Homework 1 Solutions

Homework 1 Solutions - MGMT 411 Fall 2009 MGMT 411 Homework...

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MGMT 411 Fall 2009 MGMT 411 Homework 1 Solutions 1. Corporate Finance A. Investment decision - involves NPV analysis of business projects, the management of the firm attempts to find real assets and or business projects with positive NPV. M&A and R&D both play an important role in the investment decision. Payout decision – how does the firm compensate owners? The answer could be compensation by cash or stock dividends, share repurchases or capital gains. One major caveat is that the best payout may be no payout if the firm has positive NPV projects to undertake. Also, debt reduction may be a viable substitute for payout, depending on the situation. Financing decision – what is the best way for the firm to finance marginal projects and what is the best way for the firm to be financed as a going concern? Financing options include: internal funds generated from earnings or cash reserves, debt, equity financing and mezzanine type financing. B.
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Homework 1 Solutions - MGMT 411 Fall 2009 MGMT 411 Homework...

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