1 Which of the following statements is false a Financing total assets is called the financial structure decision b Capital structure is how invested capital is financed c The financial structure is $34,000 if the total assets are $34,000 d The invested capital is $50,000 if the total assets are $50...

1 D Invested capital all interestbearing liabilities total equity The invested capital is 50000 if t ...

1. Which of the following statements is false? a. Financing total assets is called the financial structure...

Question:

1. Which of the following statements is false?
a. Financing total assets is called the financial structure decision.
b. is how invested capital is financed.
c. The financial structure is $34,000 if the total assets are $34,000.
d. The invested capital is $50,000 if the total assets are $50,000.

2. If an all-equity firm is expected to earn and pay out a $2.50 forever (in perpetuity), what is the value of the firm’s stock given a of 10 percent?
a. $25.00
b. $25.50
c. $12.50
d. $22.50

3. What is the earnings yield given a $75,000 earnings figure, a $20 market price per share, and 10,000 shares outstanding?
a. 0.625
b. 0.375
c. 0.400
d. 0.275

4. What does a firm have to earn given the following? MV of debt = $60,000; MV of equity = $140,000; Ke = 10%; Kd = 5%
a. $17,000
b. $3,000
c. $14,000
d. $13,000

5. Which of the following statements is true?
a. When ROE < Ke, management is adding value to the firm.
b. When ROE > Ke, management is decreasing the firm’s value.
c. When ROE > Ke, the market price goes above the book value of the investment.
d. When ROE = Ke, the market price goes above the book value of the investment.

6. Which of the following is not an input in the calculation of WACC?
a. Book values of equity and debt
b. Market values of equity and debt
c. Corporate tax rate

7. To increase the stock price of a firm that is assumed to grow at a constant rate g,
a. Increase the Increase the constant growth rate.
c. Decrease the payout ratio.
d. Increase the retention ratio.

8. Northern Star Inc. just paid a $3 which is expected to grow at a constant rate. Recent EPS is $6 and net income is $250,000. Total equity is $1.25 million and the is 12 percent. What is the share market price?
a. $165
b. $150
c. $50
d. $300

9. Which of the following firms is a growth firm?
a. ROE > Ke
b. ROE < Ke
c. ROE = Ke
d. Net income = Ke

10. Which of the following statements is false?
a. Star firms have both high PVGO and PVEO.
b. Google and Yahoo are examples of turnarounds.
c. Cash cows could be called growth as well.
d. Utility firms are examples of cash cows.

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...