Questions from Corporate Finance

Q: You own a rental building in the city and are interested in

You own a rental building in the city and are interested in replacing the heating system. You are faced with the following alternatives: a. A solar heating system, which will cost $12,000 to install a...

Q: You are analyzing a new security that has been promoted as equity

You are analyzing a new security that has been promoted as equity, with the following features: • The dividend on the security is fixed in dollar terms for the life of the security, which is 20 years....

Q: Plastico is considering a major change in its capital structure. It

Plastico is considering a major change in its capital structure. It has three options: • Option 1: Issue $1 billion in new stock and repurchase half of its outstanding debt. This will make it an AAA-r...

Q: IOU has $5 billion in debt outstanding (carrying an interest

IOU has $5 billion in debt outstanding (carrying an interest rate of 9%) and 10 million shares trading at $50 per share. Based on its current EBIT of $200 million, its optimal debt ratio is only 30%....

Q: Stock prices are much too volatile for financial markets to be efficient

Stock prices are much too volatile for financial markets to be efficient. Comment.

Q: You are in a world where there are only two assets,

You are in a world where there are only two assets, gold and stocks. You are interested in investing your money in one, the other, or both assets. Consequently, you collect the following data on the r...

Q: You have been given the following information on a project:

You have been given the following information on a project: • It has a five-year lifetime • The initial investment in the project will be $25 million, and the investment will be depreciated straight l...

Q: Genting Berhad is a Malaysian conglomerate with holdings in plantations and tourist

Genting Berhad is a Malaysian conglomerate with holdings in plantations and tourist resorts. The beta estimated for the firm, relative to the Malaysian stock exchange, is 1.15, and the long-term local...

Q: Answer true or false to the following statements: a.

Answer true or false to the following statements: a. The return on equity for a project will always be higher than the return on capital on the same project. b. If the return on capital is less than t...

Q: Plastico is interested in how it compares with its competitors in the

Plastico is interested in how it compares with its competitors in the same industry. a. Taking each of these variables, explain at an intuitive level whether you would expect Plastico to have more or...