1. How do free cash flows and the weighted average cost of capital interact to determine a firm’s value?
2. When you first begin operations, assuming you are the only employee and only your money is invested in the business, would any agency problems exist? Explain.
Suppose you decided (like Michael Dell) to start a computer company. You know from experience that many students, who are now required to own and operate a personal computer, are having difficulty setting up their computers, accessing various materials from the local college network and from the Internet, and installing new programs when they become available. Your immediate plan is to provide a service under which representatives of your company will help students set up their computers, show them how to access various databases, and offer an e-mail “help desk” for various problems that will undoubtedly arise.