1. 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?

2. List the two types of leases and how they are accounted for by the lessee.

3. Explain the difference between a competitive and negotiated cash sale. Which method of sale is likely to yield the lowest funding cost for firms selling plain vanilla bonds in stable markets?

4. Max Political Consultants Management, Inc. has decided to discontinue all of the firms business operations. The firm has a total of $7 million in debt and the fair market value of its assets is $10 million. The book value is $5 million. What will be the liquidating dividend the shareholders can expect to receive?

5. Three years ago you purchased four thousand shares of Metwa, Inc. for $17 per share. Today Metwa, Inc. is repurchasing its shares through a fixed price tender offer at a price of $45 per share. What are the after tax proceeds you will receive if the capital gains tax is 20%?

6.

Use the following information to complete question:

Williams Tools Corp (Public Co)

Category	Value
Market Price Per Share	$12.25
Shares Outstanding	100 million
Debt	$600 million
EBITDA	$456 million
Net Income	$226 million

Siver Machinery Co.

Category	Value
Debt	$533 million
EBITDA	$250 million
Net Income	$96 million

Calculate the earnings per share and the price earnings ratio for Williams.

7.

Use the following information to complete question:

Williams Tools Corp (Public Co)

Category	Value
Market Price Per Share	$12.25
Shares Outstanding	200 million
Debt	$600 million
EBITDA	$456 million
Net Income	$226 million

Siver Machinery Co.

Category	Value
Debt	$533 million
EBITDA	$250 million
Net Income	$96 million

Compute the Enterprise/EBITDA Rate for Williams.