Is this situation consistent with a monopolistically competitive firm maximizing profit? If yes, is it consistent with LR? P
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- How does the value of a levered firm compare to the value of anunlevered firm that is otherwise identical?What does the term “value of an unlevered firm” mean?What does the MM theory with no taxes state about the valueof a levered firm versus the value of an otherwise identical butunlevered firm? What does this imply about the optimal capitalstructure?
- Examine the weak, semi strong and the strong form if market efficiency, examine the various ways to test the different forms of market efficiency?Compare and contrast the concepts and investment implications of efficient market hypothesis(EMH), inefficient markets, and efficiently inefficient markets.Is maximizing the value of the firm an appropriate goal
- A competitive firm O Has the market power to compete effectively. O Confronts a downward-sloping firm demand curve. O Is large enough relative to the market to be taken into account by competitors. OIs a price taker.What do you think is the relationship between a firm’s operating leverage and its financial leverage? Do you think the two measures are positively correlated, negatively correlated, or unrelated? Explain your answer.Briefly explain the tradeoff hypothesis and how it is related to the long-run survival of a firm? “ One type of leverage affects both EBIT and EPS. The other type affects only EPS”. Explain this statement.
- Why is FCF an important determinant of a firm’s value?In the case of a perfect capital market, according to Modigliani and Miller Proposition I and II, what is the optimal capitalstructure? When you introduce taxes, how can leverage alter the incentives of managers?Why do most academics and financial executives regard the NPV as being the single best criterion and better than the IRR? Why do companies still calculate IRRs?