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Caroline Weslin needs to decide whether to accept a bonus of $1,820 today or wait two years and receive $2,100 then. She can invest at 6 percent. What should she do?
What is business risk? What factors influence a firm's business risk?
What is a stock repurchase? Describe the procedures a company follows when it make a distribution through a stock repurchase.
What is a dividend reinvestment plan? Explain the advantages of a dividend reinvestment plan to the firm and to shareholders.
What is a dividend reinvestment plan (drip), and how does it work?
Chaffee Company is considering an investment that will return a lump sum of $750,000 six years from now. What amount should Chaffee Company pay for this investment to earn an 8% return?
What is a cash budget, and how is this statement used by a business? How is the cash budget affected by the CCC? By credit policy?
What factors determine the required rate of return for any security?
Bo Newman will invest $10,000 today in a fund that earns 5% annual interest. How many years will it take for the fund to grow to $17,100?
An investment opportunity requires a payment of $750 for 12 years, starting a year from today. If your required rate of return is 8 percent, what is the value of the investment to you today?
What effect do share repurchases (undertaken as part of the firm's dividend decision) have on the value of the firm?
What assumptions underlie the MM theory? Are these assumptions realistic?
Adams Inc. will deposit $30,000 in a 12% fund at the end of each year for 8 years beginning December 31, 2012. What amount will be in the fund immediately after the last deposit?
What are the similarities and differences in preferred stock and debt as sources of financing for a firm?
What are stock repurchases? Discuss the advantages and disadvantages of a firm's repurchasing its own shares.
What are some factors a manager should consider when establishing his or her firm's target capital structure?
To begin, define the terms optimal capital structure and target capital structure.
A friend promises to pay you $1,000 two years from now if you lend hime $800 today. What annual rate of interest is your friend offering?
What is current value of this stock if the required rate of return is 14 percent.
In general terms, how would a change in investment opportunities affect the payout ratio under the residual payment policy?
Where on the asset side of the balance sheet are trading securities, available-for-sale securities, and held-to maturity securities reported? Explain.
How does the existence of asymmetric information and signaling affect capital structure?
Explain why, according to the pecking order theory, firms prefer internal financing to external financing.
Explain what is meant by the signaling effects of dividend policy.
When is a debt security considered impaired? Explain how to account for the impairment of an available-for sale debt security.