Questions from Managerial Finance

Q: What is the relationship between the firm’s target capital structure and the

What is the relationship between the firm’s target capital structure and the weighted average cost of capital (WACC)?

Q: Describe the logic underlying the use of target weights to calculate the

Describe the logic underlying the use of target weights to calculate the WACC, and compare and contrast this approach with the use of historical weights. What is the preferred weighting scheme?

Q: If Like A Lot Corp. borrows yen at a nominal annual

If Like A Lot Corp. borrows yen at a nominal annual interest rate of 2% and during the year the yen appreciates by 10%, what will the effective annual interest rate be for the loan?

Q: If Bob and Judy combine their savings of $1,260

If Bob and Judy combine their savings of $1,260 and $975, respectively, and deposit this amount into an account that pays 2% annual interest, compounded monthly, what will the account balance be after...

Q: Define risk in terms of the cash flows from a capital budgeting

Define risk in terms of the cash flows from a capital budgeting project. How can determination of the breakeven cash inflow be used to gauge project risk?

Q: Describe how each of the following behavioral approaches can be used to

Describe how each of the following behavioral approaches can be used to deal with project risk: (a) scenario analysis and (b) simulation.

Q: How can firms mitigate currency risk and political risk when investing in

How can firms mitigate currency risk and political risk when investing in a foreign country?

Q: Briefly explain how the following items affect the capital budgeting decisions of

Briefly explain how the following items affect the capital budgeting decisions of multinational companies: (a) exchange rate risk; (b) political risk; (c) tax law differences; (d) transfer pricing; an...

Q: Describe the basic procedures involved in using risk-adjusted discount rates

Describe the basic procedures involved in using risk-adjusted discount rates (RADRs). How is this approach related to the capital asset pricing model (CAPM)?

Q: Explain why a firm whose stock is actively traded in the securities

Explain why a firm whose stock is actively traded in the securities markets need not concern itself with diversification. Despite this reason, how is the risk of capital budgeting projects frequently...