Reference no: EM131926437

Question: $35.50 per share is the current price for Foster Farms' stock. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, rs, is 9.00%. What is the stock's expected price 3 years from today?

a. $37.86

b. $38.83

c. $39.83

d. $40.85

e. $41.69

Last year Central Chemicals had sales of $205,000, assets of $127,500, a profit margin of 5.3%, and an equity multiplier of 1.2. The CFO believes that the company could reduce its assets by $21,000 without affecting either sales or costs. Had it reduced its assets in this amount, and had the debt-to-assets ratio, sales, and costs remained constant, by how much would the ROE have changed?

a. 1.81%

b. 2.02%

c. 2.22%

d. 2.44%

e. 2.68%

Lofland's has $20 million in current assets and $10 million in current liabilities, while Smaland's current assets are $10 million versus $20 million of current liabilities. Both firms would like to "window dress" their end-of-year financial statements, and to do so each plans to borrow $10 million on a short-term basis and to then hold the borrowed funds in their cash accounts. Which of the statements below best describes the results of these transactions?

a. The transaction would improve both firms' financial strength as measured by their current ratios.

b. The transactions would raise Lofland's financial strength as measured by its current ratio but lower Smaland's current ratio.

c. The transactions would lower Lofland's financial strength as measured by its current ratio but raise Smaland's current ratio.

d. The transaction would have no effect on the firm' financial strength as measured by their current ratios.

e. The transaction would lower both firm' financial strength as measured by their current ratios.