Questions from Financial Management

Q: The Budwell & Son Oil Company is looking at two drilling proposals

The Budwell & Son Oil Company is looking at two drilling proposals. One project lasts for three years, costs $20M to start, pays back quickly, and has an NPV of $15M. The other project also costs ab...

Q: Webley Corp. has a capital budget limited to $20M.

Webley Corp. has a capital budget limited to $20M. Five relatively high IRR projects are available that have initial investments totaling $15M. They are all roughly the same size. A sixth project h...

Q: Ed Perez has always wanted to run his own restaurant. He

Ed Perez has always wanted to run his own restaurant. He worked part-time in the food service business during high school and college and has worked for a large restaurant chain since graduating from...

Q: You're the CFO of the Ramkin Company, which makes and sells

You're the CFO of the Ramkin Company, which makes and sells electronic equipment. The firm was originally an independent business, but was acquired by the larger Big Tech Inc. ten years ago, and is n...

Q: You've just been hired as CFO of the Gatsby Corp., a

You've just been hired as CFO of the Gatsby Corp., a new company in the hi-tech computer business. Shortly after your arrival you were amazed to find that the firm does virtually no planning. An exten...

Q: You're the treasurer of SuperTech Inc., a high technology firm in

You're the treasurer of SuperTech Inc., a high technology firm in the fast-growing computer business. The management team has recently been trying to decide on a long-term dividend policy. Earnings a...

Q: The Tanglefern Corporation has traditionally paid out 60% of its earnings

The Tanglefern Corporation has traditionally paid out 60% of its earnings in dividends. Recently some marvelous growth opportunities have arisen that involve only a little risk but require a lot of c...

Q: You're a bank officer considering making a loan to small family-

You're a bank officer considering making a loan to small family-owned company. The firm's principal owner is a hard-working, conservative woman who has built up the company over a number of years. Ho...

Q: Your pal, Fred Flinderbinder, came into class this morning grinning

Your pal, Fred Flinderbinder, came into class this morning grinning from ear to ear. It seems a stock in which he advised his parents to invest is doing fabulously well. Fred said the firm usually p...

Q: Briefly explain the idea of representing an interest rate as a collection

Briefly explain the idea of representing an interest rate as a collection of components. What is represented by the base rate? What is the risk premium for? Explain the idea of risk in lending.