FIN 571 TUTOR Career Path Begins/fin571tutor.com FIN 571 TUTOR Career Path Begins/fin571tutor.com | Page 41

operating costs and income taxes are paid in cash, and all cash flows occur
at the end of the year. All net working capital is recovered at the end of the
project.

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FIN 571 Week 5 DQ 1

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Because the weighted average is always a correct measure of a
required return, why do firms not create securities to finance
each project and offer them in the capital market in order to
accurately determine the required return for the project?
-----------------------------------------------------------------------------FIN 571 Week 5 DQ 2

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The development of the new issue junk bond market had
important implications for capital structure choice. The
existence of a viable junk bond market means that firms can
comfortably maintain higher degrees of leverage than they could
prior to the development of this market. Do you agree or
disagree? Justify your answer.
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