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(TCO A) In the United States, the most common type of business by number of businesses is the _____.(Points : 5) sole proprietorship C corporation
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Question 5. 5. (TCO G) If you were a manager of a company, which of the three right side components of the DuPont Identity would you want to increase and which would you want to decrease, other things being equal? Give a specific example for how to do that for each of the three. (Points : 20) |
Question 6. 6. (TCO D) A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is not expected to grow. The return on equity for similar stocks is 12%. What is P0? (Points : 20) |
Question 7. 7. (TCO D) A stock has just paid a dividend has declared an annual dividend of $12.00 to be paid one year from today. The dividend is expected to grow at a 7% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20) |
Question 8. 8. (TCO D) A bond has 5 years to maturity and has a YTM of 8%. Its par value is $1,000. Its semiannual coupons are $50. What is the bonds current market price? (Points : 10) |
Question 9. 9. (TCO D) A bond currently sells for $1,000 and has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10) |
Question 10. 10. (TCO D) What is and why is it important to investors and issuers of stock? Describe the behavior of stocks with s of greater than one, less than one, and less than zero. (Points : 30) |
Question 11. 11. (TCO E) A company has 30 million shares outstanding trading for $8 per share. It also has $90 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30) |
Question 12. 12. (TCO A) Name and describe the three functions of managerial finance. For each, give an example other than those used in the text and lecture. (Points : 25) |
Question 13. 13. (TCO H) What is the difference between the cash cycle and the operating cycle? Under what condition would they be the same? (Points : 30) |
Question 14.
14. (TCO F) A company has the opportunity to do any, none, or all of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work.
Year | A | B | C |
0 | -300 | -150 | -350 |
1 | 100 | -50 | 100 |
2 | 100 | 100 | 100 |
3 | 100 | 100 | 100 |
4 | 100 | 100 | 100 |
5 | 100 | 100 | 100 |
6 | 50 | 100 | 100 |
7 | -100 | -200 | 0 |
(Points : 40)
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