Questions from Corporate Finance

Q: What are the three rules of leverage?

What are the three rules of leverage?

Q: Describe how we determine the ROE and EPS indifference points for a

Describe how we determine the ROE and EPS indifference points for a firm based on various financing alternatives, and explain why this analysis provides the firm with useful information.

Q: Explain the impact of financial distress and agency costs on M&

Explain the impact of financial distress and agency costs on M&M’s conclusions regarding capital structure.

Q: What are some of the advantages of carrying inventories?

What are some of the advantages of carrying inventories?

Q: Why can the firm’s debt be viewed as the exercise price to

Why can the firm’s debt be viewed as the exercise price to the shareholders’ option to purchase the firm?

Q: Explain the static trade-off theory.

Explain the static trade-off theory.

Q: Explain how ratios may be used to assess a company’s ability to

Explain how ratios may be used to assess a company’s ability to assume more debt.

Q: What is Altman’s Z score and what does it measure?

What is Altman’s Z score and what does it measure?

Q: A firm is going to finance a new project 100 percent with

A firm is going to finance a new project 100 percent with debt, through a new bond issue. Since the firm is using only debt to finance the project, the NPV of the project should be calculated using th...

Q: Montreal Brokers, a small brokerage firm and PEI tronics, a

Montreal Brokers, a small brokerage firm and PEI tronics, a software development company, are both separately considering developing and marketing a new software package. Neither party is aware that t...