1. You are a new company and are in the process of developing your policies on credit sales. What are the components of this policy and what are some important things you need to consider?
2. Why is the tax differential between firms so crucial to a successful lease negotiation?
3. What is a sale-and-leaseback transaction and why would a company want to use one?
4. Why are speculators valuable to our financial markets?
5. You are three months away from completing a large construction project and obtaining $10,000,000 in permanent financing. You believe interest rates are currently very good and want to hedge against the risk of interest rates going up. Explain how you could do that. Be sure to discuss all possible outcomes.
6. Does an option have to be “in-the-money” for you to make money on your option investment?
7. Explain how the following factors affect the value of both puts and calls.
8. Describe three major historical bubbles in detail.
9. To finance some manufacturing tools it needs for the next 3 years, Waldrop Corporation is considering a leasing arrangement. The tools are estimated to have a value of 10% of their original cost after 3 years. The firm will depreciate the cost of the tools on a straight-line basis over their 3-year life. The purchase price of the tools is $4,800,000 or the firm can make 3 equal end-of-year lease payments of $2,100,000 each and lease them. The firm’s tax rate is 40%. Annual maintenance costs associated with ownership are estimated at $240,000, but this cost would be borne by the lessor if it leases. What is the net advantage to leasing (NAL).
10. What is FinTech? Give some examples. Is the U.S. ahead or behind in the FinTech revolution. How do you think FinTech will change financial transactions in the next decade in the U.S.?
11. Bonus: Assume you own a call option that you purchased for $2 and is not worth $6. There are two months left until expiration. Would you be better off selling the option or exercising the option? Explain.
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