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A firm’s profit margin is 5 percent, its debt/assets ratio is 56 percent, and its dividend payout ratio is 40 percent. If the firm is operating at less than full capacity. Then sales could increase to some extent without the need for external funds, but if it is operating at full capacity with respect to all assets, including fixed assets, then any positive growth in sales will require external financing. Would this be True or False and why?
Kirk Faust just won the state lottery which promises to pay him $1,500 per year for 20 years, starting from today, and $1,850 per year for years 21-45, given a 6.75% discount rate. Your company wants to purchase the proceeds from the lottery from Kir..
Assume you stock portfolio is comprised of: 60% of your total is in a computer company stock (that has a beta of 1.3, the risk-free rate is 5%, and the expected return on the market as a whole is 11%); and 40% of your total is in the petroleum compan..
Mooradian Corporation’s free cash flow during the just-ended year (t = 0) was $150 million, and its FCF is expected to grow at a constant rate of 5.0% in the future. If the weighted average cost of capital is 12.5%, what is the firm’s total corporate..
Firm A had net income of $30 milion last year. Deprecitation expense for year was $4million. Firm A spent $5 million last year in capital expenditures. If discount rate is 12% and firm A free cash flow is expected to grow 3% per year, calculate curre..
Benson Corporation announced that its net income for the year ended June 30, 2015 is $1,400,000. The company also reported EBITDA of $5,000,000, and depreciation and amortization expense of $1,250,000. If the company's income tax rate is 50 percent, ..
Consider a 6-month European put on GOOG with a strike price of $650. GOOG spot price is $725 and its volatility is 25%. The stock is not expected to pay any dividend. The risk-free rate is 4%. What is the put delta? If an investor with a short positi..
Using the appropriate interest table, compute the present values of the periodic amounts, shown on page 344, due at the end of the designated periods.
Suppose you observe a spot exchange rate of $2.00/£. If interest rates are 5% APR in the U.S. and 2% APR in the U.K., what is the no-arbitrage 1-year forward rate?
The Elkmont Corporation needs to raise $52.8 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $44 per share and the company’s under..
First National Bank charges 13.2 percent compounded monthly on its business loans. First United Bank charges 13.5 percent compounded semiannually. As a potential borrower, which bank would you go to for a new loan? What is the future value of $2,600 ..
Thomas Brothers is expected to pay a $3.1 per share dividend at the end of the year (that is, D1 = $3.1). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 19%. What is the stock's curr..
Fama's Llamas has a weighted average cost of capital of 9.8 percent. The company's cost of equity is 12 percent, and its pretax cost of debt is 7.8 percent. The tax rate is 40 percent. What is the company's target debt-equity ratio?
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