Assignment

Corporate Finance, Ch. 14: Efficient Capital Markets and Behavior Challenges

Consider the following as you read:

1. Describe an efficient capital market for stocks.
2. Compare and contrast the weak form of market efficiency with the strong and semi-strong forms.
3. Explain the relevance of market efficiency for financial managers.

Respond to Efficient Capital Market

posted by SANDRA

The stock market is considered to be an efficient capital market for stocks is when stock prices fully reflect all available information about the underlying value of the stock and information is in no way misleading. The efficient market hypothesis (EMH) indicates that information is reflected in prices instantaneously and investors should only expect a normal return rate and that the price adjusts prior to the investor having the ability to trade on it. In addition, firms should expect only to receive fair (present) value for the securities they sell, so financing opportunities that may have presented from fooling investors do not exist in efficient capital markets.

Reference

Ross, S., Westerfield, R., Jaffe, J., & Jordan, B. (2016). Corporate Finance (11th). New York, NY: McGraw-Hill.

Corporate Finance, Ch. 16: Capital Structure - Basic Concepts

Consider the following as you read:

1. Distinguish how maximizing the value of the corporation differs from maximizing shareholder interests.
2. Explain how leverage can improve returns to the shareholders.
3. Describe the impact of corporate taxes on the weighted average cost of capital.

Corporate Finance, Ch. 17: Capital Structure - Limits to the Use of Debt

Consider the following as you read:

1. Distinguish between direct and indirect costs in a corporate bankruptcy.
2. Describe agency costs and the impact on bondholders.
3. Explain the application and implications of the pecking-order theory.

DS1 ZOES

Listen to the latest Zoës Kitchen (ZOES) quarterly conference call (webcast) and discuss two things that you learned as a result. Try not to repeat things mentioned by other students.

http://ir.zoeskitchen.com/investor-relations/overview/default.aspx

DS2 Zoës Kitchen

Pick a competitor to Zoës Kitchen. How does this competitor differ from Zoës Kitchen? Why?

Reference
Ross, S., Westerfield, R., Jaffe, J., & Jordan, B. (2016). Corporate Finance (11th). New York, NY: McGraw-Hill.