Questions from Corporate Finance

Q: Mike’s T-Shirts, Inc., has debt claims of $

Mike’s T-Shirts, Inc., has debt claims of $400 (market value) and equity claims of $600 (market value). If the after-tax cost of debt financing is 11 percent and the cost of equity is 17 percent, then...

Q: You are analyzing a firm that is financed with 60 percent debt

You are analyzing a firm that is financed with 60 percent debt and 40 percent equity. The current cost of debt financing is 10 percent, but due to a recent downgrade by the rating agencies, the firm’s...

Q: You would like to own a common stock that has a record

You would like to own a common stock that has a record date of Friday, September 8, 2017. What is the last date that you can purchase the stock and still receive the dividend?

Q: You believe that the average investor is subject to a 20 percent

You believe that the average investor is subject to a 20 percent tax rate on dividend payments. If a firm is going to pay a $0.30 dividend, by what amount would you expect the stock price to drop on t...

Q: Two publicly traded companies in the same industry are similar in all

Two publicly traded companies in the same industry are similar in all respects except one. Whereas Publicks has issued debt in the public markets, Privicks has never borrowed from any public source. I...

Q: Your sister wants to open a store that sells antique-style

Your sister wants to open a store that sells antique-style jewelry and accessories. She has $15,000 of savings to invest, but opening the store will require an initial investment of $20,000. Net cash...

Q: You have the following information for a company you are valuing and

You have the following information for a company you are valuing and for a comparable company: Comparable company: ………….……………………………… Company you are valuing: Stock price = $23.45 ………………… …………………………………...

Q: How is a preferred stock with a fixed maturity valued?

How is a preferred stock with a fixed maturity valued?

Q: How do the cash flows that are discounted when the WACC approach

How do the cash flows that are discounted when the WACC approach (FCFF approach) is used to value a business differ from those that are discounted when the free cash flow to equity (FCFE) approach is...

Q: You are valuing a company using the WACC approach and have estimated

You are valuing a company using the WACC approach and have estimated that the free cash flows from the firm (FCFF) in the next five years will be $36.7, $42.6, $45.1, $46.3, and $46.6 million, respect...