1. Explain how profits or losses will be magnifies for a firm with high leverage as opposed to a firm with low financial leverage?
2. Alpha Beta Co. (ABC) is trying to determine the initial outlay of a project. ABC estimates that the project will generate a $20,000 net cash flow at the end of each year for 6 years. The project’s cost of capital is 8%, and the project has a 8% internal rate of return. What should be the possible initial outlay amounts?
3. Post-merger control and the negotiated price paid by the acquirer are two of the most important issues in agreeing on the terms of a merger. True? False?