Questions from Corporate Finance

Q: You need a new car and the dealer has offered you a

You need a new car and the dealer has offered you a price of $20,000, with the following payment options: (a) pay cash and receive a $2000 rebate, or (b) pay a $5000 down payment and finance the rest...

Q: Can the nominal interest rate available to an investor be significantly negative

Can the nominal interest rate available to an investor be significantly negative? Can the real interest rate be negative? Explain.

Q: Suppose that in 2016, Global launches an aggressive marketing campaign that

Suppose that in 2016, Global launches an aggressive marketing campaign that boosts sales by 15%. However, their operating margin falls from 5.57% to 4.50%. Suppose that they have no other income, inte...

Q: Consider a project that requires an initial investment of $100,

Consider a project that requires an initial investment of $100,000 and will produce a single cash flow of $150,000 in five years. a. What is the NPV of this project if the five-year interest rate is 5...

Q: Suppose the term structure of risk-free interest rates is as

Suppose the term structure of risk-free interest rates is as shown below: a. Calculate the present value of an investment that pays $1000 in two years and $2000 in five years for certain. b. Calcula...

Q: Many academic institutions offer a sabbatical policy. Every seven years a

Many academic institutions offer a sabbatical policy. Every seven years a professor is given a year free of teaching and other administrative responsibilities at full pay. For a professor earning $70,...

Q: Using the term structure in Problem 29, what is the present

Using the term structure in Problem 29, what is the present value of an investment that pays $100 at the end of each of years 1, 2, and 3? If you wanted to value this investment correctly using the an...

Q: What is the shape of the yield curve given the term structure

What is the shape of the yield curve given the term structure in Problem 29? What expectations are investors likely to have about future interest rates? Data from Problem 29: Suppose the term struct...

Q: Suppose the current one-year interest rate is 6%. One

Suppose the current one-year interest rate is 6%. One year from now, you believe the economy will start to slow and the one-year interest rate will fall to 5%. In two years, you expect the economy to...

Q: Figure 5.4 shows that Johnson and Johnson’s five-year

Figure 5.4 shows that Johnson and Johnson’s five-year borrowing rate is 1.9% and Xerox’s is 4.0%. Which would you prefer? $500 from Johnson and Johnson paid today o...