Questions from Corporate Finance

Q: Which has greater interest rate risk, a 30-year Treasury

Which has greater interest rate risk, a 30-year Treasury bond or a 30-year BB corporate bond?

Q: What is the intrinsic value of a call option? Of a

What is the intrinsic value of a call option? Of a put option? How do we interpret these values?

Q: Security F has an expected return of 10 percent and a standard

Security F has an expected return of 10 percent and a standard deviation of 49 percent per year. Security G has an expected return of 14 percent and a standard deviation of 73 percent per year. a. Wha...

Q: Assuming a world of corporate taxes only, show that the cost

Assuming a world of corporate taxes only, show that the cost of equity, RS , is as given in the chapter by MM Proposition II with corporate taxes.

Q: Pricing Model Rob wishes to buy a European put option on BioLabs

Pricing Model Rob wishes to buy a European put option on BioLabs, Inc., a non-dividend-paying common stock, with a strike price of $50 and six months until expiration. The company’s common stock is cu...

Q: Dickinson Brothers, Inc., is considering investing in a machine to

Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $975,000, and its economic life is five years. The machine will be fully...

Q: Darin Clay, the CFO of MakeMoney.com, has to

Darin Clay, the CFO of MakeMoney.com, has to decide between the following two projects: The expected rate of return for either of the two projects is 12 percent. What is the range of initial investm...

Q: Prospectors, Inc., is a publicly traded gold prospecting company in

Prospectors, Inc., is a publicly traded gold prospecting company in Alaska. Although the firm’s searches for gold usually fail, the prospectors occasionally find a rich vein of ore. What pattern would...

Q: Aday Acoustics, Inc., projects unit sales for a new seven

Aday Acoustics, Inc., projects unit sales for a new seven-octave voice emulation implant as follows: Production of the implants will require $1,500,000 in net working capital to start and additional...

Q: Consider the following project for Hand Clapper, Inc. The company

Consider the following project for Hand Clapper, Inc. The company is considering a four-year project to manufacture clap-command garage door openers. This project requires an initial investment of $15...