1. Hilton Worldwide Holdings, Inc. completed an initial public offering on December 12, 2013. The offer price was $20.00 per share and the closing price at the end of the first day was $21.50. The firm issued 117.6 million shares. What was the loss to Hilton due to underpricing?
2. Crossler Automobiles sells autos in a market where the standard auto comes with a 10 year, 100,000 mile warranty on parts and labor. Describe how an increased probability of bankruptcy could affect sales of autos by Crossler?
3.If a firm increases its debt to a very high level, then the positive effect of debt is aligning the interests of management to those of the shareholders tends to become negative. Explain why this occurs?
4. Legitron Corporation has $350 million in outstanding debt at an interest rate of 9%. What is the dollar value of the tax shield on that debt for the current year? The tax rate is 35%.
5. List and describe three practical considerations that concern managers when they make capital structure decisions?
6. List the two types of leases and how they are accounted for by the lessee.