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Funds acquired by the firm through retaining earnings have no cost because there are no dividend or interest payments associated with them, and no flotation costs are required to raise them, but capital raised by selling new stock or bonds does have a cost.
True or False?
For capital budgeting and cost of capital purposes, the firm should assume that each dollar of capital is obtained in accordance with its target capital structure, which for many firms means partly as debt, partly as preferred stock, and partly common equity.
You are CFO of a large company that has a few subsidiaries. A new board member is unfamiliar with consolidation procedures particularly with respect to the elimination of intercompany inventory transactions. Provide a summary of your talking points w..
The stock of Bruin, Inc., has an expected return of 25 percent and a standard deviation of 38 percent. The stock of Wildcat Co. has an expected return of 12 percent and a standard deviation of 43 percent. The correlation between the two stocks is .43..
Orwell Building Supply just paid a $2 dividend. The dividends are expected to grow at 30% for the first year, 25% for the second year, and then 15% for the third year. After which, the long-run rate is expected to be 6%. What is the expected dividend..
Kolby’s Korndogs is looking at a new sausage system with an installed cost of $910,000. This cost will be depreciated straight-line to zero over the project’s seven-year life, at the end of which the sausage system can be scrapped for $105,000. What ..
A 1,000 par value 10-year bond with coupons at 4% convertible semiannually can be called on any coupon date starting at the end of year 6. The price of this bond is 900, and the bond is redeemed at par. What is the minimum yield expressed as a nomina..
If the spot yield curve is flat, that is, the rate for all maturities are the same, does it mean that the Forward curve will also be flat? Explain the reason for your answer.
Demarius owns investment A and 1 share of stock B. The total value of his holdings is 1,547.71 dollars. Investment A is expected to pay annual cash flows to Demarius of 260 dollars per year with the first annual cash flow expected later today and the..
The categorical imperative is the essential base component of:
Illiad Inc. has decided to raise additional capital by issuing $170,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be i..
A $1,000 corporate bond with 10 years to maturity pays a coupon of 8% (semi-annual) and the market required rate of return is a) 7.2% and b) 10%. What is the current selling price for a) and b)?
What interest rate would make it worthwhile to incur a compensating balance of $9,000 in order to get a 0.65 percent lower interest rate on a 2 year, pure discount loan of $165,000?
Include a summary of the four elements of financial management. Include a summary of generally accepted accounting principles and general financial ethical standards
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