1. There are two companies. Company 1 has a Beta of .4 and Company 2 has a Beta of 1.8. Which of these companies is an electric utility and which is a technology company?
2. As a company uses more and more equity in its capital structure (and less debt) what is it doing to the financial risk of the company increasing it or decreasing it?
3. You are running a company with two divisions. One division is high risk and the other division is low risk. Which division should (or is expected to) earn a higher rate of return or ROIC? Why?
4. Do most industries have the same optimal financing mixture, or does it change depending on the industry? Explain.
5. You are running a company with two divisions. One division is high risk and the other division is low risk.