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A current ratio of 2.0 indicates:
a. inventories are too high
b. the firm does not have enough cash
c. the firm is using long term liabilities, preferred stock or equity to finance a portion of its current assets
d. the firm is matching financing across the balance sheet
e. the firm is financing fixed assets with current liabilities
A compensating balance is:
a. a bank discount
b. a credit discount given by a bank
c. a rebate
d. a form of inventory financing
e. none of the above
A formal agreement between a bank and a borrower indicating the maximum pre-arranged credit the bank will extend to borrower is:
a. Line of credit
b. Compensating balance
c. Discount loan
d. Operating loan
e. None of the above
A 5-year bond with a 4.45% coupon sells for $107.48. A 7-year bond with a 5.75% coupon sells for 116.564. The conversion factor for the 5-year bond is 0.933891 while the 7-year bond is 0.98588. Assume that the yields for both bonds are 6% and that co..
Messman Manufacturing will issue common stock to the public for $40. The expected dividend and growth in dividends are $3.50 per share and 3%, respectively. If the flotation cost is 9% of the issue's gross proceeds, what is the cost of external equit..
A corporation has $20,000 that it plans to invest in marketable securities. Choices include corporate bonds that yield 8%, municipal bonds that yield 6.2% and preferred stock that yields 7.4%. The corporations corporate tax rate is 30%. What is the a..
When using a portfolio rate, what would cause the portfolio interest rate on a UL to perform better than the market in an extended declining interest rate market and yet would perform worse than the market in an extended increasing interest rate envi..
Explain what is meant by open position/open interest. Why does the open position/open interest usually decline during the month preceding the delivery month? On a particular day, there are 2000 trades in a particular futures contract. Of the 2000 tra..
The expected return on a stock computed using economic probabilities is:
A new restaurant is ready to open for business. It is estimated that the food cost (variable cost) will be 30% of sales, while the fixed cost will be $540,000 The first year's sales estimates are $1,500,000. The cost to start up this restaurant will ..
What effect does compounding interest more frequently than annually have on (a) the future value, and (b) the effective annual rate (EAR)? Explain. How would you explain the difference between the annual percentage rate (APR) and effective annual rat..
If an investor is in a 30 percent marginal tax bracket and can purchase a straight (nonmunicipal bond) at 8.37 percent and a municipal bond at 6.12 percent, which should he or she choose?
A company currently pays a dividend of $2.00 per share (i.e., D0=$2.0). What is your estimate of the company's current stock price, P0?
You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street sweeper accident. In the trial, doctors testified that it will be five years before the plaintiff is able to return to work. The jury has already dec..
If you require an 18 percent rate of return on Excel's stock, what is the value of one share of this stock to you today?
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