I have several types of questions, some requre essay form answers, others are calculative.
1: Write this week about risk and its relation to pricing investments. You are a Manager of a corporation which is thinking about going into the capital markets to obtain financing for some new investment projects. Your choice is to use the debt markets (bond financing) or the equity markets (stock issuance). In your opinion what is a better form of financing: debt or equity? Please explain your rationale with specific detail analysis of the two types (pros and cons). Essay form no shorter than 200 words.
2: Is value maximization always ethical? Give an example of a company that was unethical in their maximization of company value. Why were they unethical, what were the consequences? Essay form no shorter than 200 words.
3. Distinguish between a firm’s capital budgeting decisions and its financing decisions by giving examples of each. Essay form no shorter than 200 words.
4: Find Microsoft (MSFT) and Ford (F) on http://finance.yahoo.com and examine the financial
statements of each for the most recent completed fiscal year: MSFT – 6/29/12 and F –12/30/11.
Answer the following questions utilizing data in essay form no shorter then 200 words
Which Firm uses more debt finance?
Which firm has higher cash as a percentage of total assets?
Which firm has a higher Return on Assets and Return on Equity?
Is management doing their jobs with these firms?
Ford’s free cash flow for 2011 was ($20.99 billion, Microsoft’s free cash flow for 2012 was $23.62 billion. What do these numbers tell you about the company’s financial status?
Finally, as an investor would you purchase Microsoft or Ford common stock and why?