Problem 1: The Cable Company has $1 million of positive NPV projects it would like to take advantage of. If Cable's managers follow the historical pattern of long-term financing for U.S. industrial firms, what will their financing strategy be?
Problem 2: Discuss the validity of each of the following statements.
- Leasing reduces risk and can reduce a firm's cost of capital.
- Leasing provides 100-percent financing.
- Firms that do a large amount of leasing will not do much borrowing.
- If the tax advantages of leasing were eliminated, leasing would disappear.