Explain what is meant by operating and financial risk. Suppose that firm A has a greater
operating risk than firm B. Is it true that firm A also has a higher cost of equity?
Why is the use of debt referred to as financial leverage?
You are the lead broker for the syndicate that will be issuing $45,000,000 in a new equity issue
for the Rocket Science Corporation. The issue will be a firm commitment offering and the entire
issue was purchased for a discounted price. The new equity issue will be sold using a Dutch
auction. Calculate the selling price and the number of shares each successful bidder will receive.