GB550 Purdue Global University Week 1 Importance of Corporate Finance Paper Mini Case – Details and Rubric Complete the Chapter 1 mini-case, p. 55–56. Pre

GB550 Purdue Global University Week 1 Importance of Corporate Finance Paper Mini Case – Details and Rubric

Complete the Chapter 1 mini-case, p. 55–56. Prepare this Assignment as a Word® document. List each

question (a–r), followed by your answer. Please submit this Assignment through the Dropbox. Add

Assignment Checklist and Deliverables

Criteria for Assignment Grades

Content and Analysis Points

Possible

Points

Earned

Provides correct and complete answers for the 18 questions a–r. 18

Clearly shows the reasoning and/or calculations used to arrive at the answer or

conclusion. 23

Presents work in Excel® or Word, showing all necessary formulas and steps. 4

Total 45 Assume that you recently graduated 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 she designs. She also expects to invest substantial amounts of money
through Balik and Kiefer. DellaTorre is very bright, and she would like to understand in
general terms what will happen to her money. Your boss has developed the following set of
questions you must answer to explain the U.S. financial system to Della Torre.
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?
(1) Do firms have any responsibilities to society at large?
(2) Is stock price maximization good or bad for society?
(3) Should firms behave ethically?
e. What three aspects of cash flows affect the value of any investment?
f. What are free cash flows?
g. What is the weighted average cost of capital?
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 cost that a borrower must pay to use debt capital? What two
components make up the cost of using 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?
k. What are some economic conditions that affect the cost of money?
1. What are financial securities? Describe some financial instruments.
m. List some financial institutions.
n. What are some different types of markets?
0. Along what two dimensions can we classify trading procedures?
p. What are the differences between market orders and limit orders?
q. Explain the differences among dealer-broker networks, alternative trading systems,
and registered stock exchanges.
r. Briefly explain mortgage securitization and how it contributed to the global
economic crisis.

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