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Assume that a firm's total dollar capital budget is fixed and will not be changed. Which of the following will increase the retained earnings break point, i.e., increase the dollar amount of total capital at which the WACC will increase due to having to issue new common stock?
A. The firm's net income increases.
B. The firm increases its dividend payout ratio.
C. The firm increases the percentage of equity in its target capital structure.
D. The risk of the average capital budgeting project increases.
E. The risk of the average capital budgeting project decreases.
Do some research on two firms in your industry or an industry in which you are interested. Can you get an idea of their working capital management policies from publicly available information? How do the two companies differ in their apparent working..
Brimmo Motorcycles Inc., a U.S.-based firm, manufactures and sells electric motorcycles both domestically and internationally. A sudden and unexpected appreciation of the U.S. dollar should allow sales to ________ at home and ________ abroad. (Assume..
Diane is interested in buying a five-year zero coupon bond with a face value is $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments. What is the current value of this bond?
Bourdon Software has 8.8 percent coupon bonds on the market with 19 years to maturity. The bonds make semiannual payments and currently sell for 107.2 percent of par. What is the effective annual yield?
If you were to receive $1,000 each year for 10 years starting the end of 5 years, determine what this annuity is worth right now assuming 6% interest. (deferred annuity) Please show work.
The New York Stock Exchange is an example of a stock exchange that has a physical location. e) A larger bid-ask spread means that the dealer will realize a lower profit. f) The efficient market hypothesis assumes that all inventories are rational.
For a $1.50/£ call option with an initial premium of $0.033/£ and a phi value of –0.2, after an increase in the foreign interest (the pound sterling rate) rate from 8 percent to 9 percent, the new option premium would be A $0.035/£ B $1.48/£ C $0.031..
Private equity companies target, among many others: - Robust and stable cash flow - Low capital expenditure - Quality assets Explain Why? Give example.
Consider a no-load mutual fund with 200 million in assets and 10 million shares at the start of the year and with 250 million in assets and 11 million shares at the end of the year. During the year investors have recieved income distributions of $2 p..
Madera Produces Inc. considers a $75,000 piece of equipment that will reduce pretax operating costs by $18,000 per year over the 6-year period. There will be an increase in net working capital by $5,000. This equipment falls into the MACRS 5-year cla..
Your company just signed a 20-year lease for a new office. The lease requires that your firm pay $1,000 at the end of each month over the life of the lease. If the current annual rate is 9 percent, what is the present value of this annuity stream?
Ghost Rider Corporation has bonds on the market with 8 years to maturity, a YTM of 8.3 percent, and a current price of $944. What must the coupon rate be on the company’s bonds?
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