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1. Last year a company had $355,000 of assets, $26,275 of net income, and a debt-to-total-assets ratio of 44%. Now suppose the newly hired CFO convinces the president to increase the debt ratio to 58%. Sales and total assets will not be affected, but interest expenses would increase. However, the CFO believes that better cost controls would be sufficient to offset the higher interest expense and therefore keep net income unchanged. What was the original return on equity (ROE) for this company? Assuming the president of the firm allows the CFO to increase the debt ratio to 58%, what will be the new ROE’?2.Consider the following information for three stocks: Stock X, Stock Y, and Stock Z. The returns on each of the three stocks are positively correlated, but they are not perfectly correlated. (That is, all of the correlation coefficients are between 0 and 1, or 0 < ρ < 1). Expected StandardStock Return Deviation BetaStock X 10% 20% 1.0Stock Y 10 20 1.0Stock Z 12 20 1.4Portfolio A has half of its funds invested in Stock X and half invested in Stock Y. Portfolio B has one third of its funds invested in each of the three stocks. The risk-free rate (rrf) is 5 percent, and the market is in equilibrium. (That is, the required return equals the expected return on all assets.) What is the expected return on the market, rMKT?
The company is considering two alternatives to raise the $2 million: (1) sell common stock at $10 per share, or (2) Sell bonds at a 10 percent coupon, each $1,000 bond carrying 50 warrants to buy common stock at $15 per share.
Calculate each company's cash balance at the end of the year. b. Explain what might cause company C's net cash from financing activities to be negative.
A corporation currently pays dividend of $2 per share, Do=$2. It is estimated that the company's dividend will grow at rate of 20 percent per year for the next two years;
What legal standards could the court apply in evaluating the constitutionality of a law and which would apply in this instance?
The initial offering price was $35.10 per share, and the stock rose to $42.40 per share in the first few minutes of trading. Bostitch paid $912,000 in legal and other direct costs and $264,000 in indirect costs.
Weyerhaeuser, The forest products manufacturer, traded at $42 at the starting of 1996. Beta services typically place its beta at 1.0 with a market risk premium of 6%.
What annual interest rate was used to determine the present value of the $1 billion prize?
The relationship of corporate income taxes, personal income taxes on equity investments, and personal income taxes on interest income should have a predictable change in debt ratios; which of the following predicts increasing debt ratios?
The annual expected return and standard deviation of returns for 2 assets are as follow.
Give some examples that illustrate fow (a) seasonal factors and (b) different growth rates might distort a comparative ratio analysis. How might these problems be alleviated?
Prepare a fundamental financial analysis of the company IBM from its published financial statements of the annual report year 2013, submit an 8- to 10-page paper (excluding appendices, cover page, abstract, and references).
Make a 700-1,050-word paper in which you discuss how annuities affect TVM problems and investment outcomes. In your paper, be sure to address the impact of the following items on TVM:
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