Questions from Corporate Finance

Q: True or false? a. Financial slack means having cash

True or false? a. Financial slack means having cash in the bank or ready access to the debt markets. b. Financial slack is most valuable to firms with few investment opportunities and poor prospects....

Q: Calculate the weighted-average cost of capital (WACC) for

Calculate the weighted-average cost of capital (WACC) for Federated Junkyards of America, using the following information: 1) Debt: $75,000,000 book value outstanding. The debt is trading at 90% of b...

Q: Take another look at the APV calculation for the perpetual crusher project

Take another look at the APV calculation for the perpetual crusher project in Section 19-4. This time assume that the corporation investing in the project has hit the 30% constraint on interest deduct...

Q: Take another look at the valuations of Rio in Tables 19.

Take another look at the valuations of Rio in Tables 19.1 and 19.2. Now use the live spreadsheets in Connect to show how Rio’s value depends on: a. The forecasted long-term growth rate. b. The require...

Q: Whispering Pines Inc. is all-equity-financed. The

Whispering Pines Inc. is all-equity-financed. The expected rate of return on the company’s shares is 12%. a. What is the opportunity cost of capital for an average-risk Whispering Pines investment? b....

Q: Table 19.3 shows a book balance sheet for the Wishing

Table 19.3 shows a book balance sheet for the Wishing Well Motel chain. The company’s long-term debt is secured by its real estate assets, but it also uses short-term bank loans as a...

Q: Table 19.4 shows a simplified balance sheet for the Dutch

Table 19.4 shows a simplified balance sheet for the Dutch manufacturer Rensselaer Felt. Calculate this company’s weighted-average cost of capital. The debt has just been refinanced a...

Q: Nevada Hydro is 40% debt-financed and has a weighted

Nevada Hydro is 40% debt-financed and has a weighted-average cost of capital of 10.2%: WACC = (1 − Tc)rD D/V + rE E/V = (1 − .21)(.085)(.40) + .125(.60) = .102 Goldensacks Company is advising Nevada H...

Q: Suppose Wishing Well (see Problem 6) is evaluating a new

Suppose Wishing Well (see Problem 6) is evaluating a new motel and resort on a romantic site in Madison County, Wisconsin. Explain how you would forecast the after-tax cash flows for this project. (Hi...

Q: Consider a project lasting one year only. The initial outlay is

Consider a project lasting one year only. The initial outlay is $1,000, and the expected inflow is $1,200. The opportunity cost of capital is r = .20. The borrowing rate is rD = .10, and the tax shiel...