Questions and Answers of Corporate Finance Principles And Practice

Which industry (ie non-finance) sectors would you currently associate with green finance?
Why might financial decision-making not take environmental goals into account?
Who are the key stakeholders for your organization? Be as specific as possible.
Which of the SDGs are most relevant, in your view, for the finance sector?
What might be the key barriers to green finance becoming more widespread?
Reflecting on the visible effects of climate change outlined above, in what ways do you think the finance sector may have directly or indirectly contributed to them?
Thinking about the organization you work for, or an organization you are familiar with, what (if anything) has it done/is it doing to reduce its direct or indirect emissions of green house gases?
What might be the impact of these observed and projected future changes on the city/country/region where you live and work?
How might the community you live in, or a community you are familiar with, need to adapt to climate change?
What active steps could you take, as an individual, to mitigate the impact of climate change? What active steps could the organization you work for, or another organization you are familiar with,
How might a climate-driven natural disaster impact on your organization? Think about the full range of stakeholders.
What might be some of the physical, transition and liability risks for the finance sector?
How much of your pension and other investments are invested in fossil fuels and other high-carbon assets? Do you know? Is it easy to find out?
What might be the challenges for Fairphone’s business model?
Of the two scenarios presented in this section, which would you prefer to live and work in: 1. Fast forward, or 2. Slow motion? Why?
How might governments around the world collaborate to support green and sustainable finance?
What national policies could governments introduce to support green and sustainable finance?
What should industry bodies do to support green and sustainable finance? What examples can you identify from your country?
What principles are you aware of that you would associate with green and sustainable finance?
Have you come across examples of greenwashing in the products and services you consume, or have read about? How did/does this make you feel?
Can you think of other examples of organizations with genuine deep green strategies?
How could you use your learning from this course to train and encourage colleagues?
What, in your view, is required to ensure that finance flows are consistent with the Paris Agreement targets?
In what ways (if any) are green and sustainable investments and activities monitored and reported in your organization, or in an organization with which you are familiar?
Why, in your view, is independent external review of impacts and outcomes so important?
What, in your view, might be some of the challenges of monitoring and measuring broader sustainability impacts beyond environmental performance?
What, in your view, are the advantages of the increasing availability and quality of environmental performance and climate data?
What might be some of the key climate-related and environmental risks faced by businesses?
What environmental risks is your organization (or an organization you know well) most exposed to?
Which physical risks are highest for your organization? What strategies could you put in place to minimize and/or mitigate these risks?
How vulnerable are some products and services you use to substitution by low-carbon alternatives? What would cause you to switch?
Which of these factors are most significant in terms of your organization’s climate risks, or an organization with which you are familiar?
How might retail and commercial banks be negatively affected by climate change? And what might the opportunities be for green and sustainable banking?
Has your organization, or organizations you are familiar with, signed the Principles for Responsible Banking? How might you encourage them to do so if they have not yet endorsed the Principles?
How might the different corporate forms outlined above affect how a bank sees its role in relation to the environment?
How might corporate and investment banks support the transition towards a more sustainable economy?
Why might a company choose to raise finance for new green projects by issuing bonds, rather than other sources of capital?
Why might a government prioritize the development of green bond markets?
What are the costs and benefits of having more stringent standards and requirements on use of proceeds and disclosure in order to secure green bond labelling or certification?
Would the things being financed by green use-of-proceeds bonds have been successfully financed anyway and, if so, does it matter?
Why might China be keen to encourage the growth of its green bond market?
In what ways do you think the activities of central banks could affect the natural environment?
In what ways do you think development banks have supported the growth of green finance?
What might be the business advantages of developing bespoke green loan products?
Why might the requirements and needs of investors prioritizing green and sustainable finance be different from those of any other investor?
What are the drawbacks of relying on green equity indices?
How can the distinctive characteristics of private equity investment be mobilized in support of green finance?
What might be the tensions between making green and sustainable funds greener and making those funds more accessible or attractive to large asset owners like pension funds?
What might be the advantages and/or disadvantages of ETFs for green and sustainable finance?
How might the insurance industry be affected by climate change and other forms of environmental damage? What risks and opportunities are there for the insurance industry?
How might insurance firms help to protect people from the increasing number of climate-related disasters?
What might be considered as green insurance?
Can you think of any insurance products or services that might fit with our definition of green insurance?
Can you think of any emerging trends that may open up more opportunities for motor insurers to promote environmental sustainability
With renewable energy set to grow further in the coming years, what more could insurance firms do to encourage take up?
How else might finance help to encourage energy efficiency?
What opportunities might FinTech offer for green finance?
What initiatives can you identify in markets with which you are familiar that seek to apply FinTech tools and techniques to green and sustainable corporate banking and capital markets activities?
What data does your organization, or an organization with which you are familiar, provide that might help investors and analysts assess sustainability
How might FinTech-enabled micro-insurance principles be applied to promote green and sustainable finance outcomes in the developed world?
A number of other green/sustainable cryptocurrencies are available, including Bitcoin Green and Energy Coin. Pick one of these, or find another online. What are the similarities and differences as
What initiatives to accelerate and support the use of FinTech tools and techniques in green finance are you aware of in the jurisdiction(s) where you live and work? How successful are they?
How far do you believe green finance is now part of the mainstream of finance? To what extent is it embedded in your organization, and other organizations with which you are familiar?
What have senior policymakers, regulators and financial services executives in your jurisdiction said about green and sustainable finance? What have senior executives in your organization said?
