Problem 1. As of December 1999, Amazon.com had never paid a dividend and the market value of its stock was $37 billion. Does this invalidate the dividend discount model? Why or why not?
Problem 2. Which capital budgeting technique is consistent with maximizing shareholder wealth and why?
Problem 3. WACC is also referred to by 3 other names. What are they?
Problem 4. Discuss the relationship between bond prices and interest rates. What impact do changing interest rates have on the price of long-term bonds versus short-term bonds?