Questions from Corporate Finance

Q: BMD is a firm with no debt on its books currently anda

BMD is a firm with no debt on its books currently anda market value of equity of $2 billion. On the basis of its EBITDA of $200 million, it can afford to have a debt ratio of 50%, at which level the f...

Q: Repeat the analysis in Problem 7 for a private firm that has

Repeat the analysis in Problem 7 for a private firm that has provided you with the following estimates of operating income for the 10 years, for which you have the macroeconomic data:

Q: Union Pacific Railroad reported net income of $770 million after interest

Union Pacific Railroad reported net income of $770 million after interest expenses of $320 million in a recent financial year. (The corporate tax rate was 36%.) It reported depreciation of $960 millio...

Q: Tech Products, from Question 7, pays a dividend of $

Tech Products, from Question 7, pays a dividend of $40 million. Assuming that the firm started the period with no cash, how did it raise the funding for the dividend payment?

Q: Would your answer be different for the previous problem if JC Automobiles

Would your answer be different for the previous problem if JC Automobiles were a large firm followed by thirty-five analysts? Why or why not?

Q: In recent years, top managers have been given large packages of

In recent years, top managers have been given large packages of options, giving them the right to buy stock in the firm at a fixed price. Will these compensation schemes make managers more responsive...

Q: Assume that the average variance of return for an individual security is

Assume that the average variance of return for an individual security is 50% and that the average covariance is 10%. What is the expected variance of a portfolio of 5, 10, 20, 50, and 100 securities....

Q: The following table summarizes the percentage changes in operating income, percentage

The following table summarizes the percentage changes in operating income, percentage changes in revenue, and betas for four pharmaceutical firms. a. Calculate the degree of operating leverage for eac...

Q: You have estimated the following cash flows on a project:

You have estimated the following cash flows on a project: Plot the NPV profile for this project. What is the IRR? If the cost of equity is 16%, would you accept this project?

Q: The lining of a plating tank must be replaced every three years

The lining of a plating tank must be replaced every three years at the cost of approximately $2,000. A new lining material has been developed that is more resistant to the corrosive effects of the pla...