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Assume tax rates are the same for dividends and capital gains, and that stockholders have exactly the same information as the managers who make the financial decisions of the firm. If the managers always make rational investment decisions—that is, they purchase only positive net present value capital budgeting projects—which of the following dividend policies should investors prefer the managers follow? Consider everything else is equal.
a. residual dividend
b. constant payout ratio
c. stable, predictable dividend
d. low regular dividend plus extras
e. It shouldn't matter which dividend policy the managers follow because each policy should maximize the value of the firm.
You are considering a 30-year, $1,000 par value bond. Its coupon rate is 8%, and interest is paid semiannually. If you require an "effective" annual interest rate.
At the beginning of time, t=0, Habibi Corp. has the following balance sheet: Assets Liabilities and Equity Cash: $10 Million Current Liabilities: none Other Current Assets: Recreate the statement of cash flows that the firm will release at t=1. Be s..
What is the market value of the following bond? Coupon 8% Maturity date 2038 Interest paid semiannually Par Value $1000 Market interest rate 10%. What is the formula for excel?
For this discussion, assume that you are an investor and considering the buyout of an existing publicly traded company. There are several areas you plan to focus on during your due diligence process in order to determine the organization's potential ..
Consider the following information regarding the performance of a money manager in a recent month. The table presents the actual return of each sector of the manager’s portfolio in column, the fraction of the portfolio allocated to each sector in col..
Weyman Z. Wannamaker is the chief financial officer of Cogburn Company. He prides himself on being able to manage the company’s cash resources to minimize the interest expense. Consequently, on the second business day of each month, Weyman pays down ..
Suppose the 30 year mortgage interest rate rises from 3 percent to 5 percent, and simultaneously the expected rate of inflation rises from 1 percent to 4 percent. What is the approximate change in the real interest rate? In the year 2007, the Zimbab..
Gamma Electronics is considering the purchase of testing equipment that will require an initial outlay (cost) of $500,000 to replace old equipment. The purchase of this new equipment will result in a positive after-tax cash benefit/in-flow of $200,00..
A US Treasury STRIP with a face value of $1000 has 12 years to maturity. In excel, compute and graph the yields for prices of $400 to $1000, in $50 increments. Use annual compounding of interest.
Calculate the holding period return and calculate the required return based o the CAPM - calculate the coefficient of variation
Given a floater/inverse floater tranche with a total principal amount of $25,000,000, 7% interest, and even allotments to the floater class and the inverse floater classes what is the maximum interest rate cap on the floater class?
Annuity Payment and EAR You want to buy a car, and a local bank will lend you $10,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 6%, with interest paid monthly. What is the monthly loan payment..
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