Questions from Corporate Finance

Q: Mr. Kent, one of your clients, has been reading

Mr. Kent, one of your clients, has been reading his daughter ’ s finance textbook and has a question about options. He says: “If I buy a call option, I have the right to buy the asset at the strike pr...

Q: The current price of a stock is $107. You expect

The current price of a stock is $107. You expect the price of the stock to be in the range of $105 to $115 in the next period. The call option with an exercise price of $115 is $1.30; the put option w...

Q: A firm plans to either purchase or lease a machine that costs

A firm plans to either purchase or lease a machine that costs $300,000 and is subject to a 20‐percent CCA rate, using the declining balance method. The required lease payments are $35,000 at the begin...

Q: You have just been appointed manager of the equity portfolio of a

You have just been appointed manager of the equity portfolio of a large pension plan. The portfolio has a current value of $100 billion and is well diversified; consequently, it has a beta close to on...

Q: In the next period, the economy can be in either state

In the next period, the economy can be in either state 1 or state 2, with a probability of 50 percent. You may trade any combination, including fractions of shares, of the following three securities:...

Q: Xiang Zhu, a client of FinCorp Inc., has phoned you

Xiang Zhu, a client of FinCorp Inc., has phoned you with a question. She has been reading a finance textbook and cannot understand how to use the binomial option pricing model to value a call option....

Q: Explain how the purchase method gives rise to goodwill.

Explain how the purchase method gives rise to goodwill.

Q: What is so different about evaluating FDI compared to domestic projects?

What is so different about evaluating FDI compared to domestic projects?

Q: Name some unique risks that may arise when evaluating FDI.

Name some unique risks that may arise when evaluating FDI.

Q: Assume that BigCo’s cost of capital for all the projects is 10

Assume that BigCo’s cost of capital for all the projects is 10 percent. Calculate the NPV, IRR, payback period, discounted payback, and profitability index for each project in Table...