Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 14.2, Problem 1CC
Why are investors indifferent to the firm’s capital structure choice?
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Which of the following is not a determinant of investment?
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Suppose a firm invest in proects that are much riskier than its average investments. Do you think the firm's weighted average cost of capital will be affected? Explain.
Chapter 14 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 14.1 - How does the risk and cost of capital of levered...Ch. 14.2 - Why are investors indifferent to the firms capital...Ch. 14.2 - What is a market value balance sheet?Ch. 14.2 - In a perfect capital market, how will a firms...Ch. 14.3 - How do we compute the weighted average cost of...Ch. 14.3 - With perfect capital markets, as a firm increases...Ch. 14.4 - If a change in leverage raises a firm's earnings...Ch. 14.4 - True or False: When a firm issues equity, it...Ch. 14.5 - Consider the questions facing Dan Harris, CFO of...Ch. 14.5 - Prob. 2CC
Ch. 14 - Consider a project with free cash flows in one...Ch. 14 - You are an entrepreneur starting a biotechnology...Ch. 14 - Acort Industries owns assets that will have an 80%...Ch. 14 - Wolfrum Technology (WT) has no debt. Its assets...Ch. 14 - Suppose there are no taxes. Firm ABC has no debt,...Ch. 14 - Suppose Alpha Industries and Omega Technology have...Ch. 14 - Prob. 7PCh. 14 - Prob. 8PCh. 14 - Zetatron is an all-equity firm with 100 million...Ch. 14 - Explain what is wrong with the following argument:...Ch. 14 - Consider the entrepreneur described in Section...Ch. 14 - Hardmon Enterprises is currently an all-equity...Ch. 14 - Suppose Visa Inc. (V) has no debt and an equity...Ch. 14 - Prob. 14PCh. 14 - Prob. 15PCh. 14 - Hartford Mining has 50 million shares that are...Ch. 14 - Mercer Corp. has 10 million shares outstanding and...Ch. 14 - In mid-2015 Qualcomm Inc. had 11 billion in debt,...Ch. 14 - Prob. 19PCh. 14 - Prob. 20PCh. 14 - Yerba Industries is an all-equity firm whose stock...Ch. 14 - Prob. 22PCh. 14 - Prob. 23PCh. 14 - Prob. 24P
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- What are the major disadvantages of the use of the internal rate of return method of analyzing capital investment proposals?arrow_forwardWhy do come companies prefer to use discounting in their capital investment decisions? What is a risk associated with this discounting model?arrow_forwardWhat effect would a decreased cost of capital have on a firm's future investments?arrow_forward
- Does capital structure influence the value of a firm? Why or why not?arrow_forwardWhy are capital market data and information useful when a firm is considering its cost of capital?arrow_forwardWhy might it be rational for a small firm that does not have access to the capital markets touse the payback method rather than the NPV method?arrow_forward
- What weights should be used when you calculatethe WACC? Discuss the choice between book value and market value weights, and the role of the“target” capital structure for a firm whose actualcapital structure is far removed from the target.arrow_forwardHow might capital rationing conflict with the goal of maximizing shareholders' wealth?arrow_forwardWhy does Capital Structure Decisions sometimes cause one firm to take over another?arrow_forward
- What are the Factors That Complicate Capital Investment Analysis? What is Capital Rationing?arrow_forwardHow do you call a strategy that separately examines capital market conditions and the investor's objectives and constraints?arrow_forwardKoffman Corporation is trying to raise capital. What method would be the least risky to raise capital if it has a less-than-favorable credit rating?arrow_forward
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