Questions from Corporate Finance

Q: Businesses with severe capital rationing constraints should use IRR more than NPV

Businesses with severe capital rationing constraints should use IRR more than NPV. Do you agree? Explain.

Q: Boise Cascade also had debt outstanding of $1.7 billion

Boise Cascade also had debt outstanding of $1.7 billion and a market value of equity of $1.5 billion; the corporate marginal tax rate was 36%. a. Assuming that the current beta of 0.95 for the stock i...

Q: It has been argued by some that convertible bonds (i.

It has been argued by some that convertible bonds (i.e., bonds that are convertible into stock at the option of the bondholders) provide one form of protection against expropriation by stockholders. O...

Q: You run a regression of monthly returns of Mapco, an oil

You run a regression of monthly returns of Mapco, an oil- and gas-producing firm, on the S&P 500 Index and come up with the following output for the period 1991–1995. Intercept of the regression = 0.0...

Q: You are using the arbitrage pricing model to estimate the expected return

You are using the arbitrage pricing model to estimate the expected return on Bethlehem Steel and have derived the following estimates for the factor betas and risk premia: a. Which risk factor is Beth...

Q: You have just run a regression of monthly returns of American Airlines

You have just run a regression of monthly returns of American Airlines (AMR) against the S&P 500 over the past five years. You have misplaced some of the output and are trying to derive it from what y...

Q: You have to pick between three mutually exclusive projects with the following

You have to pick between three mutually exclusive projects with the following cash flows to the firm: The cost of capital is 12%. a. Which project would you pick using the NPV rule? b. Which project w...

Q: You are the manager of a specialty retailing firm that is considering

You are the manager of a specialty retailing firm that is considering two strategies for getting into the Malaysian retail market. Under the first strategy, the firm will make an initial investment of...

Q: You are the owner of a small and successful firm with an

You are the owner of a small and successful firm with an estimated market value of $50 million. You are considering going public. a. What are the considerations you would have in choosing an investmen...

Q: Upjohn, another major pharmaceutical company, is also considering whether it

Upjohn, another major pharmaceutical company, is also considering whether it should borrow more. It has $664 million in book value of debt outstanding and 173 million shares outstanding at $30.75 per...