A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interest rate. GNP is expected to grow by
There are two stocks in the market, Stock A and Stock B. The price of Stock A today is $68. The price of Stock A next year will be $56 if the economy is in a recession, $78 if the economy is normal,
Suppose you are expecting to receive a million British pounds in six months, and you agree to a forward trade to exchange your pounds for dollars. Based on Figure 31.1, how many dollars will you get
Suppose Firm A acquires Firm B in a merger. Further, suppose Firm B’s shareholders are given one share of Firm A’s stock in exchange for two shares of Firm B’s stock. From a legal standpoint,
Look back at Example 27.2. A large bank is willing to provide the float reduction service for $175 per year, payable at the end of each year. The relevant discount rate is 8 percent. Should Lambo
Refer to Table 25.2 in the text to answer this question. Suppose you sell five March 2021 silver futures contracts on December 4, 2020, at the last price of the day. What will your profit or loss be
On April 1, Moon Chemical agreed to sell petrochemicals to the U.S. government in the future. The delivery dates and prices have been determined. Because oil is a basic ingredient in the production
Refer to Table 25.2 in the text to answer this question. Suppose you purchase a March 2021 cocoa futures contract on December 4, 2020, at the last price of the day. What will your profit or loss be
In June, Bernard Abelman anticipates a harvest of 50,000 bushels of wheat at the end of September. He has two alternatives:1. Write futures contracts against his anticipated harvest. The September
A warrant gives its owner the right to purchase three shares of common stock at an exercise price of $64 per share. The current market price of the stock is $71. What is the minimum value of the
Suppose the Moulton Company has outstanding 1,000 shares of common stock and 100 bonds. Each bond has a face value of $1,000 at maturity. They are discount bonds and pay no coupons. At maturity, each
Going back to the Lufthansa convertible bonds, Lufthansa raised €600 million by issuing convertible subordinated debentures with a 2 percent coupon rate due in 2025. Each bond had a par value of
To see how warrants affect the value of the firm, imagine that Mr. Gould and Ms. Rockefeller are two investors who have together purchased six ounces of platinum. At the time they bought the
The Popov Company has been awarded the concessions at next year’s Olympic Games in Antarctica. Because the firm’s principals live in Antarctica and because there is no other concession business
The Regional Electric Company has $1,000 of extra cash. It can retain the cash and invest it in Treasury bills yielding 10 percent or it can pay the cash to shareholders as a dividend. Shareholders
Overnight Publishing Company (OPC) has $2.5 million in excess cash. The firm plans to use this cash either to retire all of its outstanding debt or to repurchase equity. The firm’s debt is held by
Refi Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firm’s debt-equity ratio is expected to rise from 35 percent to 50 percent. The firm
On March 2, 2000, 3Com, a profitable provider of computer networking products and services, sold 5 percent of one of its subsidiaries, Palm, to the public via an initial public offering (IPO). 3Com
Suppose Vermont Electronics Company is thinking about relocating its plant to Mexico, where labor costs are lower. In the hope that it can stay in Vermont, the company has submitted an application to
Consider a firm whose debt has a market value of $40 million and whose stock has a market value of $60 million. The firm pays a 5 percent rate of interest on its new debt and has a beta of 1.41. The
For the firm in the previous problem, suppose the book value of the debt issue is $75 million. In addition, the company has a second debt issue on the market, a zero coupon bond with eight years left
D. D. Ronnelley Co. is a conglomerate firm with operations in publishing and computer software. It is considering whether to accept a new project in computer software. Noting that publishing is a
The preceding material can be further explained by the following example. We keep our one-factor model here but make three specific assumptions:1. All securities have the same expected return of 10
Locate the Treasury bond in Figure 8.5 maturing in November 2041. Is this a premium or a discount bond? What is its current yield? What is its yield to maturity? What is the bid-ask spread in
What is the end-of-year wealth if Vicki Bogan receives an APR of 24 percent compounded monthly on a $1 investment?Using Equation 4.6, her wealth is:The annual rate of return is 26.82 percent. This
Locate the Treasury bond in Figure 8.5 maturing in January 2027. What is its coupon rate? What is its bid price? What was the previous day’s asked price? Assume a par value of $10,000.Figure 8.5
Suppose the risk-free rate is 3.9 percent and the market portfolio has an expected return of 11.4 percent. The market portfolio has a variance of .0315. Portfolio Z has a correlation coefficient with
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 9 percent and a standard deviation of 14 percent. The risk-free rate is 4.3 percent and the expected
Suppose the expected returns and standard deviations of Stocks A and B are E (RA) = .10, E(RB) = .12, σA = .39, and σB = .72.a. Calculate the expected return and standard deviation of a portfolio
Security F has an expected return of 9 percent and a standard deviation of 43 percent per year. Security G has an expected return of 12 percent and a standard deviation of 76 percent per year.a. What
Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an expected return of 8.5 percent. If the risk-free rate is 3.2 percent and the market risk premium is
The stock of Aardvark Enterprises has a beta of 1.5 and that of Zebra Enterprises has a beta of .7. The risk-free rate is assumed to be 3 percent, and the difference between the expected return on
Consider the following possible returns both on the stock of Jelco, Inc., and on the market:Though the return on the market has only two possible outcomes (15% and −5%), the return on Jelco has
Mara Faccio is considering investing in the common stock of Merville Enterprises. In addition, Mara will either borrow or lend at the risk-free rate. The relevant parameters are:Suppose Mara chooses
Consider Supertech and Slowpoke. From our earlier calculations, we findthat the expected returns on these two securities are 17.5 percent and 5.5 percent, respectively.The expected return on a
We have already determined the expected returns and standard deviations for both Supertech and Slowpoke. In addition, we calculated the deviation of each possible return from the expected return for

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