Questions from Corporate Finance

Q: You own a portfolio equally invested in a risk-free asset

You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.73 and the total portfolio is equally as risky as the market, what must the beta be for t...

Q: Consider the following cash flows on two mutually exclusive projects for the

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 14 percent. As a financial analyst for BR...

Q: Technical analysis is a controversial investment practice. Technical analysis covers a

Technical analysis is a controversial investment practice. Technical analysis covers a wide array of techniques, which are all used in an attempt to predict the direction of a particular stock or the...

Q: What factors influence a firm’s choice of external versus internal equity financing

What factors influence a firm’s choice of external versus internal equity financing?

Q: The Woods Co. and the Garcia Co. have both announced

The Woods Co. and the Garcia Co. have both announced IPOs at $40 per share. One of these is undervalued by $11, and the other is overvalued by $3, but you have no way of knowing which is which. You pl...

Q: Historically, the U.S. tax code treated dividend payments

Historically, the U.S. tax code treated dividend payments made to shareholders as ordinary income. Thus, dividends were taxed at the investor’s marginal tax rate, which was as high as 38.6 percent in...

Q: In April 2014, International Lease Finance Corporation (ILFC) announced

In April 2014, International Lease Finance Corporation (ILFC) announced a deal to purchase eight Airbus A330-200 and A350-900 passenger aircraft. ILFC then signed a long-term lease contract on the pla...

Q: In 2003, Porsche unveiled its new sports utility vehicle (SUV

In 2003, Porsche unveiled its new sports utility vehicle (SUV), the Cayenne. With a price tag of over $40,000, the Cayenne goes from zero to 62 mph in 8.5 seconds. Porsche’s decision to enter the SUV...

Q: What are the differences between preferred stock and debt?

What are the differences between preferred stock and debt?

Q: You are evaluating Project A and Project B. Project A has

You are evaluating Project A and Project B. Project A has a short period of future cash flows, while Project B has relatively long future cash flows. Which project will be more sensitive to changes in...