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Which causes a company to become leveraged? Issuing high amounts of common stock Making an initial public offer (IPO) Having high fixed costs Having high
- Which causes a company to become leveraged?
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- Issuing high amounts of common stock
- Making an initial public offer (IPO)
- Having high fixed costs
- Having high variable costs
- Which of the following correctly describes how a firm's required return is determined?
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- Using the going market rate for risk-free securities
- As the present value of the firm's debt and equity
- As the opportunity cost that its investors forego
- Using the average rate paid for debt and the company's share price
- All of the following are true of the free cash flow (FCF) analysis EXCEPT
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- it can also be calculated using the operating cash flow figure from the statement of cash flows less capital expenditures.
- it includes adjustments for the difference between the change in total current assets and total current liabilities.
- it must be a positive amount for it to be interpreted positively by investors.
- it is considered a better representation of the value of the firm to shareholders than operating cash flow.
- A construction firm has a contract that has $10,000 due today, January 1, and then requires a payment of $5,000 at the end of the year and $15,000 at the end of the second year. Assuming that all funds can be invested to earn a return of 6%, how much will the contract be worth at the end of the second year?
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- $30,000
- $31,236
- $31,536
- $33,483
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