Questions from Corporate Finance

Q: You bought one of Bergen Manufacturing Co.’s 6.4

You bought one of Bergen Manufacturing Co.’s 6.4 percent coupon bonds one year ago for $1,032.50. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds...

Q: You want to create a portfolio equally as risky as the market

You want to create a portfolio equally as risky as the market, and you have $1,000,000 to invest. Given this information, fill in the rest of the following table:

Q: Advance, Inc., is trying to determine its cost of debt

Advance, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 13 years to maturity that is quoted at 95 percent of face value. The issue makes semiannual payments...

Q: Trower Corp. has a debt–equity ratio of .85

Trower Corp. has a debt–equity ratio of .85. The company is considering a new plant that will cost $145 million to build. When the company issues new equity, it incurs a flotation cost of 8 percent. T...

Q: Locomotive Corporation is planning to repurchase part of its common stock by

Locomotive Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firm’s debt–equity ratio is expected to rise from 35 percent to 50 percent. The fi...

Q: Frostbite Thermalwear has a zero coupon bond issue outstanding with a face

Frostbite Thermalwear has a zero coupon bond issue outstanding with a face value of $25,000 that matures in one year. The current market value of the firm’s assets is $27,200. The standard deviation o...

Q: With the growing popularity of casual surf print clothing, two recent

With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass a “surf lifestyle for the home.” With limited capital, they...

Q: The Yurdone Corporation wants to set up a private cemetery business.

The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is “looking up.” As a result, the cemetery project will provide a net cash inflow of...

Q: You are determining whether your company should undertake a new project and

You are determining whether your company should undertake a new project and have calculated the NPV of the project using the WACC method when the CFO, a former accountant, notices that you did not use...

Q: Suppose the market is semistrong form efficient. Can you expect to

Suppose the market is semistrong form efficient. Can you expect to earn excess returns if you make trades based on: a. Your broker’s information about record earnings for a stock? b. Rumors about a me...