Why would a firm ever forgo a positive NPV project? How can hedging help prevent this situation from arising?
What will be an ideal response?
Answer: If the firm has debt in its capital structure, we know that the managers may forego a positive NPV investment that must be financed by shareholders because too much of the increase in firm value accrues to bondholders. A hedging policy can help to avoid such as situation by avoiding the losses that may plunge the firm into financial distress and make the debt risky in the first place. By reducing the variance of income, the hedging policy makes the debt less risky in which case it sells for a price closer to face value.
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Suppose the Federal Reserve is considering the applications of four different banks to merge with other banks. Given the level of the new HHI and the change in the HHI shown below, in which case could the Fed challenge the merger?
A. New HHI = 1,900; change in HHI = 150 B. New HHI = 1,500; change in HHI = 400 C. New HHI = 1,200; change in HHI = 700 D. New HHI = 1,850; change in HHI = 250
Answer the following statements true (T) or false (F)
1.In the post-World War II era, nontariff trade barriers have decreased in importance relative to tariff barriers. 2.An import quota is a physical restriction on the quantity of goods that may be imported during a specified time period. 3.Today most industrial countries protect their industries via global import quotas rather than selective import quotas. 4.A global import quota permits a specified number of goods to be imported each year, but does NOT specify where the product is shipped from and who is permitted to import. 5.Import tariffs and import quotas yield identical protection effects, consumption effects, redistribution effects, and revenue effects.
An example of primary data is information gathered from _____
a. Bureau of Census publications b. competitors' annual reports c. company inventory reports to determine sales by geographic area d. observation by sales personnel on customer in-store behavior
Peak & Vale Accountants provides other firms with accounting services. Questions of what is ethical involve the extent to which Peak & Vale has
a. a legal duty beyond those duties mandated by ethics. b. an ethical duty beyond those duties mandated by law. c. any duty beyond those mandated by both ethics and the law. d. any duty when it is uncertain whether a legal duty exists.