Question 1. Fundamental Concepts
In your own words, discuss and evaluate the following statement based on
your learning from our classes as well as your own insight and example(s).
Question 1 - Part A.
“According to the M- M Theorem, corporate financial
decisions do not affect firm value when there is no capital market
imperfection.”
True or False? Pl
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Question 1. Fundamental Concepts
In your own words, discuss and evaluate the following statement based on
your learning from our classes as well as your own insight and example(s).
Question 1 - Part A.
“According to the M- M Theorem, corporate financial
decisions do not affect firm value when there is no capital market
imperfection.”
True or False? Please explain your answer with example(s). Hint: review Topic #1 presentation and recall our discussion
in Week #2 meetings.
Question 1 - Part B.
“Information asymmetry and agency problems change
with different stages of the firm-cycle.”
True or False? Please explain your answer with example(s). Hint: review Topic #1 presentation and recall our discussion
in Week #2 meetings.
The following questions are related to Topic #1 “Fundamental Concepts of
Corporate Finance”. Answer the following questions based on your own insight, research, and analyses. Support your own discussions
with original examples. The following questions provide helpful preparation for Individual Research Assignment
Part I - Equity Research.
Question 2. Fundamental Concepts and Equity Research (Individual
Research Assignment – Part I)
Instruction: For your Individual Research
Assignment Part I, pick a non-financial, publicly
traded company, which has comprehensive business information and
financial data available from
financial statements and resources (see, e.g., http://www.morningstar.com, http://finance.yahoo.com/, etc.). Note: Do not pick financial companies or banks as they require different sets
of techniques/analyses.
Based on the company you selected
for the equity research, answer all of the following
questions (in your own words):
Question 2 - Part A
Based on your own insight,
provide 3 examples of the best (most
competitive) products or
services that are produced by this company.
Question 2 - Part B
In your own words, discuss the
following: What is information asymmetry
problem? Based on the company you selected for the equity research,
discuss and explain whether this company is subject to any problem of information asymmetry. Discuss any
example(s) of information asymmetry for this company.
Hints: This question provides useful
preparation for your Individual Research
Assignment Part I – Equity Research. To examine information asymmetry, you
may examine some of the following examples/characteristics:
*firm age and the stage of the firm-cycle (e.g., mature firm may have
lower information asymmetry),
*industry characteristics (e.g., technology industry may have higher information
asymmetry),
*significance of intangible assets and R&Ds (which may increase
information asymmetry),
*whether
the firm paid dividends (which reduce information asymmetry),
*whether the firm is covered by financial analyst (which reduces
information asymmetry), among others.
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