Questions from Financial Management

Q: What is an exchange rate? What is the difference between direct

What is an exchange rate? What is the difference between direct and indirect rates? What is a cross rate?

Q: Suppose that the exchange rate is 0.60 dollars per Swiss

Suppose that the exchange rate is 0.60 dollars per Swiss franc. If the franc appreciates 10% against the dollar, how many francs would a dollar buy tomorrow?

Q: Sheldon Corporation projects the following free cash flows (FCFs) and

Sheldon Corporation projects the following free cash flows (FCFs) and interest expenses for the next 3 years, after which FCF and interest expenses are expected to grow at a constant 7% rate. Sheldon&...

Q: An unlevered firm has a value of $600 million. An

An unlevered firm has a value of $600 million. An otherwise identical but levered firm has $240 million in debt. Under the Miller model, what is the value of the levered firm if the corporate tax rate...

Q: An unlevered firm has a value of $800 million. An

An unlevered firm has a value of $800 million. An otherwise identical but levered firm has $60 million in debt at a 5% interest rate. Its cost of debt is 5% and its unlevered cost of equity is 11%. Af...

Q: Air Tampa has just been incorporated, and its board of directors

Air Tampa has just been incorporated, and its board of directors is grappling with the question of optimal capital structure. The company plans to offer commuter air services between Tampa and smaller...

Q: Companies U and L are identical in every respect except that U

Companies U and L are identical in every respect except that U is unlevered while L has $10 million of 5% bonds outstanding. Assume that: (1) there are no corporate or personal taxes, (2) all of the...

Q: Companies U and L are identical in every respect except that U

Companies U and L are identical in every respect except that U is unlevered while L has $10 million of 5% bonds outstanding. Assume that: (1) all of the MM assumptions are met, (2) both firms are sub...

Q: Companies U and L are identical in every respect except that

Companies U and L are identical in every respect except that U is unlevered while L has $10 million of 5% bonds outstanding. Both firms have an EBIT of $2 million. Assume that all of the MM assumption...

Q: Schwarzentraub Industries’ expected free cash flow for the year is $500

Schwarzentraub Industries’ expected free cash flow for the year is $500,000; in the future, free cash flow is expected to grow at a rate of 9%. The company currently has no debt, and its cost of equit...