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1. Which of the following factors influence(s) the estimate of a business's optimal capital structure?
a. The amount of business (inherent) risk
b. Lender/rating agency attitudes
c. Industry averages
d. The need to maintain financial flexibility (reserve borrowing capacity)
e. All of the above
2. If debt financing is used in a for-profit corporation, more of a firm's operating income is available for distribution to investors (owners and creditors). The additional available operating income arises as a result of
a. greater operating expenses
b. greater operating revenue
c. reduced operating expenses
d. lower dividends
e. tax savings
Assume that the cost of carrying silver includes storage costs. On March 17, 2015 the May 2015 futures contract settled at $ 15.578 per ounce (assume it is a 2-month contract), spot traded at $ 15.562 per ounce. Storage costs per ounce are about 0.2%..
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Harry Trading Company must choose its optimal capital structure. Currently, the firm has a 20 percent debt ratio and the firm expects to generate a dividend next year of $5.44 per share. Dividends are expected to remain at this level indefinitely.
Explain how financial leverage at investment banks differed from financial leverage at more traditional commercial banks. What is the benefit of this leverage? What are the primary risks associated with financial leverage?
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You would like to establish a trust fund that will provide $120,000 a year forever for your heirs. The trust fund is going to be invested very conservatively so the expected rate of return is only 5.75 percent. How much money must you deposit today t..
Cable Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semi annual payments, and a $1,000 par value. The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,120. What is th..
question 11.using the diagram belowlsquobuilding blocks of financial management explain the three most important
Woidtke Manufacturing's stock currently sells for $30 a share. The stock just paid a dividend of $2.00 a share (i.e., D0 = $2.00), and the dividend is expected to grow forever at a constant rate of 7% a year. What stock price is expected 1 year from ..
You pay Federal tax at the rate of 32%, and the MA state tax at the rate of 6.25%. It is estimated that the US T-Bill has zero risk of default, the MA municipal has a 1.8% chance of default,and the back CD has a 2.3% chance of default. The quoted yie..
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