Questions from Corporate Finance

Q: Suppose a factor model is appropriate to describe the returns on a

Suppose a factor model is appropriate to describe the returns on a stock. The current expected return on the stock is 10.5 percent. Information about those factors is presented in the following chart:...

Q: Shanken Corp. issued a 30-year, 5.9

Shanken Corp. issued a 30-year, 5.9 percent semiannual bond 6 years ago. The bond currently sells for 108 percent of its face value. The company’s tax rate is 35 percent. a. What is the pretax cost of...

Q: The following figures present the results of four cumulative abnormal returns (

The following figures present the results of four cumulative abnormal returns (CAR) studies. Indicate whether the results of each study support, reject, or are inconclusive about the semistrong form o...

Q: What are the two types of risk that are measured by a

What are the two types of risk that are measured by a levered beta?

Q: An investment project has annual cash inflows of $5,000

An investment project has annual cash inflows of $5,000, $5,500, $6,000, and $7,000, and a discount rate of 12 percent. What is the discounted payback period for these cash flows if the initial cost i...

Q: Discuss the accounting criteria for determining whether a lease must be reported

Discuss the accounting criteria for determining whether a lease must be reported on the balance sheet. In each case give a rationale for the criterion.

Q: What is dilution, and why does it occur when warrants are

What is dilution, and why does it occur when warrants are exercised?

Q: The St. Anger Corporation needs to raise $55 million to

The St. Anger Corporation needs to raise $55 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. If the...

Q: You work for a nuclear research laboratory that is contemplating leasing a

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $5,800,000, and it w...

Q: The price of Tara, Inc., stock will be either $

The price of Tara, Inc., stock will be either $50 or $70 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5 percent. a. Suppose the current price...