Questions from Financial Management

Q: What are the similarities and differences in preferred stock and debt as

What are the similarities and differences in preferred stock and debt as sources of financing for a firm?

Q: Why is the marginal cost of capital the relevant concept for evaluating

Why is the marginal cost of capital the relevant concept for evaluating investment projects, rather than a firm’s actual, historic cost of capital?

Q: How does the basic net present value model of capital budgeting deal

How does the basic net present value model of capital budgeting deal with the problem of project risk? What are the shortcomings of this approach?

Q: How would you define risk as it is used in a capital

How would you define risk as it is used in a capital budgeting analysis context?

Q: Describe how the concepts of relative purchasing power parity, interest rate

Describe how the concepts of relative purchasing power parity, interest rate parity, and the international Fisher effect are related.

Q: Recalling the discussion in Chapter 8, when is the standard deviation

Recalling the discussion in Chapter 8, when is the standard deviation of a project’s cash flows an appropriate measure of project risk? When is the coefficient of variation an appropriate measure?

Q: How does the basic net present value capital budgeting model deal with

How does the basic net present value capital budgeting model deal with the phenomenon of increasing risk of project cash flows over time?

Q: When should a firm consider the portfolio effects of a new project

When should a firm consider the portfolio effects of a new project?

Q: What are the primary advantages and disadvantages of applying simulation to capital

What are the primary advantages and disadvantages of applying simulation to capital budgeting risk analysis?

Q: Computer simulation is used to generate a large number of possible outcomes

Computer simulation is used to generate a large number of possible outcomes for an investment project. Most firms invest in a particular project only once, however. How can a computer simulation model...