Questions from Corporate Finance


Q: What is the pecking order according to Myers’ argument?

What is the pecking order according to Myers’ argument?

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Q: Summarize the main factors you need to consider if the CFO of

Summarize the main factors you need to consider if the CFO of your firm asks you to evaluate your firm’s capital structure.

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Q: Explain four of the most important factors influencing capital structure decisions as

Explain four of the most important factors influencing capital structure decisions as indicated in the survey results and how they relate to the conceptual discussion of an optimal capital structure....

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Q: Distinguish between operating and financial leverage.

Distinguish between operating and financial leverage.

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Q: Why do we say that equity holders bear the brunt of the

Why do we say that equity holders bear the brunt of the effects of leverage?

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Q: Why is the weighted average cost of capital (WACC) so

Why is the weighted average cost of capital (WACC) so important?

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Q: What are the steps involved in estimating a firm’s WACC?

What are the steps involved in estimating a firm’s WACC?

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Q: How can we estimate the market value of common equity, preferred

How can we estimate the market value of common equity, preferred equity, and long-term debt?

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Q: In the M&M no‐tax world, an unlevered

In the M&M no‐tax world, an unlevered firm has a cost of equity of 12 percent and expected EBIT of $480,000. The firm decided to issue $3 million of debt at a cost of 8 percent to finance a project, w...

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Q: Suppose Sio Inc. has 45 days of accounts receivable (AR

Suppose Sio Inc. has 45 days of accounts receivable (AR) of $900,000 on its books. A factor offers a 45‐day AR loan equal to 90 percent of AR. The quoted interest rate is 6 percent, and there is a com...

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