Class : Corporate Finance
This is a course assignment from the textbook issued by the professor as followed: Essentials of Managerial Finance, 14 edition, Author Besley & Bringham, ISBN-13: 978-0-324-42270-2 The questions listed below for each chapter must be answer. Do NOT WRITE THE QUESTIONS JUST GIVE ANSWER in 5 to 6 sentences. Please Do Not write a cover letter paper.
Chapter 9 pg. 379, Question 9-1, 9-2, 9-3
9-1 How is a project classification scheme (for example, replacement, expansion into new markets, and so forth) used in the capital budgeting process?
9-2 Explain why the NPV of a relatively long-term project, defined as one for which a high percentage of its cash flows are expected in the distant future, is more sensitive to changes in the required rate of return than is the NPV of a short-term project.
9-3 Explain why the NPV of a relatively exclusive projects are being compared, the project that generates most of its cash flows in the beginning of its life might have higher ranking under the NPV criterion if the required rate of return is high, whereas the projects that generates most of its cash flows toward the end of its life might be deemed better if the required rate of return is low. Would changes in the required rate of return ever cause a change in the IRR ranking of two such projects? Explain.
Chapter 10 Pg. 425, Question # 10-3 and 10-5, Pg. 426, Question # 10-7
10-3 Explain why sunk cost should not be included in a capital budgeting analysis but opportunity costs and externalities should be included?
10-5 In general, is an explicit recognition of incremental cash flows more important in new project analysis or replacement analysis? Why?
10-7 Why is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward?
Chapter 11 Pg. 479 Question # 11-1 Pg 481 Question 11-6 and 11-7
11-1 In what sense does the marginal cost of capital schedule represent a series of average costs?
11-6 What impact will investors expectations about inflation have on a firms cost of debt? Will the firms cost of equity be affected? Explain
11-8 Suppose a firm invests in projects that are much riskier than its average investments. Do you think the firms weighted average cost of capital will be affected? Explain
Chapter 12 Pg. 523 Question 12-3 12-4 and 12-5
12-3 Explain why the following statement is true. All else the same. Firms with relatively stable sales are able to carry relatively high debt/assets ratios.
12-4 If a firm went from zero debt to successively higher levels of debt, why would you expect its stock price to first rise, then hit a peak, and than begin to decline?
12-5 When carsons car sales increase by 5 percent, its earnings per share increase by 20 percent. Does the firm have leverage? If so, can you tell what kind? Explain
Chapter 13 Pg.554 Question 13-5 Pg. 555 Question 13-6 and 13-7
13-5 The cost of retained earnings is less than the cost of new outside equity capital. Consequently. It is totally irrational for a firm to sell a new issue of stock and to pay dividends during the same year. Discuss this statement.
13-6 Would it ever be rational for a firm to borrow money to pay dividends? Explain.
13-7 If investors have the same information (symmetric information) as the managers/executives of a firm, then which of the dividend policies mentioned in the chapter should the firm follow to maximize value? Explain your answer
Chapter 14 Pg. 587 Question 14-1 14-4 and 14-5
14-1 How does the seasonal nature of a firms sales influence its decision regarding the amount of short-term credit to use in its financial structure?
14-4 Describe the cash conversion cycle. How can a financial manager use knowledge of the cash conversion cycle to better manage the working capital of a firm?
14-5 What are the advantages of matching the maturities of assets and liabilities? What are disadvantages?
Chapter 15 Pg. 625 Question 15-3 15-4 and 15-5
15-3 What is a cash budget? For what purposes should cash budgets be created?
15-4 Why is a cash budget important even when there is plenty of cash in the bank?
15-5 Discuss why it is important for a financial manager to understand the concept of float to effectively manage the firms cash.
Chapter 16 Pg.659 Question 16-2 16-3 and 16-4
16-2 Is it true that both trade credit and accruals represent a spontaneous source of capital for financing growth? Explain
16-3 Is it true that most firms are able to obtain some free trade credit and that additional trade credit often is available, but at a cost? Explain
16-4 The availability of bank credit often is more important to a small firm than to a large one. Why?