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Which of the following is the reason why economic sticklers would not consider shares /equities as financial instruments:
A. Shares represent part-ownership in the company and are not redeemable
B. Companies can re-purchase their shares
C. Preferred shares are closer to debt instruments
D. Companies can have debt and shares, they are substitutes for each other
2. Derivatives can be strictly defined as
A. Financial instruments
B. Securities with strong economic foundations
C. Contracts that may lead to profits or losses
D. Representatives of “claims” of holders on issuers
Calculate the expected return and risk (standard deviation) for General Fudge for 200X, Suppose you had to choose between General Fudge and Stock B, with expected return E(rB)=9% and ?B=6%. Which is preferred on a stand-alone basis?
A firm has 0 debts in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 40% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would be its c..
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Assume a firm has no interest expense or extraordinary items. Given this, the operating cash flow can be computed as:
Sure Tea Co. has issued 6.8% annual coupon bonds that are now selling at a yield to maturity of 9.8% and current yield of 9.0492%. What is the remaining maturity of these bonds?
A general contractor is buying construction equipment for grading with a purchase price of $140,000. The salvage price after 5 years is $16,000. The expected monthly benefit is $3,400. The dealership offered him to buy additional equipment with a tot..
Kellogg Co. (K) recently earned a profit of $3.82 earnings per share and has a P/E ratio of 20.15. The dividend has been growing at a 4 percent rate over the past few years. If this growth rate continues, what would be the stock price in six years if..
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