Which of the following statements is not true?

Derivatives are claims whose value is derived based on what happens to another underlying asset.

As a general rule, the required return of common stocks is higher than the YTM of bonds issued by the same company.

Working capital represents a firm’s investment in long-term assets

The dividend irrelevance theory states that dividends have no effect on either the price of a firm’s stock or its cost of capital

Dollar denominated claims issued : ______ are dollar denominated claims issued by U.S. banks representing ownership of shares of a foreign company’s stock held on deposit by the U.S. bank in the issuing firm’s home country. |

Higher concentration ratios imply higher correlation : Bank’s primary reserves are short-term assets that can provide the bank with additional liquidity while safely earning some interest income. Value at Risk (VAR) is a common approach to assessing risk in financial firms’ trading accounts. Higher conce.. |

Compute the expected share price-perpetual growth method : Suppose the dividends for the Seger Corporation over the past six years were $1.36, $1.44, $1.53, $1.61, $1.71, and $1.76, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method. |

What are the monthly-nominal and effective interest rates : BMW is offering a 1-Series for $18,588. This can be financed with a down payment of $2,008.80 and $249 per month for 72 months. What are the monthly, nominal, and effective interest rates for this purchase? |

Working capital represents firms investment in assets : Derivatives are claims whose value is derived based on what happens to another underlying asset. As a general rule, the required return of common stocks is higher than the YTM of bonds issued by the same company. Working capital represents a firm’s i.. |

Expected yearly before-tax cash savings due to acquiring : Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing 5 fully-depreciated vans, which you think you can sell for $4,500 apiece and which you could probably use for another 2 years .. |

Evaluate the proposed acquisition of a new special : You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $20,900. The firm’s marginal .. |

Medical insurance : You have medical insurance for your family with a $250 deductible, 20% coinsurance, and $1,500 OOP maximum for each individual and $3,000 family OOP maximum. Calculate your OOP costs if three people in your family each incur $6,000 in medical costs. |

## What is the probability of cash flow two yearsA cash flow is expected to be $500.00 (50% probability) or $1,000.00 (50% probability) next year. Assuming the cash flow next year is $500.00, the cash flow the following year is $400.00 (60% probability) or $600.00 (40% probability). What is the pro.. |

## Two-year treasury security has a yieldA one-year Treasury security has a yield of 4.0000% and a two-year Treasury security has a yield of 4.8000%. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.4000%. What is the market's e.. |

## The state lottery that offers a choice of paymentPenny just won the state lottery that offers a choice of payment. She may opt for either receiving $1,000,000 today or $2,000,000 at the end of ten years. If she can invest her funds at 5% annually, which is better choice? |

## How much can you withdraw each year in your retirementYou are planning your retirement in 10 years. You currently have $176,000 in a bond account and $616,000 in a stock account. You plan to add $6,400 per year at the end of each of the next 10 years to your bond account. How much can you withdraw each .. |

## What would be the cost of equity from new stockJavits and Son’s common stock currently trades at $30.00 a share. It is expected to pay an annual dividend of $3.00 per share at the end of the year (D1= $3.00), and the constant growth is 5% a year. (A) What is the company’s cost of common equity if.. |

## Application of time value of money principlesApplication of time value of money principles can help you make decisions on loan alternatives. This exercise requires you to compare three mortgage alternatives using various combinations and points. Points on a mortgage refer to a payment that is m.. |

## The cost of equity for a firm with a debt-equity ratioThe cost of equity for a firm with a debt-equity ratio of .35: |

## What is the expected inflation rateUsing the expectations theory, what is the yield on a 1-year bond, one year from now? Calculate the yield using a geometric average. What is the expected inflation rate in Year 1? |

## What annual rate of return is analyst assuming you can earnA financial analyst tells you that investing in stocks will allow you to double your money in 7 years. What annual rate of return is the analyst assuming you can earn? |

## The stock is expected to have a year-end dividendA stock is trading at $80 per share. The stock is expected to have a year-end dividend of $4 per share, which is expected to grow at some constant rate g throughout time. The stock's required rate of return is 14%. If you are an analyst, what would b.. |

## What is the optimal number of discs to produce at a timeLindsay hawkes sells discs that contain 25 software packages that perform a variety of financial functions typically used by business students. Depending on th quantity ordered, Lindsay offers the following price discounts order quantity PRICE. The a.. |

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