1. Firms often use IRR and payback period as secondary criteria for making capital budgeting decisions. Provide an economic justification for this use.

2. What is a necessary condition for a firm to earn positive NPV on its projects? Give some real world examples of firms which are very profitable and your understanding of the reason for their success.

3. What are the reasons why leasing may be advantageous to a lessee? Explain.

4. Stock prices fall when firms issue new shares because of dilution of existing shareholders position. Comment.

5. Explain the book building hypothesis for IPO underpricing.