Recent Question

The Lashgari Company is expected to pay a dividend 1. Stock A has a required return of 10 percent. Its dividend is expected to grow at a constant rate of 7 percent per year. Stock B has a required return of 12 percent. Its dividend is expected to grow at a constant rate of 9 percent per year. Stock A has a price of $25 per share, while Stock B has a price of $40 per share. Which of the following statements is most correct? a. The t ...

Other / Other 27 Apr 2016

What is Sebring’s amount of total operating capital You have just obtained financial information for the past 2 years for Sebring Corporation. SEBRING CORPORATION: INCOME STATEMENTS FOR YEAR ENDING DECEMBER 31 (MILLIONS OF DOLLARS) 2013 2012 Sales $3,600.0 $3,000.0 Operating costs (excluding depreciation and amortization) 3,060.0 2,550.0 EBITDA $ 540.0 $ 450.0 Depreciation and amortization 90.0 0.0 Ear ...

Other / Other 27 Apr 2016

How much could you withdraw at the end of each of the next 20 years 1. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment? a. The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity lasts for only 5 rather than 10 years, hence that e ...

Other / Other 27 Apr 2016

What is the company’s weighted average cost of capital 1. Billick Brothers is estimating its WACC. The company has collected the following information: • Its capital structure consists of 40 percent debt and 60 percent common equity. • The company has 20-year bonds outstanding with a 9 percent annual coupon that are trading at par. • The company’s tax rate is 40 percent. • The risk-free rate is 5 ...

Other / Other 27 Apr 2016

Moerdyk Corporation's bonds have a 15-year maturity 1. A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT? a. The bond’s coupon rate exceeds its current yield. b. The bond’s current yield exceeds its yield to maturity. c. The bond’s yield to maturity is greater than its coupon rate. d. The bond’s current yield is equal to its coupon rate. e. If ...

Other / Other 27 Apr 2016

Sorenson Corp.’s expected year-end dividend 1. Stock X has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT? Expected dividend, D1 $3.00 Current Price, P0 $50 Expected constant growth rate 6.0% a. The stock’s required return is 10%. b. The stock’s expected dividend yield and growth rate are equal. c. The stock’s ex ...

Other / Other 27 Apr 2016

What was its basic earning power (BEP) ratio 1. A firm’s new president wants to strengthen the company’s financial position. Which of the following actions would make it financially stronger? a. Increase accounts receivable while holding sales constant. b. Increase EBIT while holding sales and assets constant. c. Increase accounts payable while holding sales constant. d. Increase notes payable while holding sales co ...

Other / Other 27 Apr 2016

What is the project's discounted payback 1. Which of the following statements is CORRECT? a. The NPV method was once the favorite of academics and business executives, but today most authorities regard the MIRR as being the best indicator of a project’s profitability. b. If the cost of capital declines, this lowers a project’s NPV. c. The NPV method is regarded by most academics as being the best indicator of a projectâ₠...

Other / Other 27 Apr 2016

What is the project’s discounted payback 1. A major disadvantage of the payback period is that it a. Is useless as a risk indicator. b. Ignores cash flows beyond the payback period. c. Does not directly account for the time value of money. d. Statements b and c are correct. 2. Which of the following statements is most correct? a. If a project’s internal rate of return (IRR) exceeds the cost of capital, then t ...

Other / Other 27 Apr 2016

How much value will your firm sacrifice if it selects the project 1. Your company is choosing between the following non-repeatable, equally risky, mutually exclusive projects with the cash flows shown below. Your cost of capital is 10 percent. How much value will your firm sacrifice if it selects the project with the higher IRR? Project S: 0 1 2 3 | | | | -1,000 500 500 ...

Other / Other 27 Apr 2016