating whether to produce an “essentialized” version, meaning a shorter (and lower-priced) book. What are some o...

Q: An option can often have more than one source of value.

An option can often have more than one source of value. Consider a logging company. The company can log the timber today or wait another year (or more) to log the timber. What advantages would waiting...

Q: What is the difference between arithmetic and geometric returns? Suppose you

What is the difference between arithmetic and geometric returns? Suppose you have invested in a stock for the last 10 years. Which number is more important to you, the arithmetic or geometric return?...

Q: A broker has advised you not to invest in oil industry stocks

A broker has advised you not to invest in oil industry stocks because they have high standard deviations. Is the broker’s advice sound for a risk-averse investor like yourself? Why or why not?

Q: What rule should a firm follow when making financing decisions? How

What rule should a firm follow when making financing decisions? How can firms create valuable financing opportunities?

Q: How is it possible that dividends are so important, but at

How is it possible that dividends are so important, but at the same time dividend policy is irrelevant?