Questions from Financial Management

Q: How can a company use a bankruptcy to abrogate labor contracts?

How can a company use a bankruptcy to abrogate labor contracts? Has this occurred in certain industries in recent years?

Q: The Jimenez Corporation’s forecasted 2016 financial statements follow, along with some

The Jimenez Corporation’s forecasted 2016 financial statements follow, along with some industry average ratios. Calculate Jimenez’s 2016 forecasted ratios, compare...

Q: Greene Sisters has a DSO of 20 days. The company’s average

Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year.

Q: Explain, in your own words, how MM uses the arbitrage

Explain, in your own words, how MM uses the arbitrage process to prove the validity of Proposition I. Also, list the major MM assumptions and explain why each of these assumptions is necessary in the...

Q: A utility company is allowed to charge prices high enough to cover

A utility company is allowed to charge prices high enough to cover all costs, including its cost of capital. Public service commissions are supposed to take actions that stimulate companies to operate...

Q: Modigliani and Miller assumed that firms do not grow. How does

Modigliani and Miller assumed that firms do not grow. How does positive growth change their conclusions about the value of the levered firm and its cost of capital?

Q: Your firm’s CEO has just learned about options and how your firm’s

Your firm’s CEO has just learned about options and how your firm’s equity can be viewed as an option. Why might he want to increase the riskiness of the firm, and why might the bondholders be unhappy...

Q: Define each of the following terms: a. MM Proposition

Define each of the following terms: a. MM Proposition I without taxes and with corporate taxes b. MM Proposition II without taxes and with corporate taxes c. Miller model d. Adjusted present value (AP...

Q: How is the value of a financial option affected by:

How is the value of a financial option affected by: (a) the current price of the underlying asset, (b) the exercise (or strike) price, (c) the risk-free rate, (d) the time until expiration (or mat...

Q: The stockholders’ claim in a levered firm can be viewed as a

The stockholders’ claim in a levered firm can be viewed as a call option; stockholders have the option to purchase the firm’s assets by paying off its debt. What incentives does this provide to stockh...