What is the weighted average cost of capital

Reference no: EM13256760

Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm's clients is Michelle DellaTorre, a professional tennis player who has just come to the United States from Chile. DellaTorre is a highly ranked tennis player who would like to start a company to produce and market apparel she designs. She also expects to invest substantial amounts of money through Balik and Kiefer.

DellaTorre is very bright, and she would like to understand in general terms what will happen to her money. Your boss has developed the following set of questions you must answer to explain the U.S. financial system to DellaTorre.

a. Why is corporate finance important to all managers?

b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form.

c. How do corporations go public and continue to grow? What are agency problems? What is corporate governance?

d. What should be the primary objective of managers?

(1) Do firms have any responsibilities to society at large?

(2) Is stock price maximization good or bad for society?

(3) Should firms behave ethically?

e. What three aspects of cash flows affect the value of any investment?

f. What are free cash flows?

g. What is the weighted average cost of capital?

h. How do free cash flows and the weighted average cost of capital interact to determine a firm's value?

i. Who are the providers (savers) and users (borrowers) of capital? How is capital transferred between savers and borrowers?

j. What do we call the price that a borrower must pay for debt capital? What is the price of equity capital? What are the four most fundamental factors that affect the cost of money, or the general level of interest rates, in the economy?

k. What are some economic conditions (including international aspects) that affect the cost of money?

l. What are financial securities? Describe some financial instruments.

m. List some financial institutions.

n. What are some different types of markets?

o. How are secondary markets organized?

(1) List some physical location markets and some computer/telephone networks.

(2) Explain the differences between open outcry auctions, dealer markets, and electronic communications networks (ECNs).

p. Briefly explain mortgage securitization and how it contributed to the global economic crisis.

Reference no: EM13256760

Questions Cloud

Determine the net free energy for the reaction : Based on the energetics of microbial growth, write a balanced equation for the fermentation of sucrose to methane. Assume that nitrate is available as the nitrogen source for cell synthesis

Write an expression for i1 of the form of imaginary part : We have v1(t)=10cos(wt+30degrees). The current i1(t) has an rms value of 5A and leads v1(t) by 20s. (The current and the voltage have the same frequency) Draw a phasor diagram showing the phasors.

Prepare a job cost sheet : Prepare a Job Cost Sheet for Job No.13A, following proper format

Determine the constant angular acceleration of centrifuge : A centrifuge in a medical laboratory rotates at an angular speed of 3400 rev/min. Find the constant angular acceleration of the centrifuge

What is the weighted average cost of capital : What are some economic conditions (including international aspects) that affect the cost of money?

What is the nature of the process fluid : What is the nature of the process fluid and what are the objectives of the two sample points and in what way do the samples reaching the instruments differ?

Calculate the circumference of the radius : Write a program that allows the user to enter a letter (as a code) and a real number (as the radius of a circle). If the letter is 'A' your program must calculate the area of the circle. If the letter is 'C' your program must calculate the circumfere..

Which form cash flow stream or lump-sum amount preferred : Given the cash flow stream and lump-sum amounts associated with each, and assuming a 9 percent opportunity cost, which alternative (X or Y) and in which form (cash flow stream or lump-sum amount) would you prefer?

Compute and plot the 128 point fft of a cosine wave : Compare the differences in the FFT result. Explain why even though the inputs to both FFTs are the same cosine waves, the shapes of the FFTs are different. Calculate, plot and compare the results of the 512-point FFT of the above signal.

User Account

All Pages