1) Please describe the best capital structure for a high growth firm in the tech start up sector- PayPal for example - with its heavy reliance on human capital as a source of innovation and growth. What would an ideal mix of debt and equity look like?
2) Assuming that the average comic book store has a life of about 10 years, what is the NPV of opening a new store if the required rate of return in this business is 10%? You may assume that the $250,000 in initial inventory will be recovered at the end of the 10th year (in addition to the annual operating cash flow for that year). What is the IRR that one can earn by opening up a new store?
3) Do you think that mutually exclusive capital budgeting projects are equally risky? If a firm holds a portfolio of many different investment projects can the acceptance of a new project change a firm's overall risk profile?
4) Please describe the general relationship between operating leverage, financial leverage and total leverage of a firm. Do the various types of leverage complement one another or not? Why or why not?