Questions from Corporate Finance

Q: Terck, a leading pharmaceutical company, currently has a balance sheet

Terck, a leading pharmaceutical company, currently has a balance sheet that is as follows: The firm’s income statement looks as follows: The firm’s bonds are all 20...

Q: Pfizer, a major pharmaceutical company, has a debt ratio of

Pfizer, a major pharmaceutical company, has a debt ratio of 10.30% and is considering increasing its debt ratio to 30%. Its cost of capital is expected to drop from 14.51% to 13.45%. Pfizer had an EBI...

Q: Stock buybacks really do not return cash to stockholders because only those

Stock buybacks really do not return cash to stockholders because only those who sell back stock receive the cash. Is this statement true or false? Explain.

Q: RJR Nabisco, in response to stockholder pressure in 1996, announced

RJR Nabisco, in response to stockholder pressure in 1996, announced a significant increase in dividends paid to stockholders financed by the sale of some of its assets. What would you expect the stock...

Q: In the face of disappointing earnings results and increasingly assertive institutional stockholders

In the face of disappointing earnings results and increasingly assertive institutional stockholders, Eastman Kodak was considering the sale of its health division, which earned $560 million in EBIT in...

Q: A prominent beta estimation service reports the beta of Comcast Corporation,

A prominent beta estimation service reports the beta of Comcast Corporation, a major cable TV operator, to be 1.45. The service claims to use weekly returns on the stock over the prior five years and...

Q: In Germany, large banks are often large lenders and large equity

In Germany, large banks are often large lenders and large equity investors in the same firm. For instance, Deutsche Bank is the largest stockholder in Daimler Chrysler, as well as its largest lender....

Q: Every investor in the capital asset pricing model owns a combination of

Every investor in the capital asset pricing model owns a combination of the market portfolio and a riskless asset. Assume that the standard deviation of the market portfolio is 30% and that the expect...

Q: You are analyzing two mutually exclusive projects with the following cash flows

You are analyzing two mutually exclusive projects with the following cash flows: a. Estimate the NPV of each project, assuming a cost of capital of 10%. Which is the better project? b. Estimate the IR...

Q: You have been asked to compare three alternative investments and make a

You have been asked to compare three alternative investments and make a recommendation. • Project A has an initial investment of $5 million and after-tax cash flows of $2.5 million a year for the next...