Questions from Corporate Finance

Q: Consider the following airline industry data from mid-2009:

Consider the following airline industry data from mid-2009: a. Use the estimates in Table 12.3 to estimate the debt beta for each firm (use an average if multiple ratings are listed). b. Estimate th...

Q: Weston Enterprises is an all-equity firm with two divisions.

Weston Enterprises is an all-equity firm with two divisions. The soft drink division has an asset beta of 0.60, expects to generate free cash flow of $50 million this year, and anticipates a 3% perpet...

Q: Harrison Holdings, Inc. (HHI) is publicly traded,

Harrison Holdings, Inc. (HHI) is publicly traded, with a current share price of $32 per share. HHI has 20 million shares outstanding, as well as $64 million in debt. The founder of HHI, Harry Harrison...

Q: Your company operates a steel plant. On average, revenues from

Your company operates a steel plant. On average, revenues from the plant are $30 million per year. All of the plants costs are variable costs and are consistently 80% of revenues, including energy cos...

Q: Unida Systems has 40 million shares outstanding trading for $10 per

Unida Systems has 40 million shares outstanding trading for $10 per share. In addition, Unida has $100 million in outstanding debt. Suppose Unida’s equity cost of capital is 15%, its debt cost of capi...

Q: See Table 2.5 showing financial statement data and stock price

See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. Compare Mydeco’s accounts payable days in 2012 and 2016. b. Did this change in accounts payabl...

Q: You would like to estimate the weighted average cost of capital for

You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9%...

Q: Aluminum maker Alcoa has a beta of about 2.0,

Aluminum maker Alcoa has a beta of about 2.0, whereas Hormel Foods has a beta of 0.45. If the expected excess return of the marker portfolio is 5%, which of these firms has a higher equity cost of cap...

Q: Suppose Best Buy stock is trading for $30 per share for

Suppose Best Buy stock is trading for $30 per share for a total market cap of $9 billion, and Walt Disney has 1.65 billion shares outstanding. If you hold the market portfolio, and as part of it hold...

Q: Standard and Poor’s also publishes the S&P Equal Weight Index

Standard and Poor’s also publishes the S&P Equal Weight Index, which is an equally weighted version of the S&P 500. a. To maintain a portfolio that tracks this index, what trades would need to be made...