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People often convey the idea behind Modigliani & Millers’ proposition 1 by various supermarkets analogies, for example, “The value of a pie should not depend on how it is sliced,” or, “The cost of a whole chicken should equal the cost of assembling one by buying two drumsticks, two wings, two breasts, and so on,” Actually proposition 1 doesn’t work in the supermarket. You’ll pay less for an uncut whole pie than for a pie assembled from pieces purchased separately. Supermarkets charge more for chickens after they are cut up. Why? What costs or imperfections cause proposition 1 to fail in the supermarket? Are these costs or imperfections likely to be important for corporations issuing securities on the capital markets? Explain
Should the effects of a portfolio impact the way investors think about the riskiness of individual stocks?
Describe what episodes you watched and what the problems were that caused the business to be failing.
If you receive $2,590 at the end of each year for the first three years and $627 at the end of each year for the next two years. What is the future value of this cash flow stream? Assume interest rate is 6%.
What is the value of partner A’s cash flow from the Joint Venture under the 50-50 rule?
Venture capitalists provide financing for new firms from the seed and start-up stage all the way to mezzanine and bridge financing. In exchange for financing, entrepreneurs give:
What is the required rate of return on your company’s stock? What is the estimated value per share of your firm’s stock?
Water Wings Sports is considering an investment that costs $300,000 and is expected to generate cash flows of $90,000 per year during its 5-year life. If WWS’s required rate of return is 15%, what is this investment’s net present value? A. $150,000 B..
Discuss how you may have used TVM in a recent investment or loan decision and explain some of the TVM details that may have been involved in your transaction.
Pecos Manufacturing has just issued a 15?-year, 13?% coupon interest? rate, ?what happens to the bond value as time moves toward? maturity?
Discounted Payback Coughlin Motors is considering a project with the following expected cash flows: Year Project Cash Flow 0 –$830 million 1 200 million 2 373 million 3 228 million 4 566 million Calculate the project's discounted payback assuming the..
Carter Corporation's sales are expected to increase from $5 million in 2012 to $6 million in 2013, or by 20%. Its assets totaled $3 million at the end of 2012. Carter is at full capacity, so its assets must grow in proportion to projected sales. Why ..
In this lesson's discussion "Managing Change: Every Penny Counts" we noted, "Traditional views of change reflect the pace of world travelers,
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