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The company just announced that future dividends will be increasing by 2 percent annually. How much are you willing to pay for one share of this stock if you require a 14 percent return?
What are some examples of restrictive covenants that might be specified in a bond's indenture?
What is the financial leverage effect and what causes it? What are the potential benefits and negative consequences of high financial leverage?
What is the operating leverage effect and what causes it? What are the potential benefits and negative consequences of high operating leverage?
Estimate the average annual return you would have made on your investment. Estimate the standard deviation and variance in the annual returns.
Explain the difference between the discounted free cash flow model as it is applied to the valuation of common equity and as it is applied to the valuation of complete businesses.
Answer the following multiple-choice question. Total stockholders' equity minus preferred stock equity divided by the number of shares outstanding represents the Return on equity.
Define the P/E valuation method. Under what circumstances should a stock be valued using this method?
Common shares outstanding on January 1, 50,000 shares July 1, 2-for-1 stock split October 1, a stock issue of 10,000 shares Required Compute the denominator of the earnings per share computation f
What is the usual pattern of cash flows for a share of preferred stock? How does the market determine the value of a share of preferred stock, given these promised cash flows?
All other things held constant, how would the market price of a bond be affected if coupon interest payments were made semiannually instead of annually?
A firm has earnings before interest and tax of $1,000,000, interest of $200,000, and net income of $400,000 in Year 1. Calculate the degree of financial leverage in base Year 1.
What is the relationship between a bond's market price and its promised yield to maturity? Explain.
The Dicker Company has the following pattern of financial data for Years 1 and 2:Required Calculate earnings per share and comment on the trend.
How and why does working capital affect the incremental cash flow estimation for a proposed large capital budgeting project? Explain.
What is a sunk cost? Is it relevant when evaluating a proposed capital budgeting project? Explain.
Quiddich Company sells bonds that cost $40,000 for $45,000, including $1,000 of accrued interest. In recording the sale, Quiddich books a $5,000 gain. Is this correct? Explain.
Explain how using a risk-adjusted discount rate improves capital budgeting decision making compared to using a single discount rate for all projects?
Why is the coefficient of variation a better risk measure to use than the standard deviation when evaluating the risk of capital budgeting projects?
Explain how to resolve a "ranking conflict" between the net present value and the internal rate of return. Why should the conflict be resolved as you explained?
What is the decision rule for accepting or rejecting proposed projects when using net present value?
Kate Denton is confused about losses and gains on the sale of debt investments. Explain these issues to Kate: How the gain or loss is computed.
How do we calculate the payback period for a proposed capital budgeting project? What are the main criticisms of the payback method?
For a given IOS and MCC, how do financial managers decide which proposed capital budgeting projects to accept, and which to reject?
What is the investment opportunity schedule (IOS)? How does it help financial managers make business decisions?