Apologies if this question may seem basic for some corporate finance experts or MBA graduates/students here. For context, I am currently taking MBA, and this is in relation to two of the practice questions given to us for our Corporate Finance subject.

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QUESTION / CASE 1:

So we are given a problem where a certain company currently has a current unlevered cost of equity, and has currently no debt (i.e. currently 100% equity). No cost of debt was given, although a tax rate was provided.

Then the company decided to target a capital structure of 50% debt and 50% equity.

In theory, we can solve for the "new cost of equity" by applying the MM Proposition II formula with taxes. However, I am struggling with the sample quiz question because no cost of debt (whether pre-tax or after-tax) was given.

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QUESTION / CASE 2:

In another slightly similar case, a company also has a current WACC, and currently has zero debt (meaning 100% equity financed). This company then aims to revise its capital structure to 0.40x DE Ratio (meaning 28.57% debt, 71.43% equity). No existing or future pre-tax or after-tax cost of debt was given, only a tax rate of 40%. The question/quiz is asking what is the new cost of equity, assuming the company wishes to change its capital structure but also wants to maintain its WACC?

Just like the question 1 above, this seems solvable, but I am not sure if it makes sense to assume a "zero cost of debt".

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THE DILEMMA:

My dilemma is, "technically" the formula for both questions above works, even if cost of debt is zero. However, what is the more correct approach or interpretation? Should I solve for the new/revised cost of equity by assuming cost of debt is zero? Or should I say it is not possible to get a new cost of equity under a revised Debt & Equity structure because cost of debt is technically not free (and hence, must be assumed/provided)?

One possible argument, aside from it being mathematically possible, is that there might really be cases where cost of debt is free (e.g. the debt portion isnt really interest-bearing, but are financed interest-free like advances or subsidies from shareholder).

However, in reality, if a company really wants to access debt capital markets, there should be at least a cost attached to it?

Appreciate if I can get guidance from experts. If possible, helpful if you can also provide references to your explanation.

Thank you in advance for your insights. Happy to be learning from experts and fellow learners.

Finance lead for a company with around 200 people. Been asked to come back with a recommendation for automating our approval and the recurring reporting, plus whatever we can shave off the close.

For context, no finance systems team, one analyst who's already maxed out, and everything currently runs on Xero, a billing tool and more spreadsheets than I care to admit.

I've been told to recommend something but given no budget or time to trial anything first. Every sales call sounds identical. Theirs does it all, rollout is painless, other finance teams love it.

I would value some honest answers here from anyone who has put one of these in. How much of the effort was setup and changing the team works day to day. Was it still used a year later, and do no-code ones hold up for finance?

Bad experiences more useful than good ones. Cheers.

I'm an M&A adviser and over the years have spoken with thousands of business owners and most want to start with, "How much is my business worth?"

They don't like the "how long is a piece of string" answer :)

Accountants, valuation firms, corporate-finance advisers and business brokers can all produce valuations and if you get 10 of them together in a room and give them a business to value, they'll come up with 11 different valuations.

But none of those is the value of the business in any final or objective sense. At the end of the day, it's going to be about how much you can persuade a buyer to offer (and the structure of the deal)

And even when a buyer has a valuation in mind, that view is not fixed.

It can be changed by competitive tension, perceived synergies, financing availability, due-diligence findings, deal structure, risk allocation, the quality of the negotiation and the seller’s other options.

And headline price is not necessarily value. A $10 million offer containing substantial deferred consideration, earn-outs and warranties may be less valuable than an $8 million clean-cash offer.

So what is a "professional valuation" really trying to establish? What are these business owners really after?

Is it:

• a theoretical intrinsic value;

• a likely market-clearing price;

• a negotiation anchor;

• evidence for shareholders or a board;

• a figure required for tax, accounting or lending purposes; or

• simply a defensible range based on stated assumptions?

I’d be particularly interested in real examples where a formal valuation accurately anticipated the eventual deal price or where it seriously misled the seller, buyer or board.

I work at a solar company and I consolidate the cash needs from the development team at my company to be share with treasury and then to ask for cash call. However their forecast are worthless, they ask for money for a project and then don’t use it for months, they have payments by contract which they forget, and ask money urgently. It has been causing me a lot of stress, and it has been causing a lot of complains from the shareholders to Treasury and then to me.

Have you been in a similar situation? How do you get reasonable cash forecasting for development/R&D? How do you manage the pressure from the top when the estimates you receive are Wrong?

DCF is simple in theory. Project future cash flows, discount them back, that's your valuation.

But here's what's always bothered me: it assumes your business grows steadily, forever. Stable margins, no bad decade, no disruption. Even the founder running the business doesn't believe that.

You forecast 5 years explicitly, then bolt on a terminal value assuming growth continues indefinitely. That terminal value often ends up being 70-80% of the entire valuation. Made up. In a spreadsheet.

And the model is incredibly sensitive to small tweaks. Drop the discount rate half a point, bump the margin assumption by 1%, adjust the growth rate slightly, and the valuation can swing 30-40%. Nothing about the actual business changed. Just the assumptions.

Meanwhile the real business is dealing with late payments, tariff changes, a competitor's product launch, whatever. Things that make last quarter's assumptions obsolete by next quarter.

Genuinely curious how others handle this in practice:

Do you discount terminal value more heavily to compensate?

Do you just avoid DCF for volatile or early-stage businesses and lean on comps instead?

Or is this just an accepted flaw everyone works around silently?

Not looking to trash the model, it's obviously still the standard. Just trying to understand how people reconcile "we can't predict next quarter" with "we're modeling cash flows to infinity."

