Questions from Corporate Finance


Q: AMC Corporation currently has an enterprise value of $400 million and

AMC Corporation currently has an enterprise value of $400 million and $100 million in excess cash. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchas...

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Q: Explain why most companies choose to pay stock dividends (split their

Explain why most companies choose to pay stock dividends (split their stock).

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Q: When might it be advantageous to undertake a reverse stock split?

When might it be advantageous to undertake a reverse stock split?

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Q: RFC Corp. has announced a $1 dividend. If RFC’s

RFC Corp. has announced a $1 dividend. If RFC’s price last price cum-dividend is $50, what should its first ex-dividend price be (assuming perfect capital markets)?

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Q: KMS Corporation has assets with a market value of $500 million

KMS Corporation has assets with a market value of $500 million, $50 million of which are cash. It has debt of $200 million, and 10 million shares outstanding. Assume perfect capital markets. a. What i...

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Q: Suppose you work for Oracle Corporation, and part of your compensation

Suppose you work for Oracle Corporation, and part of your compensation takes the form of stock options. The value of the stock option is equal to the difference between Oracle’s stock price and an exe...

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Q: Explain whether each of the following projects is likely to have risk

Explain whether each of the following projects is likely to have risk similar to the average risk of the firm. a. The Clorox Company considers launching a new version of Armor All designed to clean an...

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Q: Consider Alcatel-Lucent’s project in Problem 6. a.

Consider Alcatel-Lucent’s project in Problem 6. a. What is Alcatel-Lucent’s unlevered cost of capital? b. What is the unlevered value of the project? c. What are th...

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Q: Consider Alcatel-Lucent’s project in Problem 6. a.

Consider Alcatel-Lucent’s project in Problem 6. a. What is the free cash flow to equity for this project? b. What is its NPV computed using the FTE method? How does it compare with t...

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Q: WorldCom reclassified $3.85 billion of operating expenses as capital

WorldCom reclassified $3.85 billion of operating expenses as capital expenditures. Explain the effect this reclassification would have on WorldCom’s cash flows. (Hint: Consider taxes.) WorldCom’s acti...

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