MIT Sloan School of Management
Corporate Finance (15.402)
Final Exam
• You have 80 minutes to complete the exam. Budget your time carefully.
• 100 points possible.
• The exam is open notes. You can use any notes, handouts, and textbooks, as well as the calculator
provided.
• No communication is allowed with anyone else. Devices, phones, tablets, computers, etc. are not
allowed. No Internet access is allowed.
• To get full credit, you must show and fully explain your work, i.e., we want to see all steps that
lead to the solution. Partial credit will be given generously, provided there is something to give
credit for.
• Limit your answers to the space provided.
NAME: __________________________
SECTION: _______________________
MIT EMAIL:
1
, Part 1: Short Answer (12 points total)
1. You are thinking about buying shares in SparkScoot, a company that rents electric scooters.
SparkScoot’s operations are pretty stable: in good years and bad, scooter usage doesn’t swing
wildly. A friend tells you, “The business isn’t that risky, but the stock is super volatile –
management just took on a lot more debt.” Does this make sense? Explain it in the language of
betas. (4 points)
2. You start your own company, Crimson Crumbs, selling wildly popular snack boxes on
subscription. Your accountant shows you the income statement: sales are growing fast, and your
gross margins are solid. But when you check the bank account, there’s almost no cash. Is there a
working capital reason a company like Crimson Crumbs might not be seeing much cash in the
bank right now? Explain in 2-3 sentences. (4 points)
3. In a finance meeting, a manager says: “Debt is cheaper than equity, so we should fund everything
with debt.” In layperson terms, what does she mean? Do you agree? Give two reasons you agree
or disagree. (4 points)
2
Corporate Finance (15.402)
Final Exam
• You have 80 minutes to complete the exam. Budget your time carefully.
• 100 points possible.
• The exam is open notes. You can use any notes, handouts, and textbooks, as well as the calculator
provided.
• No communication is allowed with anyone else. Devices, phones, tablets, computers, etc. are not
allowed. No Internet access is allowed.
• To get full credit, you must show and fully explain your work, i.e., we want to see all steps that
lead to the solution. Partial credit will be given generously, provided there is something to give
credit for.
• Limit your answers to the space provided.
NAME: __________________________
SECTION: _______________________
MIT EMAIL:
1
, Part 1: Short Answer (12 points total)
1. You are thinking about buying shares in SparkScoot, a company that rents electric scooters.
SparkScoot’s operations are pretty stable: in good years and bad, scooter usage doesn’t swing
wildly. A friend tells you, “The business isn’t that risky, but the stock is super volatile –
management just took on a lot more debt.” Does this make sense? Explain it in the language of
betas. (4 points)
2. You start your own company, Crimson Crumbs, selling wildly popular snack boxes on
subscription. Your accountant shows you the income statement: sales are growing fast, and your
gross margins are solid. But when you check the bank account, there’s almost no cash. Is there a
working capital reason a company like Crimson Crumbs might not be seeing much cash in the
bank right now? Explain in 2-3 sentences. (4 points)
3. In a finance meeting, a manager says: “Debt is cheaper than equity, so we should fund everything
with debt.” In layperson terms, what does she mean? Do you agree? Give two reasons you agree
or disagree. (4 points)
2