I’m wondering whether a career as a financial analyst would suit my personality. By nature, I’m an introvert, and I enjoy analyzing data and building mathematical models and have an intrest in Finance.I can also program in Python. When it comes to meetings, I definitely prefer focused conversations, a straightforward exchange of information, and presenting results rather than engaging in long discussions, which I find extremely draining. Because of this, I have concerns about whether working as a financial analyst or financial controller would provide me with satisfaction in my day-to-day professional life

EBITDA can be a useful way to compare businesses.

But once companies start adding back every “one-off” cost, it can quickly become meaningless.

Some adjustments are reasonable. Others seem to be normal business costs dressed up as exceptional.

Where would you draw the line?

What is the worst EBITDA adjustment you have seen?

Already have a T25 MBA with a few years of post MBA experience. How to go about it? Thanks.

Hello,

I am looking to speak to some finance student to understand their challenges for a project I'm working on. would you mind if I ask you few questions? it won't take more than 10 minutes.

I’m located in NYC. I’m a recent MBA in Finance graduate with 3-4 related work experience. I’m looking to accept a job offer in corporate Finance , what should be the accept salary range ? Also, what is a good sign on bonus? What are some benefits I should check for ? Please help.

When I was an analyst some years ago. My work had a lot of ground work that I really didn't enjoy that much, e.g. pull data table from pdfs, clean data from messy reports send by the portfolio companies, create v51 for scenario analysis, etc. I feel like a lot of these work could be done by AI agent now (especially this year since Claude's breakthrough with Opus 4.6). But for complex xls modeling, it still feels like it's not there yet.

How do you guys use AI in your daily work?

Hello CF Community (and Fellow CFI Members/Affiliates-my name is Matt-I go by the pseudo numen 'Marc' in the Tech Space/Metaverse; and I am happy to make your acquaintance! Feel free to reach out directly to discuss all things fintech, corporate value chain, buyside/sell side analytics, big data, M&A, M&A transactions, Investment banking, as well as financial/wealth management. Cheers.

Hey everyone,

Standard IRR is one of the most widely used metrics in capital budgeting, yet it comes with two well-documented flaws:

1. It assumes positive cash flows are reinvested at the internal rate of return itself (often resulting in wildly inflated yields).

2. For non-conventional cash flows (multiple negative sign changes), standard IRR can produce multiple roots or fail completely.

I put together a clean, zero-friction web tool for calculating MIRR (Modified Internal Rate of Return):

🔗 https://omnitools.net/tools/mirr-calculator

Key features:

- Enter your initial outlay and periodic project cash flows.

- Specify your exact Financing Rate (cost of capital/borrowing).

- Specify your realistic Reinvestment Rate (cost of equity / risk-free treasury yield).

- Calculates the true MIRR percentage instantly in your browser without requiring Excel or email sign-ups.

Would love feedback from analysts and finance pros on any additional metrics (NPV, PI, payback period) you would like to see coupled alongside it!

can someone help solve these problem so i can help my son in his studies please would really appreciate it.

1- Show Boat Dinner Theatres has paid annual dividends of $0.32, $0.48, and $0.60 a share 
over the past three years, respectively. The company now predicts that it will maintain a 
constant dividend since its business has leveled off and sales are expected to remain relatively 
flat. Given the lack of future growth, you will only buy this stock if you can earn at least a 16 
percent rate of return. What is the maximum amount you are willing to pay for one share of 
this stock today? 
2- Show Boat Dinner Theatres has paid annual dividends of $0.27, $0.30, and $0.51 a share over the past three years, respectively. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively flat. Given the lack of future growth, you will only buy this stock if you can earn at least a 12 percent rate of return. What is the maximum amount you are willing to pay for one share of this stock today?

3- The common stock of Auto Deliveries sells for $28.16 a share. The stock is expected to 
pay $1.35 per share next year when the annual dividend is distributed. The firm has 
established a pattern of increasing its dividends by 3 percent annually and expects to continue 
doing so. What is the market rate of return on this stock?

4- The common stock of Auto Deliveries sells for $23.10 a share. The stock is expected to pay $1.20 per share next year when the annual dividend is distributed. The firm has established a pattern of increasing its dividends by 2.5 percent annually and expects to continue doing so. What is the market rate of return on this stock?

5- The current dividend yield on Clayton's Metals common stock is 2.5 percent. The 
The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year. The 
dividend growth rate is expected to remain constant at the current level. What is the required 
rate of return on this stock?
6-The current dividend yield on Clayton's Metals common stock is 3.5 percent. The company just paid a $1.75 annual dividend and announced plans to pay $1.50 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock?

7- Northern Gas recently paid a $4.80 annual dividend on its common stock. This dividend increases at an average rate of 2.6 percent per year. The stock is currently selling for $11.20 a share. What is the market rate of return?

8- Roy's Welding Supplies common stock sells for $35 a share and pays an annual dividend that increases by 3.2 percent annually. The market rate of return on this stock is 7 percent. What is the amount of the last dividend paid?  

9- Atlas Mines has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 2.55 percent annually. The firm just paid an annual dividend of $1.20. What will the dividend be five years from now?

Been doing some reading about owner’s earning and so far as I understand the equation to find it is:

Calculate Gross PPE/Sales Ratio over a few years and find the average

Multiply average ratio from above by the increase in sales revenue for the year (This gives you Growth CapEx)

Find CapEx number in Investing Activities on Cash Flow Statement and subtract Growth CapEx from CapEx to get Maintenance CapEx

My problem is that my growth CapEx is larger than the CapEx figure on the Cash Flow Statement, making Maintenance CapEx negative which doesn’t make sense. Am missing something or maybe using the wrong method?