1. What is β and why is it important to investors and issuers of stock? Describe the behavior of stocks with βs of greater than one, less than one, and less than zero.
2. A company has 100 million shares outstanding trading for $8 per share. It also has $900 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 12%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Show workings)
3. What is the difference between capital structure and capital budgeting? Explain and give an example of a capital structure decision and an example of a capital budgeting decision.
4. What is the Cash Conversion Cycle (CCC)? Name the components of the CCC and explain why the CCC is important to business.