Questions from Corporate Finance

Q: Suppose your company needs to raise $50 million and you want

Suppose your company needs to raise $50 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 6 percent, and you’re evaluating two issue a...

Q: Suppose the returns on long-term corporate bonds and T-

Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Based on the historical record, use the NORMDIST function in Excel ® to answer the following questions: a. What i...

Q: As a shareholder of a firm that is contemplating a new project

As a shareholder of a firm that is contemplating a new project, would you be more concerned with the accounting break-even point, the cash break-even point (the point at which operating cash flow is z...

Q: Given that Transocean was down by about 63 percent for 2014,

Given that Transocean was down by about 63 percent for 2014, why did some investors hold the stock? Why didn’t they sell out before the price declined so sharply?

Q: Suppose the expected returns and standard deviations of Stocks A and B

Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .11, E(RB) = .13, α A = .39, and αB = .76. a. Calculate the expected return and standard deviation of a portfolio tha...

Q: Assume a firm’s debt is risk-free, so that the

Assume a firm’s debt is risk-free, so that the cost of debt equals the risk-free rate, Rf . Define βA as the firm’s asset beta—that is, the systematic risk of the firm’s assets. Define βS to be the be...

Q: Pricing Model Maverick Manufacturing, Inc., must purchase gold in three

Pricing Model Maverick Manufacturing, Inc., must purchase gold in three months for use in its operations. Maverick’s management has estimated that if the price of gold were to rise above $1,380 per ou...

Q: McKeekin Corp. has a project with the following cash flows:

McKeekin Corp. has a project with the following cash flows: What is the IRR of the project? What is happening here?

Q: Some people argue that the efficient market hypothesis cannot explain the 1987

Some people argue that the efficient market hypothesis cannot explain the 1987 market crash or the high price-to-earnings ratios of Internet stocks during the late 1990s. What alternative hypothesis i...

Q: Fincher Manufacturing has projected sales of $135 million next year.

Fincher Manufacturing has projected sales of $135 million next year. Costs are expected to be $76 million and net investment is expected to be $15 million. Each of these values is expected to grow at...