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FM Final questions 2011 - 7 SBS Corp is considering...

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Answer all questions. Answers for each question should not be more than 1 page with single line spacing and times new roman font 12. This assignment has to be handed in via email to [email protected] by the 6 th of February, 2011. 1. What is meant by risk in finance? Describe the term ‘systematic risk’. 2. Explain why it is not possible for firms to increase debts even though it is advantageous for them in a situation where there is corporate tax. 3. What is a dividend policy? What are the factors that firms should consider with regard to their dividend policy? 4. Explain why some investors do not prefer firms that pay dividends. 5. Explain by using examples how an asset is being valued? 6. Explain the effect of an increase in corporate tax on the capital structure decision of a firm and the financial market.
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Unformatted text preview: 7. SBS Corp is considering restructuring its capital to increase its value. The company is a power utility provider. What in your opinion is the best capital structure for the company? 8. Explain how firms attempt to signal information with their capital structure decisions? 9. SDI Corp is considering issuing new shares within the next 6 months for their expansion program. With the current stock market being very uncertain, explain how SDI can reduce its risk of the issue by using derivative instruments and still get their target funds. 10. Describe the role and tasks that you perform in your group work in this course. Comment each of your group members on their contribution to the group. Out of a maximum of 10 points, give a score to each of the members in your group....
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