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Rio Rubber Corporation follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in the firm's dividend per share?
A. The company increases the percentage of equity in its target capital structure.
B. The number of profitable potential projects increases.
C. Congress lowers the tax rate on capital gains. The remainder of the tax code is not changed.
D. The firm's net income increases.
E. Earnings are unchanged, but the firm issues new shares of common stock.
Winter's Toyland has a debt-equity ratio of 0.58. The pre-tax cost of debt is 8.1 percent and the required return on assets is 15.1 percent. What is the cost of equity if you ignore taxes?
Discuss the following statement: All else equal, firms with relatively stable sales are able to carry relatively high debt ratios. Is this statement true or false? Why? Why is EBIT generally considered independent of financial leverage? Why might EBI..
A company has identified a number of promising projects, as indicated in Table 2. The cash flows for the first 2 years are shown (they are all negatives). The cash flows in later years are positive, and the net present value of each project is shown...
What is Netflix’s long-run objective? How does Netflix plan to achieve its long-run objective? How would you assess Netflix’s business model. Why does McCarthy use a subscriber model to forecast Netflix’s future cash flow requirements? What are the b..
How do you calculate the expected annual free cash flows as opposed to annual cash flows? The problem asks for the calculation both was at different sales levels.
Suppose you just bought a 20-year annuity of $7,500 per year at the current interest rate of 10 percent per year. What is the value of your annuity today? What happens to the value of your investment if interest rates suddenly drop to 5 percent? What..
The Perfect Rose Co. has earnings of $1.90 per share. The benchmark PE for the company is 14. What stock price would you consider appropriate? What if the benchmark PE were 17?
(Principal-Only MBS and Interest-Only MBS) Referring to the previous question, what is the average life of the IO MBS? Submission Guideline: Give your answer in years rounded to two decimal places.
What was his total rate of return?
The state lottery's million-dollar payout provides for $1 million to be paid out over the course of 19 years in equal cash amounts. The first payment is made immediately, and the remaining 19 payments occur at the end of each of the next 19 years. If..
Bart? Simpson, age 10 ?, wants to be able to buy a really cool new car when he turns 18 . His really cool car costs ?$19,000 ?today, and its cost is expected to increase 4 percent annually. How much will? Bart's car? cost, and how much does Bart have..
Kantorovich Company normally takes 30 days to pay for its average daily credit purchases of $2,000. Its average daily sales are $3,000, and it collects accounts in 25 days. What is its net credit position? Note that a negative position implies receiv..
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