Discussions

1) For nearly 40 years, complex derivative securities have been the source of great debate. The derivatives market today exceeds $300 trillian in notional (underlying) value. But they can be quite risky, particularly because  they can generate enormous profits, or equally enormous losses. Do complex derivatives (not forward purchase contracts) have a role in corporate financial strategy? If so, how and why? If not, why not?

2) Often, when companies announce a public offering to raise equity, it is interpreted as a negative signal. Is that interpretation reasonable, or is it an oversimplification? Why did you answer as you did?

3) When we are initially taught capital budgeting, we use book value cost of capital as the basis for setting the required rate of return, but investors invest at the market price and expect returns based on their investment. Is the book value cost of capital, based as it is on the already establish capital that is often used to fund capital investments, the appropriate basis for setting the required rate of return or should we teach market value cost of capital from the beginning?

4) There are several articles and essays exploring working capital management in more current terms than the text book discussion does. Are creative means of managing accounts receivable, inventory, and accounts payable relevant to small and medium sized businesses, or should they be reserved for the largest companies?

5) How should we consider the calculated cost of capital in times of artificially low interest rates?

6) Interest rates are and have been very low. Do low interest rates alter the required rates of return on investments and other business decisions? Do they lower returns required by investors? How should managers adjust required rates of return in periods of low interest rates, or should they not make any adjustment, utilizing the rates as calculated

7) In the Dell Computer announcement, it was noted that several executives had been replace. In a number of other significant cororate governance cases, executives have been terminated or allowed to resign. Is the loss of your job, and the loss of millions of dollars of compensation, sufficient penalty in such cases or should there be other penalties? Why or why not?  If there shouold be other penalties, what should they be?

8) How will changes made by companies in light of the coronavirus pandemic now affect the operations of business after we return to more normal activities?

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