Reference no: EM131360819
1. Which of the following statements is CORRECT?
a. A firm's business risk is determined solely by the financial characteristics of its industry.
b. The factors that affect a firm's business risk include industry characteristics and economic conditions, both of which are generally beyond the firm's control.
c. One of the benefits to a firm of being at or near its target capital structure is that this generally minimizes the risk of bankruptcy.
d. A firm's financial risk can be minimized by diversification.
e. The amount of debt in its capital structure can under no circumstances affect a company's EBIT and business risk.
2. Other things held constant, which of the following events would be most likely to encourage a firm to increase the amount of debt in its capital structure?
a. Its sales are projected to become less stable in the future.
b. The bankruptcy laws are changed in a way that would make bankruptcy more costly to the firm and its stockholders.
c. Management believes that the firm's stock is currently overvalued.
d. The firm decides to automate its factory with specialized equipment and thus increase its use of operating leverage.
e. The corporate income tax rate is increased.
What are the net proceeds to the issuer per share
: An offering for 2,000,000 shares of commons stock has the following profit distribution items: Takedown $2.00 Manager’s fee $0.50 Public offering price $30.00. What are the net proceeds to the issuer per share? If the entire issue sells, how much wil..
|
What is total rate of return on the bond
: Consider a bond (with par value = $1,000) paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has 3 years until maturity. Find the bond's price today and 6 months from now after the next ..
|
Balance sheet-statement of retained earning-income statement
: Financial Statements are critically important in understanding the overall "financial health" of a company. All of the financial statements must be reviewed as a complete package rather than one being analyzed as a standalone statement that could giv..
|
What is the total rate of return on bond
: Consider a bond (with par value = $1,000) paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has 3 years until maturity. a. Find the bond's price today and 6 months from now after the ne..
|
Determined solely by financial characteristics
: A firm's business risk is determined solely by the financial characteristics of its industry. Other things held constant, which of the following events would be most likely to encourage a firm to increase the amount of debt in its capital structure?
|
Business impact analysis-risk communication
: Define and discuss the Risk Management function and its supporting sub functions of: Risk Assessment; Business Area Analysis, Business Impact Analysis, Risk Communication; and Risk-Based Decision Making.
|
Cost of capital-project yields negative npv
: If you have a cost of capital of 12% and your project yields a negative NPV, what can you say for certain about the project?
|
Identical financial and operating leverage
: It is possible for Firms A and B to have identical financial and operating leverage, yet for Firm A to have more risk as measured by the variability of EPS. This would occur if Firm A has more business risk than Firm B.
|
Excess profits based on the analysis of historical price
: Investors cannot earn excess profits based on the analysis of historical price information. We say that the financial markets are: Stock A has an expected return of 16 percent and a beta of 1.4. Stock B has an expected return of 11 percent and a beta..
|