Questions from Corporate Finance

Q: You recently graduated from college, and your job search led you

You recently graduated from college, and your job search led you to S&S Air. Because you felt the company’s business was taking off, you accepted a job offer. The first day on th...

Q: Mark Sexton and Todd Story, the owners of S&S

Mark Sexton and Todd Story, the owners of S&S Air, have been in discussions with a light aircraft dealer in Monaco about selling the company’s planes in Europe. Jarek Jachowicz, the dealer, wants to a...

Q: We have seen that over long periods, stock investments have tended

We have seen that over long periods, stock investments have tended to substantially outperform bond investments. However, it is common to observe investors with long horizons holding entirely bonds. A...

Q: Mark Sexton and Todd Story have been discussing the future of S

Mark Sexton and Todd Story have been discussing the future of S&S Air. The company has been experiencing fast growth, and the two see only clear skies in the company’s future. However, the fast growth...

Q: Joey Moss, a recent finance graduate, has just begun his

Joey Moss, a recent finance graduate, has just begun his job with the investment firm of Covili and Wyatt. Paul Covili, one of the firm’s founders, has been talking to Joey about the firm’s investment...

Q: What is forecasting risk? In general, would the degree of

What is forecasting risk? In general, would the degree of forecasting risk be greater for a new product or a cost-cutting proposal? Why?

Q: What is the essential difference between sensitivity analysis and scenario analysis?

What is the essential difference between sensitivity analysis and scenario analysis?

Q: As indicated by a number of examples in this chapter, earnings

As indicated by a number of examples in this chapter, earnings announcements by companies are closely followed by, and frequently result in, share price revisions. Two issues should come to mind. Firs...

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

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

Q: At one time at least, many Japanese companies had a “

At one time at least, many Japanese companies had a “no-layoff” policy (for that matter, so did IBM). What are the implications of such a policy for the degree of operating leverage a company faces?