Questions from Corporate Finance

Q: Explain why the aftertax borrowing rate is the appropriate discount rate to

Explain why the aftertax borrowing rate is the appropriate discount rate to use in lease evaluation.

Q: Suppose the interest rate on T-bills suddenly and unexpectedly rises

Suppose the interest rate on T-bills suddenly and unexpectedly rises. All other things being the same, what is the impact on call option values? On put option values?

Q: Insurance, whether purchased by a corporation or an individual, is

Insurance, whether purchased by a corporation or an individual, is in essence an option. What type of option is an insurance policy?

Q: What is the difference between the term structure of interest rates and

What is the difference between the term structure of interest rates and the yield curve?

Q: Is it unfair or unethical for corporations to create classes of stock

Is it unfair or unethical for corporations to create classes of stock with unequal voting rights?

Q: In the context of capital budgeting, what is an opportunity cost

In the context of capital budgeting, what is an opportunity cost?

Q: Consider the following two mutually exclusive projects available to Global Investments,

Consider the following two mutually exclusive projects available to Global Investments, Inc.: The appropriate discount rate for the projects is 10 percent. Global Investments chose to undertake Proj...

Q: You are discussing a project analysis with a coworker. The project

You are discussing a project analysis with a coworker. The project involves real options, such as expanding the project if successful, or abandoning the project if it fails. Your coworker makes the fo...

Q: Comment on the following remarks: a. Leasing reduces risk

Comment on the following remarks: a. Leasing reduces risk and can reduce a firm’s cost of capital. b. Leasing provides 100 percent financing. c. If the tax advantages of leasing were eliminated, leasi...

Q: The historical asset class returns presented in the chapter are not adjusted

The historical asset class returns presented in the chapter are not adjusted for inflation. What would happen to the estimated risk premium if we did account for inflation? The returns are also not ad...