Recent Question

Stock appreciation TRUE/FALSE 1. Total earnings from securities include both dividends and price appreciation. 2. Book value per share measures the current value of the net assets on a per share basis. 3. When market value is below book value, this relationship indicates that the investors view the company as having strong future potential. 4. Stock appreciation rights give the employee compensation at a future d ...

Other / Other 18 Mar 2016

effect of the exercise of stock options 1. The ratio percentage of earnings retained is the same as that termed: a. dividend yield b. dividend payout c. this year's retained earnings to net income d. return on common equity e. book value 2. The earnings per share is computed for: a. common stock b. non-redeemable preferred c. redeemable preferred d. common stock and non-redeemable preferred stock e. common stock and fully d ...

Other / Other 18 Mar 2016

Dawn Alive reported the following for 2010 1. A summarized income statement for Leveraged Inc. is presented below. Sales $1,000,000 Cost of Sales 600,000 Gross Profit $ 400,000 Operating Expenses 250,000 Operating Income $ 150,000 Interest Expense 30,000 Earnings Before Tax $ 120,000 Income Tax 40,000 Net Income $ 80,000 The degree of financial leverage is: a. $150,000/$30,000 b. $150,000/$120,000 c. $1, ...

Other / Other 18 Mar 2016

Capital Structure and Leverage 11. Modigliani and Miller (MM) show that under a restrictive set of assumptions that a firm’s value is unaffected by its capital structure. Which of the following are not assumptions used by MM? a. no brokerage costs, no taxes, and no bankruptcy costs b. investors borrow at the same rate as corporations c. all investors have the same information as investors about the firm’s future investment ...

Other / Other 17 Mar 2016

Capital Structure and Leverage 21. Texas Industries estimates that its fixed operating costs are $1,000,000, and its variable costs are $6.00 per unit sold. Each unit produced sells for $8.00. What is the company’s unit sales breakeven point? a. 125,000 units b. 166,667 units c. 250,000 units d. 500,000 units 22. Texas Products Inc. has a division that makes plastic composite bags for the space industry. The division has f ...

Other / Other 17 Mar 2016

Capital Structure and Leverage 16. Suppose you know that your firm is facing relatively poor prospects but needs new capital. If you also know that investors do not have this information, signaling theory would predict that you would: a. issue debt to maintain the returns of equity holders. b. issue equity to share the burden of decreased equity returns between old and new shareholders. c. both a and b are correct 17. Which of the f ...

Other / Other 17 Mar 2016

Capital Structure and Leverage 26. The Free Indeed Company manufactures ladies shoes that are sold through discount houses. The shoes are sold for $20 each pair; the fixed costs are $110,000 for up to 30,000 pairs of shoes; variable costs are $13 per pair of shoes. What is the firm’s gain or loss at sales of 12,000 pairs of shoes? a. -$26,000 b. $84,000 c. $130,000 d. $240,000 e. $300,000 27. The Free Indeed Company manufact ...

Other / Other 17 Mar 2016

IS 466 Decision Support Systems 6. The decision maker who is neither optimistic nor pessimistic might use which criterion? a. minimax b. maximin c. maximax d. the principle of insufficient reason 7. Consider the following payoff table in which D1 through D4 represent decisions, S1 through S4 represent states of nature, and the values in the cells represent profits. S1 S2 S3 S4 D1 -20 40 60 100 D2 30 120 60 -50 D3 30 30 40 40 D4 10 ...

Other / Other 17 Mar 2016

Capital Structure and Leverage 6. Which of the following statements is most correct? a. Increasing financial leverage is one way to increase a firm’s revenues. b. Firms with lower fixed costs tend to have greater operating leverage. c. The debt ratio that maximizes EPS generally exceeds the debt ratio that maximizes share price. d. Statements a and b are correct. 7. As a rule, the optimal capital structure is found by determini ...

Other / Other 17 Mar 2016

Capital Structure and Leverage 1. The mix of debt, preferred stock, and common equity with which the firm plans to raise capital is called the: a. financial risk. b. operating leverage. c. business risk. d. target capital structure. 2. The target capital structure is affected by which of the following factors? a. business risk b. the firm’s tax position c. financial flexibility considerations d. managerial attitudes (conser ...

Other / Other 17 Mar 2016