Questions from Financial Management

Q: In general, do timing options make it more or less likely

In general, do timing options make it more or less likely that a project will be accepted today?

Q: If a company has an option to abandon a project, would

If a company has an option to abandon a project, would this tend to make the company more or less likely to accept the project today?

Q: sPetersen Company has a capital budget of $1.2 million

sPetersen Company has a capital budget of $1.2 million. The company wants to maintain a target capital structure which is 60% debt and 40% equity. The company forecasts that its net income this year w...

Q: The Wei Corporation expects next year’s net income to be $15

The Wei Corporation expects next year’s net income to be $15 million. The firm’s debt ratio is currently 40%. Wei has $12 million of profitable investment opportunities, and it wishes to maintain its...

Q: A firm has 10 million shares outstanding with a market price of

A firm has 10 million shares outstanding with a market price of $20 per share. The firm has $25 million in extra cash (short-term investments) that it plans to use in a stock repurchase; the firm has...

Q: JPix management is considering a stock split. JPix currently sells for

JPix management is considering a stock split. JPix currently sells for $120 per share and a 3-for-2 stock split is contemplated. What will be the company’s stock price following the stock split, assum...

Q: Gardial GreenLights, a manufacturer of energy-efficient lighting solutions,

Gardial GreenLights, a manufacturer of energy-efficient lighting solutions, has had such success with its new products that it is planning to substantially expand its manufacturing capacity with a $15...

Q: Suppose you own 2,000 common shares of Laurence Incorporated.

Suppose you own 2,000 common shares of Laurence Incorporated. The EPS is $10.00, the DPS is $3.00, and the stock sells for $80 per share. Laurence announces a 2-for-1 split. Immediately after the spli...

Q: Fauver Enterprises declared a 3-for-1 stock split last

Fauver Enterprises declared a 3-for-1 stock split last year, and this year its dividend is $1.50 per share. This total dividend payout represents a 6% increase over last year’s pre-split total dividen...

Q: Most firms generate cash inflows every day, not just once at

Most firms generate cash inflows every day, not just once at the end of the year. In capital budgeting, should we recognize this fact by estimating daily project cash flows and then using them in the...