Questions from Managerial Finance

Q: Explain the EBIT–EPS approach to capital structure. Include in

Explain the EBIT–EPS approach to capital structure. Include in your explanation a graph indicating the financial breakeven point; label the axes. Is this approach consistent with maximization of the o...

Q: Why do maximizing EPS and maximizing value not necessarily lead to the

Why do maximizing EPS and maximizing value not necessarily lead to the same conclusion about the optimal capital structure?

Q: What important factors in addition to quantitative factors should a firm consider

What important factors in addition to quantitative factors should a firm consider when it is making a capital structure decision?

Q: What procedure is used to value a bond that pays annual interest

What procedure is used to value a bond that pays annual interest? Semiannual interest?

Q: What relationship between the required return and the coupon rate will cause

What relationship between the required return and the coupon rate will cause a bond to sell at a discount? At a premium? At its par value?

Q: If the required return on a bond differs from its coupon rate

If the required return on a bond differs from its coupon rate, describe the behavior of the bond price over time as the bond moves toward maturity.

Q: Joseph is a friend of yours. He has plenty of money

Joseph is a friend of yours. He has plenty of money but little financial sense. He received a gift of $12,000 for his recent graduation and is looking for a bank in which to deposit the funds. Partner...

Q: As a risk-averse investor, would you prefer bonds with

As a risk-averse investor, would you prefer bonds with short or long periods until maturity? Why?

Q: Why do rapidly growing firms generally pay no dividends?

Why do rapidly growing firms generally pay no dividends?

Q: What is a bond’s yield to maturity (YTM)? Briefly describe

What is a bond’s yield to maturity (YTM)? Briefly describe the use of a financial calculator and the use of an Excel spreadsheet for finding YTM. Why is the YTM a good measure of the required return o...