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Title of the article that you are to read: "Agency Problems in Public Firms: Evidence from Corporate Jets in Leveraged Buyouts" by Jesse Edgerton.Published in the Journal of Finance, December 2012. You should be able to download the article (at no charge) from an on-campus computer. Alternatively, the article is available at the GMU library.
Assignment: Respond to the following issues (total write-up not to exceed 3 pages, double-space, 12 point font).
What is a private equity firm?
What is an LBO?
In general (i.e. not specific to the Journal of Finance article), what is the agency problem between stockholders and managers?
Describe the data used by the researcher in the analysis.Summarize the main findings of the paper (you do not need to read the theoretical model section of the paper. In addition, you do not need to read the material contained in the paper's appendix.
The firm you are CEO if has a current period cash flow of 1.0 million and pays no dividend. The present value of the company’s future cash flows is $2.5 million. The company is entirely financed with equity and there are 500,000 shares outstanding. A..
L.A. Clothing has expected earnings before interest and taxes of $2,200, an unlevered cost of capital of 16 percent and a tax rate of 34 percent. The company also has $2,900 of debt that carries a 7 percent coupon. The debt is selling at par value. W..
Consider a 20-year, $105,000 mortgage with a 5.70 percent interest rate. After nine years, the borrower (the mortgage issuer) pays it off. How much will the lender receive?
A company builds a new plant and finances its construction by issuing stock. Which ratio is least likely to be affected, all else being equal?
Kennedy Air Services is now in the final year of a project. The equipment originally cost $24 million, of which 90% has been depreciated. Kennedy can sell the used equipment today for $6 million, and its tax rate is 30%. What is the equipment's after..
It is well known that Investors generally do not like to bear risk. For two otherwise identical corporate bonds, the one with more idiosyncratic risk should have a price that is lower or the same?
A firm has decided to borrow 500,000 on a 10% add on basis, payable in 6 end of the month installments. What would the nominal annual rate be on the loan be?
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 12.5% and 14.7%, respectively. The beta of A is .7, while that of B is 1.3. The T-bill rate is currently 7%, while the expected rate o..
A fast-growing firm recently paid a dividend of $0.60 per share. The dividend is expected to increase at a 20 percent rate for the next four years. Afterwards, a more stable 12 percent growth rate can be assumed. If a 13.5 percent discount rate is ap..
The financial statement of Edgewater marina reflect depreciation expense of $21600 and interest expenses of $27900 for the year .the current assets increased by$31800 and the net fixed assets increased by $28600. what is the amount of net capital spe..
Describe how to conduct financial transactions and navigate the legal issues of electronic commerce
You will be developing a simple portfolio that will be used for analysis over the following five weeks. This will also be used in your in-depth analysis of the entire portfolio for the Week Six Final Paper. You are given $10,000 to allocate to a port..
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