Question 1: How does growth and return on invested capital drive free cash flow? Illustrate with an example employing constant and non-constant growth rates.
Question 2: Why might large firms experience lower rates of growth than smaller firms? What is the danger of having a large company attempt to match the growth of a small company?
Question 3: Why is the required rate of return on common stock greater than on bonds?
Question 4: If interest on debt is deductible in arriving at taxable income, and dividends on stock is not so, how does that situation alter the optimal capital structure?
Question 5: How is competition in the product markets related to the valuation of the firm in the economic profit model?
Question 6: In the economic profit model (i.e. EVA), is the opportunity cost of equity capital treated as cost, as debt capital is?
Question 7: How can management's plan to change the outlays for new capital investment impact the enterprise DCF model's estimate of business valuation?
Question 8: When interest rates rise, how does that impact the cost of capital?