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Enterprise Free Cash Flows should include:
I. Capital expenditures
II. Financing costs
III. Taxes
IV. Working capital requirements
I and IV
I, II and IV
I , III and IV
I, II, III, IV
A firm desires a WACC of 8.4 percent. Its cost of equity is 11.2 percent and its pre-tax cost of debt is 7.1 percent. The firm does not issue preferred stock. The tax rate is 38 percent. What must the debt- equity ratio of the firm be if it is to ach..
An individual retirement account, or IRA, earns tax-deferred interest and allows the owner to invest up to $5000 each year. Joe and Jill both will make IRA deposits for 30 years (from age 35 to 65) into stock mutual funds yielding 9.4%. Joe deposits ..
Find the present value of $600 due in the future under each of these conditions: 16% nominal rate, semi annual compounding, discounted back 4 years. 16% nominal rate, monthly compounding, discounted back 1 year.
Toyota Corp.'s stock price has a variance of returns of 0.0250. Honda Corp.'s stock has a variance of returns of 0.0505. The covariance between Toyota and Honda is 0.0255. What is the correlation coefficient between Toyota and Honda?
Why is the N.P.V. considered to be theoretically superior to all other capital budgeting techniques? Reconcile this reasoning with the prevalence in practice of using the I.R.R. How would you respond to your C.F.O. if she instructed you to use the I...
Prestige Auto's records show net income of $30,00, depreciation expense of $10,000, and cash dividend paid of $5,000. Using the indirect method, determine the cash flow from operating activities on the cash flow statement.
Suppose that an investor owns 10% of the stock of firm L, and assume that this investor can lend and borrow at the same interest rate as firm L, that is, at 12% (recall the assumption of perfect markets). Based on the trade-off theory of capital stru..
Biochemical Corp. requires $500,000 in financing over the next three years. The firm can borrow the funds for three years at 10.60 percent interest per year. The CEO decides to do a forecast and predicts that if she utilizes short-term financing inst..
If the preferred stock is cumulative, determine the total amount of cash dividends paid to each class of stock in each of the three years. What is the Common Stock for year 2?
A company currently pays a dividend of $1.75 per share (D0 = $1.75). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, and then at a constant rate of 8% thereafter. The company's stock has a beta of..
Diversification occurs when stocks with low correlations of returns are placed together in a portfolio. Identify at least one type of firm that might exhibit low correlations of returns with the overall stock market? Explain why the correlations of t..
Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the corporate (composite) WACC is 12.0%.
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