Why do maximizing EPS and maximizing value not necessarily lead to the same conclusion about the capital structure?
Your sister just got married.She and her new husbandhave found a home to buy that is selling for$130,000 :Theywill put down $20,000 and obtaina 30-yearfixed-ratemortgage at 9% for the remainder. How much interest will they pay(in dollars)over the life of the loan?
Your company also owns a $50,000,000 stock portfolio. The portfolio has a beta of 1.2. Your boss wants to hedge the portfolio using e-mini S&P 500 futures and puts you in charge of doing it.What do you do?