Questions from Corporate Finance

Q: MVP, a manufacturing firm with no debt outstanding and a market

MVP, a manufacturing firm with no debt outstanding and a market value of $100 million, is considering borrowing $40 million and buying back stock. Assuming that the interest rate on the debt is 9% and...

Q: You are trying to evaluate whether United Airlines (UAL) has

You are trying to evaluate whether United Airlines (UAL) has any excess debt capacity. In 1995, UAL had 12.2 million shares outstanding at $210 per share and debt outstanding of approximately $3 billi...

Q: You are analyzing the dividend policy of Conrail, a major railroad

You are analyzing the dividend policy of Conrail, a major railroad, and you have collected the following information from the past five years The average debt ratio during this period was 40%, and the...

Q: Longs Drug, a large U.S. drugstore chain operating

Longs Drug, a large U.S. drugstore chain operating primarily in northern California, had sales per share of $122 on which it reported earnings per share of $2.45 and paid a dividend per share of $1.12...

Q: Barring the case of multiple IRRs, is it possible for the

Barring the case of multiple IRRs, is it possible for the NPV of a project to be positive while the IRR is less than the discount rate? Explain.

Q: Now assume that Plastico is considering a project that re- quires

Now assume that Plastico is considering a project that re- quires an initial investment of $100 million and has the following projected income statement (depreciation for the project is expected to be...

Q: Chrysler, the automotive manufacturer, had a beta of 1.

Chrysler, the automotive manufacturer, had a beta of 1.05 in 1995. It had $13 billion in debt outstanding in that year and 355 million shares trading at $50 per share. The firm had a cash balance of $...

Q: You are helping a manufacturing firm decide whether it should invest in

You are helping a manufacturing firm decide whether it should invest in a new plant. The initial investment is expected to be $50 million, and the plant is expected to generate after-tax cash flows of...

Q: You are examining the viability of a capital investment in which your

You are examining the viability of a capital investment in which your firm is interested. The project will require an initial investment of $500,000 and the projected revenues are $400,000 a year for...

Q: A business in the 45% tax bracket is considering borrowing money

A business in the 45% tax bracket is considering borrowing money at 10%. a. What is the after-tax interest rate on the debt? b. What is the after-tax interest rate if only half of the interest expense...