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1. Which of the following activities result in an increase in a firm’s cash?
a. pay dividends
b decrease accounts payable
c. repurchase of common stock
d. decreased fixed assets
2. An operating loss incurred by a corporation
a. Must be carried forward unless the company has had 2 loss years in a row.
b. Is carried back 2 years, then carried forward up to 20 years following the loss.
c. Is carried back 5 years and forward 3 years.
d. Cannot be used to reduce taxes in other years except with special permission from the IRS.
e. Can be carried back 3 years of forward 10 years whichever is more advantageous to the firm.
MGM Grand said it plans to eventually buy back up to 20% of its shares (from stockholders) and announced a tender offer for half of them at a 31% premium (over the market price). Provide a rationale for the stock repurchase.
If an average share of stock is expected to yield a return of 7.2% and comparable Treasury bonds yield a return of 3.6%, what is the market risk premium?
You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. If the appropriate interest rate is 6 percent, what is the present value of the cash flow stream that the company ..
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Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. A project’s NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC..
How close could you get to a risk free investment with stocks? Are stocks inherently risky, so that a risk free return would not be possible?
Callculate the present value of a perpetuity bond that is expected to pay 300 interest per year if the investor requires an annual return of 12 percent?
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The use of debt in the capital structure of a company increases leverage. Leverage can be effectively used to increase the returns available to the shareholders. Critically evaluate showing examples the use of debt financing and leverage in the capit..
The margin on the loan is 5.4% and the rate cap is 6.25% over the life of the loan. If the current index rate is 7%, what is calculated interest rate of the ARM
Sadik Industries must install $300 of new machinery in its Texas plant. It can either lease the equipment or obtain a bank loan for 100% of the required amount and buy the equipment. What would be the company's debt ratio, in percentages, if it purch..
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