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Compare and contrast the capital structures of the following firms and answer the related questions: JC Penney-a clothing retailer, Google- a technology Company and Johnson and Johnson- Health and Wellness Company.
1. What is percentage of long-term debt, common stock, retained earnings and preferred stock in each company’s capital structure? Prepare a table to display your results.
2. Discuss each company’s relative amount of long-term debt, common equity and retained earnings.
3. Evaluate the level of business risk associated with each company and industry. Evaluate the appropriate use of debt as it relates to each company and its industry.
4. Would any of three companies benefit from the following, why or why not?
a. Stock Dividend
b. Stock Split
c. Stock Repurchase
5. Research and provide information each company’s dividend policy.
The Niendorf Corporation produces teakettles, which it sells for $15 each. Fixed costs are $700,000 for up to 400,000 units of output. Variable costs are $10 per kettle. What is the operating breakeven point? Illustrate by means of a chart.
The Global Growth Fund is a load fund with a 6 percent front load fee. It started the year with a Net Asset Value (NAV) of $16.50. During the year the fund distributed $1.05, and at the end of the year its NAV was $17.95. What was the fund's return, ..
The next year the common stock of Gold Corp. will pay a dividend of $5.82 per share. If the company is growing at a rate of 4.85 percent per year, and your required rate of return is 14.61 percent, what is Gold's company stock worth to you?
The real risk-free rate is 3.15%. Inflation is expected to be 2.6% this year, 4.65% next year, and then 2.15% thereafter. The maturity risk premium is estimated to be 0.05(t - 1)%, where t = number of years to maturity. What is the yield on a 7-year ..
You are depositing $20,000 in a retirement account today and expect to earn an average return of 6% per year on this money. How much additional income will you earn if you leave the money invested for 25 years instead of just 20 years? (show calculat..
A stock has a required return of 11%; the risk-free rate is 2.5%; and the market risk premium is 4%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 8%, what would happen to the stock's requi..
you are an arbitrageur looking for opportunities to capitalise on mispriced securities. you notice that the bhp put
Assume you sold short 100 shares of common stock at $50 per share. The initial margin is 60%. What would be the maintenance margin if a margin call is made at a stock price of $60?
Calculate the payback period for a combine purchased for $250,000 if it adds an estimated $40,000 to your net cash flows in harvesting expense savings for the next 4 years, $30,000 per year for years 5 through 8, and has a salvage value of $20,000 at..
Consider a firm where the effort undertaken by managers can affect cash flows in the next period. For simplicity, assume managers either exert low effort or high effort. Assume that investors cannot observe effort. Assume that, with low effort, the f..
The process of selecting among potential major corporate investments is called capital budgeting. The goal of the capital budgeting decisions is to select capital projects that will decrease the value of the firm.
Stanley has $2,400 that he is looking to invest. His brother approached him with an investment opportunity that could give Patrick $4,800 in 4 years. What interest rate would the investment have to yield in order for Stanley’s brother to deliver on h..
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