1. What is the difference between the return to an investor or lender and the cost to the borrower?
2. Why would one lender charge different rates to different borrowers for the same loan? Why would two different lenders charge different rates to the same borrower for the same loan?
3. What is the advantage of financial leverage, the degree to which a firm or individual uses borrowed money to make money?
4. How do we measure the advantage of financial leverage to the company's owners?
5. In what way is the decision on capital structure related to the company's expected earnings?
6. What is asymmetric information? How does it affect the prioritization of financing sources under the pecking order hypothesis?