Finance Questions

Financial Management Questions

100 words per answer

1. What are three key features of common stock? 

2. What are the differences among authorized, issued, and outstanding shares?

3. If you switch to the discounted payback period from the payback period, what assumption are you making about the timing of the cash flow? 

4. What drawback of the discounted payback period does the net present value overcome?

5. What are the two different ways to estimate the cost of equity for a firm?

6. When calculating the cost of capital, why is it that the company adjusts only the cost of debt for taxes?

7. What is asymmetric information? How does it affect the prioritization of financing sources under the pecking order hypothesis?

8. What is the difference between the return to an investor or lender and the cost to the borrower?