Assignment: Due in Unit 1
Complete the Chapter 1 mini-case homework, p. 48 – 49. Prepare this Assignment as
a Word document. List each question, followed by your answer.
Please submit this Assignment through the Dropbox.
Chapter
1
An Overview of Corporate Finance and
The Financial Environment

MINI CASE

Assume that you recently
graduated with a degree in finance and have just reported to work as an
investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm’s clients is Michelle
Dellatorre, a professional tennis player who has just come to the United States
from Chile. Dellatorre is a highly
ranked tennis player who would like to start a company to produce and market
apparel that she designs. She also
expects to invest substantial amounts of money through Balik and Kiefer.

a. Why is corporate finance important to
all managers?
b. Describe
the organizational forms a company might have as it evolves from a start-up to
a major corporation. List the advantages and disadvantages of each form.
c. How do corporations “go public” and
continue to grow? What are agency problems? What is corporate governance?
d. What
should be the primary objective of managers?
d. 1. Do firms have any responsibilities to society
at large?
d. 2. Is
stock price maximization good or bad for society?
d. 3. Should firms behave ethically?
e. What
three aspects of cash flows affect the value of any investment?
f. What
are free cash flows? What are the three determinants of free cash flows?
g. What
is the weighted average cost of capital? What affects it?
h. How
do free cash flows and the weighted average cost of capital interact to
determine a firm’s value?
i. Who
are the providers (savers) and users (borrowers) of capital? How is capital transferred between savers and
borrowers?
j. What do we call the price that a
borrower must pay for debt capital? What is the price
of equity capital? What are the four most fundamental factors
that affect the cost of
money, or the general level of interest
rates, in the economy?
m. List some financial institutions.

l.
What are financial securities? Describe some financial instruments.

l.
What are financial securities? Describe some financial instruments.

k.
What are some economic conditions (including international aspects) that
affect the cost of money?
n. What are some different types of
markets?
o.
How are secondary markets organized?
1. List some physical location markets
and some computer/telephone networks.
2. Explain the differences between open
outcry auctions, dealer markets, and electronic
communications networks (ECNS).

p.
Briefly explain mortgage securitization and how it contributed to the global
economic crisis.

Answer: