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Chapter 12

1. Your company is now wishing to undertake a new project. What are the issues to be considered when considering the use of debt vs. equity financing of this new project? Of these two types of capital which will have the most impact on earnings per share for your company?

2. In your continuing effort to determine whether to use debt or equity financing of a new project you are also trying to determine if you should use the weighted average cost of capital (WACC) or if you should use the capital asset pricing model (CAPM). What are the pros and cons related to using each of these evaluation methods in making your financing decision?

Chapter 17

1. Your company is now considering the amount to pay out in dividends at the end of the current quarter. If your company has consistently paid dividends that were relatively constant over the last several quarters, what concerns should you address based upon the dividend signaling hypothesis?

2. You have now decided to pay out dividends at the end of your companys current quarter. You have asked your company Treasurer to discuss each of the following terms related to dividends.

1. Declaration date
2. Record date
3. Ex-dividend date
4. Distribution date

How will your Treasurer describe each of these items?