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Explain why, according to the pecking order theory, firms prefer internal financing to external financing.
Explain the tools the Fed uses to control interest rates and the money supply, and compare the positive and negative effects of their application.
Describe the procedures a company follows when it make a distribution through dividend payments.
Wentworth Industries is 100 percent equity financed. Its current beta is 0.9. The expected market rate of return is 14 percent and the risk-free rate is 8 percent. Calculate Wentworth's cost of equi
Paradise Inc, has identified an investment project with the following cash flows. If the discount rate is 8 percent, what is the future value at a discount rate of 11 percent? At 24 percent?
What are the similarities and differences in preferred stock and debt as sources of financing for a firm?
Your investment account earns 7% compounded semiannually. How much money must you put in the investment account today?
Should a firm pay cash dividends in a year in which it raises external common equity?
$85,000 invested in a stock that is returning 22.75%, and $235,000 invested in a stock that is returning 10.25%. What is the expected return of your portfolio?
In general terms, how would a change in investment opportunities affect the payout ratio under the residual payment policy?
A uses debt and has interest expense of $10 million, but B has no debt and no interest expense. Calculate the tax liability of the two companies.
Why should the NPV method be the primary decision tool used in making capital investment decisions?
The bonds mature on January 1, 2020, and pay interest annually beginning January 1, 2011. Mr. Crockrill purchased the bonds to yield 12%. How much did Mr. Crockrill pay for the bonds?
What kinds of errors can be made when the WACC for a firm is used as the discount rate for evaluating all projects in the firm?
When are multiple rates of return likely to occur in an internal rate of return computation? What should be done when a multiple rate of return problem arises?
Describe the relationships among accounts payable, inventories, accounts receivable, and the cash account by tracing the impact on these accounts of a product manufactured
What is the rationale behind the NPV method? According to NPV, which project(s) should be accepted if they are independent? Mutually exclusive?
What is the underlying cause of ranking conflicts between NPV and IRR?
Underwriters of a new issue of preferred stock would charge $3 per share in flotation costs. The firm's tax rate is 40%. Compute the cost of new preferred stock for DEF?
What is the reinvestment rate assumption, and how does it affect the NPV versus IRR conflict?
When forecasting operating expenses, explain the difference between a fixed cost and a variable cost.
What is the yield-to-maturity of a 10-year, 10% semi-annual coupon bond if its current price is $1,135.90? Assuming a 35% tax rate, what is the after-tax cost of debt?
What reinvestment rate assumptions are built into the NPV, IRR, and MIRR methods? Give an explanation (other than ?obecause the text says so??) for your answer.
Currently, new Baa bonds are being issued with a coupon of 7%. Assuming the firm's income tax rate is 35%, what is the after-tax cost of debt capital for the firm?